Covid-19 has significantly disrupted the private equity (PE) industry in Asia Pacific (APAC), but it does not alter the industry’s promising long-term growth prospects. In fact, it could create opportunities for funds that understand the characteristics and trends of PE deals in the region and are willing to be bold.
Success requires a deep understanding of the region’s characteristics and typical deal patterns during the period of strong growth prior to the pandemic, as well as a clear sense of how those factors have changed as a result of Covid-19. Some new sectors and investment themes are emerging. In other instances, opportunities that were attractive before the pandemic are even more so now, due to reduced valuations, faster growth or other factors.
In the past, PE investors in APAC created value primarily through debt financing and multiple arbitrage — that is, through largely financial strategies. But to win in the future, they will need to create teams and networks that can make large-scale operational changes with the potential to unlock significant value in portfolio companies.