Private equity deals in Asia-Pacific excluding Japan declined in the third quarter as high inflation and prolonged effects of the pandemic hampered dealmaking.

Transaction value in the July to September period plunged 72.9% to $6.89 billion from $25.39 billion a year ago, S&P Global Market Intelligence data shows. The number of deals slipped 52.2% year over year to 43 from 90 transactions.

Transaction value for the first nine months of the year stood at $52.89 billion, slightly lower than $54.02 billion the previous year.

Executing successful deals in the region are becoming more challenging due to risks such as rising inflation, territory-specific characteristics and increased regulatory scrutiny, professional services firm PwC said in a report.

"Inflation across the region has compounding challenges — potentially dampening underlying customer demand due to high prices and increasing financing costs, making transactions more expensive to complete, and pressuring high-return expectations. Whether this is a long-term structural change or a short-term demand/supply shock remains to be seen," PwC said.

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Private equity involvement in M&A activity

M&A activity in the region recorded $116.81 billion in total value in the third quarter, 50.9% lower from $238.01 billion in the same period a year ago. Transactions with private equity involvement slipped to 6% of the total from 11% in the third quarter last year.

Biggest deals

Among the largest deals announced in the nine months ended Sept. 30 were KKR & Co. Inc.'s US$23.03 billion acquisition of Sydney-based hospital operator Ramsay Health Care Ltd. and EQT AB (publ)'s US$7.45 billion buyout of Hong Kong-based firm Baring Private Equity Asia.

Australia recorded the largest transaction value of transactions at US$26.93 billion, bolstered by KKR's acquisition of Ramsay Health. Hong Kong and mainland China came in second and third with US$7.46 billion and US$5.27 billion, respectively.