Asia Pacific private equity deal value down 44% in 2022, says Bain report

Private equity (PE) deal value in Asia Pacific plunged 44% year-onyear to $198 billion in 2022, ending two years of record dealmaking, according to Bain & Company’s Asia Pacific Private Equity Report 2023 launched today.

Slower economic growth, declining consumer confidence, falling manufacturing output, high inflation, and mounting global and regional uncertainties resulted in a perfect storm which dampened investor sentiment.

Across the region, deal value declined between 25% and 53%. Greater China and Southeast Asia saw the greatest fall at 53% and 52%, respectively, with the for the second quarter. The IT giant also announced that it will cut about 19,000 jobs. former challenged by uncertainties relating to the zero-Covid policy, geopolitical tensions and tech regulatory crackdowns, and the latter faced with fewer growth deals. Deal value in Australia-New Zealand (ANZ), Korea and Japan dropped 48%, 39%, and 28%, respectively. Deal value in India declined 25%.

Net headcount addition was meagre at just 425 employees, flat sequentially and up 6% annually. Accenture said the job cuts was a strategy to combat wage inflation and reduce structural costs. 50% of the job cuts were in non-billable corporate functions.

The Dublin-based company reported a revenue of $15.8 billion, beating its own guidance of $15.2-15.75 billion.

“There is no significant cut to Accenture’s organic growth guidance, with mid-point of guidance maintained, despite concerns in BFSI sector due to crisis of confidence across US and Europe. We believe that recent events in the global BFSI space may not lead to more than 2-3% EPS cut for our covered companies vs fall of about 9% in NIFTY IT in past one month. We see no significant decline in demand given Accenture’s strong bookings and healthy pipeline,” analysts at ICICI Securities said in a note.

“Client focus on cost-optimisation deals bodes well for Indian IT companies given their expertise in large cost-optimisation deals. There could be delay in deal signings or conversion of deals to revenue in next couple of quarters in our view, which is also the feedback we have got from our covered companies ahead of their silent period,” ICICI Securities said.

“The declines in deal value, exits and fundraising in 2022 should not be a surprise. In fact, conditions were set for a perfect storm. Investor exuberance and a superabundance of global capital helped propel Asia Pacific deal value to an extraordinary high in 2021. As economic forces battered the market in 2022, investors retreated and deal value fell back to the level of 2020,” said Kiki Yang, co-head of Bain & Company’s Asia Pacific PE practice.

Greater China continues to hold the lion’s share of the region’s total deal value although it plummeted to 31%, a 9-year low. India and ANZ increased their shares to 23% and 19%, respectively.