Asian private equity managers have poured cold water on hopes that the re-opened market for initial public offerings in China will spark a flood of profitable sales and free the industry to raise more money and to stimulate deals.
Private equity investors across Asia, and especially in China, have struggled to exit investments because IPO markets have been sluggish in Asia broadly and closed in China.
Buyout groups in Asia have relied on stock listings to sell out of their investments, and a wave of exits in China had been expected once markets opened again this month.
But private equity investors and managers now realise that their companies are at the end of a queue of 700-plus IPO hopefuls in China.
David Pierce, a partner at Flag Squadron, the Asian arm of a global fund-of-funds business, said private equity groups must be more realistic about their options for some investments.
“The idea that the IPO window reopening is going to solve all of our problems is just not true,” he said.
A survey by consultants EY and data providers Mergermarket found that the Asian private equity industry expected a long wait until it could again use IPOs as an exit route.
The industry saw just 20 IPOs raise $2.8bn across Asia in 2013, but there were 166 trade sales worth $31.5bn.
In contrast, more than half of last year’s European IPOs were private equity-backed companies, and the US also saw some big private equity exits such as the $2.4bn raised by Blackstone-backed Hilton Hotels.
Eric Solberg, head of private equity investment group EXS Capital, suggested that a strong public equity market would hamper Asian private equity groups.
“A successful IPO market will make it harder for private equity firms to gain control [in new investments] and means we will likely have to pay more for deals?.?.?.?If the market heats up too fast, both entrepreneurs and retail investors will get unrealistic expectations again about value, and our conversations will become very difficult.”
Derek Sulger, a partner at China-focused Lunar Capital, said the industry must focus more on secondary sales, sales to trade buyers and other routes.
The total value of Asian buyout deals shrank from $33.1bn in 2012 to $29.1bn in 2013, according to Mergermarket. Within this, the value of inbound deals by global private equity firms was $6.5bn, down from $8.2bn. There were only five deals worth more than $1bn, down from 11.
In spite of low deal volumes, buyout groups have continued to add to their war chests.
Flag Squadron合伙人戴维?皮尔斯(David Pierce)表示，私人股本集团必须更现实地看待它们的某些投资选择。Flag Squadron是一家全球“基金的基金”(FOF)旗下的亚洲子公司。
私人股本投资集团EXS Capital的总裁埃里克?索尔伯格(Eric Solberg)表示，IPO市场强劲反而将对亚洲私人股本集团造成不利影响。
专注中国业务的云月投资(Lunar Capital)的合伙人苏丹瑞(Derek Sulger)表示，私人股本行业必须将重点更多地放在二级市场出售、股份转让以及其他途径上。