Megadeals, public to private transactions and the Internet sector drove record performances in the Asia-Pacific private equity industry last year. But there are many challenges ahead in the shifting market. Suvir Varma, leader of Bain's Asia-Pacific Private Equity practice, discusses three themes that will help investors.
Read the transcript below.
SUVIR VARMA: 2015 was an exceptional year for the private equity industry in Asia-Pacific. Private equity funds found a way to close $125 billion of deal flow in the region, a record. What was driving this record performance were internet deals, public-to-private transactions, and mega-deals in which sovereign wealth funds and government investors participated alongside private equity funds.
In addition, the asset class trended positive in terms of cash flows for the second year running, and returns continued to rise. While the industry made it look easy in 2015, we think the coming years will be challenging. First of all, there is a significant capital overhang to be deployed into the asset class in Asia-Pacific. Two, pricing is going up steadily. It is [at] an all-time high.
We believe thriving in this new normal will require funds to focus on three things. First of all, having a clear and differentiated investment sweet spot, behind which they're going to focus on finding deals. Two, investing in their own post-deal value addition skills. And three is really upping the game on the internal processes and decision-making frameworks they use within their own organizations. Those funds that are able to deliver on these three themes will likely emerge winners in this new normal.
Read the Bain Brief: Asia-Pacific Private Equity Report 2016