Asia Pacific Private Equity 2025 Almanac

Deloitte Private Equity Asia Pacific's team has published the latest Asia Pacific Private Equity 2025 Almanac. By having connections to every part of the market and, critically, local presence and knowledge, we have set out to provide the kinds of nuanced and contextualised insights on the buyout PE funds and their transactions (i.e. traditional buyout funds, focused on control deals) in Asia Pacific. This almanac dives deep into 2024’s defining themes and offers some forward-looking insights for 2025, including exploring whether and how trends from more-established western markets may manifest in Asia Pacific.

As highlighted in the almanac, there has been a significant rebound in Private Equity (PE) activity since 2024, evolving investment strategies, and emerging market trends across the region. Asia Pacific PE buyout investments reached US$138 billion in 2024, an 8.1% increase from 2023, marking the second-best year for PE dealmaking over the past decade. with interest rates stabilising and record stockpiles of dry powder, there is a clear and very welcome sense of optimism for the coming year.

Asia Pacific Private Equity Market Overview

• Accelerating momentum in M&A deals: Increased M&A volumes will lift PE investor sentiment and lead to more PE transactions. Rising deal volume will lead to a rapid acceleration in deal making and drive a rebound in mid-cap secondary trades that were relatively suppressed in 2023 and 2024.
• Geographic realignment: Surprisingly, China and Australia took the lead in the largest share of PE investments, but India and Japan continue to be viewed as attractive markets. At the same time, some sovereign wealth funds from the Middle East began to ramp up their Asia Pacific operations, including significant investments into China.
• Geo splits: Amid this geographic rebalancing, PE portfolio companies and corporates pursued a strategy of geo splits – restructuring their portfolio along geographical lines to optimise business operations and attract potential buyers.
• Rise of "Zombie" funds: Lower fundraising prospects and the consolidation of funds will also mean more small and mid-cap funds will close in the coming years, and we will see the emergence of so-called "zombie funds" – funds that continue for a prolonged period with little to no activity, looking for an exit and tying up capital from other, more productive investments.
• Expanding operation teams: GPs are likely to build out their in-house capabilities, taking on more specialised operational professionals to assess and roll-out value creation plans. Areas they are likely to focus will include finance and operational efficiency, cost optimisation, digital and cloud adoption, and regulatory non-financial disclosures.
• Hot sectors: Consumer, TMT, and industrial sectors were the primary focus of PEs in 2024, with consumer leading the sector activity at 223 deals, followed by TMT with 221 deals and industrials with 155 deals.

Commenting on the report, Sam Padgett, Deloitte Asia Pacific’s Private Equity Origination Leader said, "2024 was a year when statistics told a different story from the sentiment felt within the PE market in Asia. The numbers painted a picture of strong market activity, yet the sentiment on the ground told a different, more complicated story. It felt like a year of recovery, rerouting and realignment. The pandemic's long-term effects and recent geopolitical shifts have reshaped our industry. As we enter 2025, market participants are coming to terms with the new normal in the PE landscape, and there's a palpable sense of growing momentum and optimism. All signs point to 2025 being a dynamic and eventful year for private equity in Asia Pacific, albeit one that may have to contend with shocks and volatility originating both inside and outside the region".

In response to the current landscape of China's private equity market, Deloitte China's Private Equity Industry team has further released the "Asia Pacific Private Equity 2025 Almanac – China Edition". This report builds upon the insights from the original "Asia Pacific Private Equity 2025 Almanac", and focuses on venture capital, private equity, state-owned and industrial investment funds active in China's private equity market and their related transactions, deeply analysing the core issues of China's private equity market activities in 2024.

China Private Equity Market Overview

• State-owned capital shapes a new private equity era in China: In 2024, the China private equity market continued to confront a challenging fundraising environment. RMB-denominated investors, especially state-owned capitals and government-guided funds, emerged as the predominant source of capital, mitigating the impact of reduced foreign investment. In 2024, the aggregate capital contribution from state-owned capitals and government-guided funds surpassed RMB1.25T, representing 82% of the total capital contribution from limited partners (LPs).
• Rewiring capital flows in a fractured world: Despite the overall downward trend in the local market, certain high-tech sectors, especially those in the early and growth stages, such as semiconductors and advanced manufacturing – areas supported by government policy – have maintained relatively active RMB financing. In 2024, the semiconductor sector and advanced manufacturing sector secured the private equity investments of RMB134.9B and RMB102.1B, respectively, accounting for 13% and 9% of the total deal value. Furthermore, propelled by factors such as market saturation and heightened competition within the domestic market, as well as the global reconfiguration of the industrial chain, market-oriented professional investment institutions that previously dominated the private equity market have begun to explore strategic transformation opportunities. This includes regional and global expansion strategies aimed at mitigating investment risks through diversified global asset allocation.
• The IPO market continues to struggle, while policy tailwinds may reshape a new paradigm for exit: The IPO market continues to struggle, with a substantial decrease in the number of listed companies in the China A-share market, reflecting the ongoing tightening of traditional exit channels. IPO exits constituted just 36% of the total, a significant decline from the peak of 68% in 2021. In response, the market’s demand for alternative exit channels, such as M&A, has been steadily increasing. In 2024, the Chinese government implemented a comprehensive set of supportive policies aimed at facilitating cross-industry M&A and this continues to encourage the establishment of M&A funds. Consequently, the M&A market is expected to experience a new wave of structural opportunities.
• The rise of M&A deals: The number of potential M&A targets in China market is growing, fuelled by multi-dimensional catalysts, signalling a structural shift in industrial ecosystems and capital allocation logic. First, regulatory thaw is unlocking deal flow. Second, industrial Darwinism is reshaping the target pool. Third, capital exit pressures are turbocharging supply. Finally, cross-border reallocation is reshaping the board.

Conrad Chan, the Deloitte China Private Equity Industry Leader said: "In 2024, the China private equity market demonstrated remarkable resilience in a complex domestic and international environment, with significant structural changes evident in all aspects of fundraising, investment, post-deal management, and exit. From a policy perspective, the continuous release of positive signals has further consolidated market confidence, including state-owned capitals and government-guided funds becoming important sources of fundraising; the expansion of the QFLP pilot program and the successive establishment of M&A funds which will provide new possibilities for broadening exit channels. As industry practitioners, we deeply understand that the investment strategies in China's private equity industry are undergoing a transformation, gradually shifting from the pursuit of high valuations and high returns in "trend-chasing investments" to a focus on "value enhancement". The valuation adjustment has prompted a shift in investment logic from "scale expansion" to the construction of "technological barriers". At the same time, leading PE/VCs are accelerating their global expansion, integrating industrial chain resources through cross-border M&A to achieve deeper value creation. Despite the short-term pressure exerted by geopolitical factors and fluctuations in the secondary market on the industry, the deepening reform of the capital market and the continuous upgrading of the industrial structure still offer long-term opportunities for the industry's development. Currently, the China private equity market is at a critical stage of transitioning from "scale growth" to "quality evolution", and each of us in the industry should re-examine and firmly maintain confidence in the industry”.