Global viewpoint: Navigating uncertain times
Private equity hit record highs in 2021 across fundraising, investment, and exits and according to Mergermarket data there were 4,605 buyouts globally in Q1-Q3 2021, beating the annual record for global PE volume. While the outlook remains strong, several factors will weigh on private market investors’ as they look to deploy dry powder and pick the next wave of deals. Covid-19–related issues are still present, inflation has increased to levels not seen for a generation and Russia’s invasion of Ukraine has dialed up global disruption, causing uncertainty around supply chains and energy prices. For GPs, achieving the returns LPs have come to expect will require developing new management strategies and value creation capabilities.
- How will the macroeconomic and political situation affect private market investments?
- How are GPs protecting margins and future returns across their portfolio?
- Where are the defensive opportunities in the deal market currently?
- What digital transformation strategies are being used across portfolios for value creation?
Japan update: Staying ahead of the game
Private equity in Japan has been in rude health and although the outlook is still positive, the challenges facing GPs today resulting from the pandemic, macroeconomic factors and a closed IPO market means that there will be winners and losers from the current crop of GPs as they look to manage their investments and achieve maximum returns. For those that can whether the storm and originate deals at decent entry multiples in growth sectors that both benefit from disruption and have the characteristics to thrive in the current environment, the ability to continue excelling is present. In this session a panel of Japan experts will share their strategies for staying ahead of the game and keeping the run of Japanese private equity top performance continuing.
- What are the major challenges to portfolio companies and how do you tackle them?
- What deal characteristic do you look for to capture growth and protect against current threats?
- Where are exits likely to be found over the next 12-24 months?
- Are we likely to see more or less carve-out opportunities now?
Mid-Market: Finding the next crop of investments
COVID-19 is expected to facilitate succession-related deal flow, business conditions are tougher, the need for outside expertise in areas like digitalization is recognized as consumer buying habits disrupt traditional business models, Ageing company owners have been a longstanding source of deal flow and as founder become more familiar with the asset class and see their peers’ profit from partnerships they are more amenable to private equity advances and those of M&A advisors who are becoming a bigger player in the ecosystem. The succession phenomenon could be accelerated by an economic downturn, but investors must still come armed with convincing value creation plans and be willing to make tough decisions to ensure they are getting in at the right price to achieve the desired return.
- Valuations and expectations – how have they changed over the last two years?
- Does intermediation necessarily result in more competitive processes?
- What can managers do to differentiate their value proposition?
- What lessons were learned from COVID-19-driven portfolio disruption?
- How are local managers developing their value creation capabilities?
Buyouts: Japan takes centre stage
Numerous global and pan-regional GPs now have resources in place locally to take advantage of the opportunity as uncertainties across other key buyout markets make Japan an even more attractive destination for mega deals. There is a hope that the current tough macro business environment will mean corporate Japan will have to confront risks and think about their fundamental approach to core and non-core strategies resulting in opportunities for GPs. Activist investors are also applying pressure so it will be interesting to see the volume of deals that come to market, who the sellers are and what GPs need to do to beat the competition.
- To what extent has the pressure on corporates to divest changed?
- What sectors are most attractive and open to private equity?
- Is activism on the rise in Japan, and how can private equity capitalise?
- How competitive is the market and how do you differentiate yourself from the competition?
LP viewpoint: A consistent approach to private markets
Quicker, bigger and shorter fundraising cycles, elevated valuations and wider economic uncertainty are just some of the issues confronting Japanese LPs who for the most part as recent entrants into the alternative space have only known positive market conditions. Despite these challenges, the strong performance of the asset class remains as do the fundamentals when investing in private markets - finding the right partners, advisors, reporting mechanism and internal capabilities to effectively manage a long-term programme. In this session a panel of experiences LPs will share their strategy for portfolio management through 2022 and beyond.
- How are LPs handling shorter fundraising cycles and the risk of re-ups outpacing allocation plans?
- What approach should new entrants to the asset class take in the current climate?
- Have investment plans changed over the last 18 months?
- How do you build a truly diversified portfolio capturing mid-market, country and sector specific funds?
Private debt and credit: What’s next for the asset class
The private credit asset class continues to mature, attracting new market entrants and high levels of capital raising from both global and regional fund managers. However, market conditions are contributing to a more complex operating environment and have the potential to impact the space serviced by debt and credit players. Our panel of private credit GPs will discuss their views on the industry, tips and tricks on how to navigate the markets, and the opportunities and challenges they expect in the year ahead.
- Which private debt strategies offer the best opportunities in 2022 and beyond?
- How has LP sentiments and sophistication towards investing in private credit evolved?
- What’s next for private credit in Asia?
- What are the advantages of targeting credit via a specialist vs. a multi-strategy manager?
2022 for Japan Private Equity: opportunity in turbulence
Private equity in Japan has shown sustained momentum through the first half of 2022 after a blockbuster 2021, with deal activity remaining at historically high levels. This relative resiliency has come despite rising inflation, a weakening yen, and macroeconomic turbulence at the global level. PE investors can seek opportunity in this turbulence but should remain vigilant.
- Which deals are driving continued high activity, and have exits kept pace?
- What can explain Japan’s relative resilience in the face of inflation and a weakening yen?
- How should PE investors change tactics when evaluating new assets and those they already own?
Accessing alternatives in 2022: Global perspective
Private equity firms had an exceptionally busy 2021. Deal value soared to US$987.6 billion in the year, more than doubling what was an already high total of US$474.5 billion in 2020, according to Mergermarket data. Not unsurprisingly, the asset class has become popular with a growing mix of investors and with a myriad of fund types, strategies and investment styles on offer, for LPs understanding the landscape, how to gain access and who to partner with is key. In this session, our experts discuss the various strategies available, the best way to gain access to a wider group of opportunities globally and the outlook for the deal market.
- What kinds of deals will define the market in the next two years?
- What are the best ways to source and manage co-investments and club deals?
- How does activity compare across key global markets?
- How do you pick the right GPs and advisors to deliver top performance?
Venture Capital: Changing gears
Despite headwinds for venture capital investors including high valuations and challenges in the IPO market, the outlook for Japan remains strong as the ecosystem expands with new and varied entrants, growing international LP interest and the government taking a more active role to encourage start-up activity. As competition increases going early is now the way forward to access the best deals at a fair price and achieving growth internationally, especially in the US, via LP relationships or other partnerships is more important than ever to source the most lucrative exit route. Our panelists consider next steps on the Japanese VC journey.
- To what extent are investors rethinking their IPO options?
- Are valuations outpacing the near-term market potential?
- How are VCs sourcing and selecting earlier stage deals?
- What strategies are being used to capture large-scale offshore growth?
Asia viewpoint: Playing the long game
From a record high of USD 111.2bn in the final quarter of 2021, private equity investment in Asia slipped to USD 64.7bn in the first quarter of 2022 according to AVCJ data. Though still a sizeable total – bettered only four times to date – it confirms anecdotal accounts of a weakening in investor sentiment. Pandemic-related disruptions have continued to punctuate the Asia story in 2022 prolonging the impact on portfolios and effecting market sentiment, whilst regulatory activity in China is prompting some LPs to review their strategy. However, the strong demographics that attracted global investors to the region remains as they look to tap into the renewed growth story post Covid-19 and the geographies and sectors that are primed to capitalise on disruption and changing consumer habits. In this session a group of seasoned Asia experts look to the future.
- How has Asia performed over the last two years?
- What have LPs done to address their China concerns?
- How, where and when are exits being found?
- Which markets and strategies offer the most potential?
ESG spotlight: Responsible investing in a changing world
As the world continues to adapt to the changes brought about by the pandemic, the progress of ESG in the private equity space is more crucial than ever and fund managers of all sizes are now activity investing time and money implementing ESG as they strive to utilises it as a source of value creation. Globally, LPs are continuing to work towards greater levels of engagement with GPs on responsible investing taking considerations such as climate change, supply chain transparency and diversity into account when deciding where to commit capital. In this session a panel of investors will share the ESG priorities they are focusing on to build greener businesses that maximise returns.
- How are ESG trends reshaping LP preferences and fund selection?
- What are the first steps on an ESG journey and how do you turn it into a value creation tool?
- Where do you find ESG talent in Japan?
- What questions are LPs are asking their GPs in 2022 and how has the conversation evolved?
Networking lunch and close of conference
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