Despite larger deals, broader investment and strong returns in 2017 underpinning another solid year for Private Equity (PE) in the Asia-Pacific (APAC) region, a more challenging environment is emerging as the market matures and competition rises. With high valuations and a dwindling pool of attractive deals expected, fund managers may need to develop new capabilities to boost top-line growth and maintain a competitive edge.
The maturing market will have implications for investment decisions and portfolio management, and firms may need to be more creative about where they invest their capital and their capital structure.14 To maintain returns, firms will need to help their portfolio companies boost top-line growth, which may require the development of new capabilities.15 Embracing digital innovation and transformation is expected to be a key priority for Asia-based private equity firms, given the region's companies often lack sufficient market data and analytics capabilities to drive commercial excellence.16 "Many Asian organizations lag behind in actual adoption and risk ceding a competitive advantage to companies that have built advanced analytics capabilities," a report by McKinsey noted in March 2018.17 Building these capabilities may also be important to help portfolio companies defend their position against digital disruption.