Healthcare private equity (PE) in Asia-Pacific continues to show signs of strength as total disclosed deal value in 2022 reached over US$19 billion, surpassing previous year’s US$17.8 billion record, with six deals in excess of US$1 billion, according to a recent report.

Large deals in Japan, India, South Korea and Australia accounted for majority of deal value in the region, including six buyouts valued over US$1 billion. India, in particular, had an impressive year accounting for four of the top 10 deals, states Bain & Company’s 12th annual Global Healthcare Private Equity and M&A report.

Seven of the 10 largest deals were announced in the second half of the year, defying the ‘tale of two halves’ narrative seen in North America and Europe. Five of the top 10 deals were sponsor-to-sponsor transactions, and these large trades between sponsors demonstrate the region’s maturity and attraction for global mega-cap funds.

While 2022 generated impressive value numbers, total Asia-Pacific healthcare PE deal count slowed in 2022 compared with prior years. The region also lost ground in terms of share of global buyout volume. Deal volume in Asia-Pacific reached 35% to 40% of global activity in 2020 and 2021 but was only around 25% of global volume in 2022.

Part of the decline was due to decreased deal activity in China, a result of Covid-related restrictions, geopolitical tensions, and evolving sector policies. As a result of these trends, total annual deal value in China dropped from an average of around US$5.3 billion across 2017–21, to US$1.6 billion in 2022. Deal count in 2022 dropped by 67% from the 2017–21 average. Medtech and biopharma sectors were also consequently impacted.

Outside of China, Asia-Pacific had its best year ever in terms of deal count and disclosed value. This was driven mostly by activity in the provider sector.

There are several reasons to remain optimistic in 2023, even with uncertainty still swirling in deal markets, the report notes. Asia-Pacific fund-raising is up, dry powder remains ample, and mergers and acquisitons in healthcare has created more large-cap targets.

Finally, India and Southeast Asia continue to be markets to watch. In both regions, investors are likely to continue to bet on the large unmet healthcare needs supporting the hospital sector. India will likely see increased investments in pharma services and the application programming interface/contract development manufacturing organization space as global biopharma companies diversify their supply chains beyond China.

“The strong regional activity shows these markets coming of age with geographical breadth, opportunities across sectors and, on average, cheque sizes continuing to grow,” says Vikram Kapur, head of Bain’s Asia-Pacific healthcare and life sciences practice. “Time will tell if 2022’s busy second half is a sign of more to come in 2023, but we are optimistic.”