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Private Capital

Asia Deal Opportunities

April 17, 2023
PE activity has slowed, but energy and infrastructure deals are set to surge.

The dealmaking backdrop

Private equity deal values in Asia fell by 44% last year and fundraising fell by 9% amid an uncertain macroeconomic outlook — a trend likely to continue into 2023. Although the drop in dealmaking was less stark than in other regions, China’s closed economy influenced the subdued PE environment through 2022; and despite China’s reopening, dealmakers remain cautious.

While PE fund managers will likely take a cautious approach to China deals over the next 12 months, they won’t stand still, having already recalibrated their expectations and pivoted to new markets. The broader Asia-Pacific region continues to offer a wealth of opportunities, as neighboring countries benefit from the redistribution of PE capital, the reprisal of global travel, and accelerated trade flows.

India has benefited most from China’s reduced deal flow, as private capital seeks opportunities across the subcontinent’s rapidly growing economy. Korea has also been a beneficiary as PE funds scour Asia for deals. Meanwhile, Japan has become a growing focus as sponsors seek deal opportunities as the country's large conglomerates divest non-core assets, including as a result of shareholder activism.

Each jurisdiction is different, with unique market dynamics at play. Overall though, deal flow has been slow across Asia since Q4 of 2022, with most jurisdictions having been impacted by the global macro-economic situation. Despite the decline in dealmaking activity, new opportunities are emerging, notably in the infrastructure space, as Asia’s fast-growing economies seek private capital for energy transition, digital infrastructure expansion, and more traditional infrastructure projects.

An infrastructure boom

The Asian infrastructure sector is experiencing an exciting period of development, with deal volumes in India and Southeast Asia increasing month-on-month in the early part of 2023. The recent surge in activity and need for private capital is driven by material underfunding of the region’s infrastructure and the need to modernize and invest in traditional “core” infrastructure such as roads, ports, airports, and hospitals.

There is also an urgent need to develop new digital infrastructure assets such as data centers, wireless communications, telco towers and fiber optic networks to facilitate the growth of the region’s dynamic economies and accommodate data localization laws being introduced in some markets. Most of Asia’s infrastructure lags a decade behind the US and Europe and demand, for example in the case of digital infrastructure, is being driven by the region’s heavy reliance on alternative financial services such as fintech and e-commerce.

Following the strong demand for private capital, new infrastructure investors have entered the Southeast Asia market. Numerous funds have created or expanded infrastructure-focused verticals and are deploying resources on the ground in markets including Singapore, Hong Kong, and India as they seek access to the growing pipeline of deal opportunities. The significant increase in the number of sophisticated players in this space will further facilitate deal flow across Asia and accelerate plans by state-owned enterprises and mobile network operators to divest existing non-core infrastructure assets.

As China’s slow recovery and reopening continue, economies across Asia are expected to enjoy an uptick in infrastructure investment in the year ahead. In Southeast Asia, we have noted a recent redeployment of private capital from Indonesia, the region’s largest economy, to Vietnam, the Philippines, and Malaysia over the past six months. Whether this investment shift is permanent, or a short-term reaction to the uncertainties that next year’s elections will bring remains unclear.

Some Southeast Asian economies are also creating sovereign wealth funds to invest in and partner with private capital providers on infrastructure projects. The Indonesia Investment Authority (INA), founded in 2021 by the nation’s government, has signaled interest in collaborating with private capital on infrastructure projects and has already inked sizeable joint ventures with pension funds and sovereign wealth funds in the Americas and the Middle East. The Philippines has also confirmed plans to establish a sovereign wealth fund called the Maharlika Investment Fund (MIF) to invest in infrastructure assets and attract inbound third-party capital, another exciting development for Asia-based dealmakers. The emergence of national sovereign wealth funds to spur infrastructure development is an interesting trend to watch for private capital investors looking to deploy large sums of capital in the region. Investors will also be watching to see if these funds have a “first look” right for new infrastructure M&A opportunities and greenfield projects.

Energy transition

Energy transition and related infrastructure assets as a sub-sector will alone present a wealth of deal opportunities for the region’s local players and global infrastructure specialists looking to enter the Asia market. Most Asian countries have rapidly growing energy demand and good conditions for solar and wind power resulting in very ambitious 2040-2050 renewable energy targets, particularly India, Japan, South Korea, and Taiwan. But this demand is all from almost a standing start compared with ten years ago so there is massive need for private capital deployment to achieve the goals.

As an asset class, energy transition is particularly attractive to private investors for several reasons. Apart from the increased government and social support, renewable power, as well as energy efficiency and related infrastructure such as smart grids, are increasingly economically competitive with traditional fossil fuel sources. Revenue is often indirectly sovereign-backed with natural inflation protection. Portfolios of renewable energy assets can accumulate significant scale and will require sizeable private capital deployment — which will in turn attract the virtually endless pools of capital in the form of LPs seeking ESG investment.

However, private capital providers in the energy and infrastructure sectors will not have it all their own way. Cash-rich multinational oil and gas companies with a lower cost of capital are also looking to take advantage of the investment opportunities in energy transition in Asia, to balance their broader energy portfolios, and will provide significant competition for the private capital players. Regional giants and national champions are also participating in the energy transition, presenting challenges for private capital firms in competitive deal processes. We have seen Asian corporates partnering with private capital providers to fund large-scale infrastructure and energy transition projects. This partnering mitigates country risk for international investors while providing a much needed source of new capital for local strategics.  


The vast majority of private equity and infrastructure transactions in Asia are still financed out of the Asia bank-driven syndicated loan markets, but private debt funds are playing an increasingly active role.

The debt financing markets across Asia are largely independent and segregated with large local banks dominating local currency financing in China, Korea, and Japan. In recent years, onshore liquidity has also increased significantly in economies such as the Philippines, Thailand, Malaysia, and Indonesia, resulting in more limited opportunities for regional and international investment banks and private credit funds to compete for US dollar financing opportunities in the region.

Despite this backdrop, private debt providers have increased their presence in Asia in recent years. A proliferating number of regional and global credit investors have redeployed people from Europe and the US to Asia to build credit strategies across the region. Regional institutions including the Monetary Authority of Singapore have also signaled that challenges facing the global banking sector this year could create more opportunities for private debt firms. More broadly, a stabilization in US interest rates in the medium- to long-term could also make offshore US dollar financings more attractive to borrowers. This interest rate stabilization in the US could shift attention away from local currency financing and benefit private debt providers, who tend to lend in US dollars.

In recent years, private debt firms have begun to pivot from historically more traditional credit strategies in Asia, such as special situations and distressed debt, towards mature, senior debt as firms become more comfortable with the risk profile of Asian companies. Private debt assets under management in Asia are only 6% of the global private debt market. As Asia has a 30% share of global assets under management, there is substantial room for growth. The emergence of private debt funds is an area to watch for deal teams, as new credit providers increase competition and financing options across Asia.

Singapore’s VC hub

Southeast Asia’s venture capital market, centered around Singapore, is also well positioned for an increase in deal activity. The Singapore Venture Capital Association (SVCA) is rapidly expanding, and dealmakers are using the city-state as a launchpad for VC deals across Asia, primarily Indonesia, where the fintech and e-commerce markets are particularly strong. Startup success stories including Gojek, Tokopedia, and Traveloka, have jointly raised billions of dollars in VC funding from Singapore. The SVCA is focused on retaining its central role in VC funding for businesses across the region, from Vietnam and Thailand to Malaysia.


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