Q1��25 Pulse of Private Equity �� Asia-Pacific insights

PE investment in Japan helps buoy ASPAC results in Q1��25

The Asia-Pacific region saw $37.5 billion in announced private equity investment during Q1��25 �� a relatively strong start to the year despite a modest deal count of just 226 transactions. Japan led the region, accounting for the largest share of capital with $20 billion invested, underscoring sustained investor confidence in its stable, domestic-focused economy and ongoing wave of corporate restructuring and transformation.

In contrast, China experienced a quiet quarter, with only $4 billion invested across 36 deals, as persistent regulatory uncertainty and sluggish economic performance continued to weigh on sentiment. Australia also underperformed, attracting just $5.3 billion across 69 deals, significantly below its 2024 pace.

By sector, automotive manufacturing, energy, and industrial manufacturing were standout performers in Q1��25. Over $2.2 billion was invested in the automotive sector, marking a strong quarter as electrification and supply chain reshoring gained momentum. The energy sector saw a strong start as well, attracting $9.4 billion —already well on its way to surpassing the 2024 full-year total of $14.2 billion. Industrial manufacturing also drew heightened interest, with $11.9 billion invested in Q1��25 alone, putting the sector on pace to significantly exceed its 2024 annual total of $23 billion.

The quarter featured several high-profile transactions that helped drive overall deal value. Key deals included Bain Capital’s $5.4 billion acquisition of York Holdings�� headquarters and retail operations,¹�� the take-private of Shinko Electric Industries by a consortium including JIC Capital, Mitsui Chemicals, and Dai Nippon Printing,¹�� and Bain Capital’s $4.6 billion acquisition of Mitsubishi Tanabe Pharma.¹��

Energy remains big focus for PE investors in ASPAC; digital infrastructure emerging as area of interest

In recent quarters, PE investors in the ASPAC region have shown increasing interest in digital infrastructure opportunities. Interest has run a gamut from pure digital infrastructure and the data centres required to enable large AI plays to logistics businesses providing warehousing, transportation, and delivery of e-commerce packages �� areas where PE firms see significant opportunities to maximize efficiencies and drive value creation.

Rising middle class a major driver of PE investment in ASPAC

Rising income levels and the rapid growth of the middle class in many parts of ASPAC �� particularly in Southeast Asia, India, and China �� has driven an enormous increase in demand for all types of solutions and services, including education, healthcare, banking, consumer products, and e-commerce. Given the alignment with sectors typically favoured by PE firms, it’s not surprising that global PE firms have increasingly focused their funds in these high growth sectors in the region. While investment in China has waned in recent quarters, this macro trend will likely continue to drive the focus of PE investors in other parts of the ASPAC region in Q2��25 and beyond.

ASPAC exit activity slows further as continuation funds gain ground

Exit activity in the ASPAC region had a notably slow start to 2025, continuing the downward trend seen in recent years. Achieving high-quality exits has remained a persistent challenge for PE funds in the region �� and globally �� for more than two years. Over recent quarters, many ASPAC-focused funds have come under increasing pressure from LPs to return capital, particularly those nearing the end of their fund lifecycle.

In response, a growing number of PE firms have turned to continuation vehicles �� structures that allow them to transfer portfolio companies from maturing funds into new vehicles. These vehicles offer a way to deliver liquidity to investors while avoiding rushed or suboptimal exits in challenging market conditions.

The increasing use of continuation funds has also sparked broader strategic shifts. Some firms in the region are beginning to rethink their investment time horizons, with a few launching permanent capital vehicles that allow them to retain high-quality assets indefinitely �� free from the pressures of fixed fund timelines and forced exits.

Trends to watch for in Q2��25

Private equity investment in Japan will be a key area to watch in Q2��25, as the country continues to offer compelling opportunities tied to domestic corporate restructuring and transformation. While occasional slowdowns may occur �� largely due to resource constraints and a limited pool of professionals fluent in both Japanese and private equity dealmaking �� any pullbacks are expected to be modest. Over the long term, Japan is well-positioned for a significant acceleration in PE activity, particularly as succession planning and operational modernization remain top priorities for many domestic firms.

Across the ASPAC region more broadly, geopolitical considerations are expected to play a defining role in shaping investment decisions in Q2��25. US tariff policies in particular are a major concern; the constantly shifting policies are seen as more of a challenge than the implementation of a clear, stable, and predictable tariff regime that could be priced and valued accordingly.

In response to the lack of clarity, PE investors are reviewing their existing portfolios to assess potential impacts and determine mitigation strategies. Many are also putting pending deals with any significant US import or export angle on hold until there is more certainty. In some cases, exit activities are also being delayed until conditions improve.

A number of announced deals have included MAC clauses, which can be triggered based on adverse impacts. Other ASPAC deals are being repriced due to perceived losses or benefits �� primarily the former. Should the US tariffs on China remain substantial or volatile, other jurisdictions in the ASPAC region could benefit from increased deal flow. As businesses face increasing distress as a result of the tariff environment and uncertainties, there could be increasing opportunities for PE investors to pick up distressed assets.

Until there is more certainty around tariffs, PE investors in the region are likely to prioritize sectors that are more insulated from geopolitical risk. Areas such as digital infrastructure (including data centers and connectivity platforms) and healthcare are expected to attract increasing attention as firms look to deploy capital into resilient, future-oriented industries.