"Asia Joint Investment Attractive... Higher Valuation Appeal Compared to Developed Countries"

Adams Street Partners Report
Positive Co-Investment Outlook in Korean Private Equity Market for Healthcare and E-Commerce

[Asia Economy Reporter Minji Lee] Positive trends are being observed in the capital flows and portfolios of the Asia co-investment market. Investment opportunities in Asia are not only increasing but also becoming more attractive.

On the 15th, according to Adams Street Partners, a global private equity firm, a survey conducted by the Economist Intelligence Unit (EIU) revealed that 41% of institutional investors worldwide expect to gain the most promising private equity opportunities through co-investment this year. Additionally, 42% of respondents predicted that the Asia region will receive the most attention in the global private equity market.

The main reason for the positive outlook on Asia is that its economic growth rate is better and risk levels are lower compared to the US and Europe, while valuation attractiveness is higher. Furthermore, based on growth-adjusted criteria, many Asian companies’ valuations are much more attractive, and their debt levels are lower, the analysis showed.

Most minority stake investment deals in growth companies within emerging markets do not use leverage, which is expected to reduce the overall financial risk significantly by lowering the dependency of returns on leverage.

Exit methods for Asia region co-investments are also diversifying. Asia co-investment deals adopt a passive strategy and rely on lead equity sponsors to drive exits. Recently, experienced GPs (private equity firms) have emerged, actively seeking capital and solutions for co-investments. GPs operating in Asia are taking proactive steps alongside co-investors in various deals such as ‘large deal syndications,’ ‘joint acquisition bids,’ ‘follow-on investments,’ and ‘secondary transactions,’ creating many investment opportunities.

Adams Street Partners explained that attractive co-investment opportunities also exist in Korea. Korea has a high correlation with global trade and a large economic scale, and its private equity market is active due to corporate spin-offs and restructuring, management succession and business transformation, strengthening domestic demand, and global market expansion. In Korea, co-investment opportunities are expected not only in traditional leveraged buyout deals but also in sectors such as healthcare R&D, e-commerce, and social media.

Adams Street Partners stated, “After years of growth, the Asia private equity market offers a variety of unique deal types, additional portfolio exposure, and differentiated returns in both developed and emerging countries.”