Investors continue to pour capital into private equity, even as PE firms face rising valuations and competition for targets. However, volatility across global markets raises the question of which regions will see the most PE activity in the year ahead.
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Toppan Vintage question: Which regions are likely to see the most private equity investment in the next 12 months? Leading deal experts weigh in...
Broadly speaking, the regional balance of PE activity reflects that of all M&A dealmaking. North America tends to have the most buyout value, while Europe usually has the greatest number of deals. Asia-Pacific generally sits in third place for both value and volume of transactions.
Over the first three quarters of 2017, North America saw 885 PE buyouts valued at US$163bn. This compared to 997 deals worth US$115bn in Europe and 331 deals valued at US$100bn in APAC.
More than two-thirds of our survey respondents (68%) believe North America will retain its position as one of the top two regions for PE investment. However, 64% say they think Asia-Pacific will also be in the top two, while just 44% predict that Europe will be up there. Less than a quarter of participants (24%) said Latin America will be one of the regions with the greatest number of buyouts over the next year.
In North America, positive economic figures are bolstering confidence among investors. In September, the US Labor Department announced that the jobless rate had fallen to 4.2%, the lowest level since February 2001. Meanwhile, US equities reach record highs on a weekly basis.
In addition, Europe’s economy is rapidly recovering from its long malaise. Consumer confidence in the EU climbed from -3.3 in May to -1.3 in June 2017 – the highest level in roughly a decade.
“Europe saw a wave of investments last year and it’s going to experience the same in the coming 12 months,” said a managing director at a PE firm headquartered in San Francisco that focuses on growth equity. “Europe has two aspects that allows it to stand out: the consumer sector and its investment policies. Europe received a tremendous amount of incoming capital from foreign investors last year.”
In the Asia-Pacific region, the energy and infrastructure segments are showing promise, according to a respondent from a Chicago-based PE firm with more than 15 current investments. In one recent noteworthy deal in that area, US based Tennenbaum Capital Partners and Goldman Sachs BDC acquired Singapore-based solar energy developer Conergy Asia for an undisclosed sum in August 2017. Conergy builds and manages solar facilities in Australia, Japan, Myanmar, the Philippines, Thailand, and Germany.