Grind, creativity and buyer education are essential to securing exits in adverse market conditions, investors told the Hong Kong Venture Capital & Private Equity Association’s (HKVCA) Asia forum.

“It’s tough out there. You have to scrape and grind and find every which way,” said Hans Wang, a managing partner at CVC Capital Partners [AMS:CVC], which realised over USD 1bn out of Asia in 2024, primarily through trade sales and sell-downs of listed companies. “The key is to be as creative as you can and find as many avenues as you can.”

Fellow pan-regional manager PAG returned approximately USD 3bn to LPs. Trade sales accounted for half the total, with the rest coming from existing portfolio companies through dividend payments, recapitalisations, sale-and-leaseback arrangements, and non-core asset disposals.

Lincoln Pan, a partner and co-head of private equity at the firm, also emphasised being able to “grind things out,” describing 2024 as the year of the failed exit with an industry-wide conversion rate no better than one in five or one in six.

“Something gets to exclusivity, and you find that the counterparty doesn’t have equity, doesn’t have LP approval to do deals, or doesn’t have co-investment at the last minute,” he said, noting that PAG achieved a 50% hit rate by prioritising a handful of key exits. “The days of sitting back and hoping people show up to buy your assets, that’s a long time ago.”

An agreement to sell PAG-backed printer manufacturer Lexmark International to Xerox [NASDAQ:XRX] for USD 1.5bn was announced at the tail-end of 2024. Overall, Asia private equity exits reached USD 73.1bn for the year, bettering the 2023 total of USD 64.7bn, according to AVCJ Research. Trade sales accounted for USD 26.1bn, trailing sponsor-to-sponsor sales for the first time.

Though a marginal improvement from 2023, the trade sale contribution is well short of the average contribution of USD 46.7bn for the six prior years. This underlines the difficulties in engaging strategic buyers following COVID-19.

K.Y. Tang, founding chairman and managing partner of Affinity Equity Partners, identified asset selection and being proactive as the key points. “You have to do buyer education, so they have enough conviction,” he said.

Affinity announced the MYR 4.2bn (USD 966m) sale of Malaysia-based Island Hospital last September. The buyer, IHH Healthcare [KLSE:IHH], was among the first groups it reached out to when planning the exit.

Investment has also been slow – USD 155.7bn in 2024, compared to an average of USD 227.9bn for the prior six years – but Tang was reasonably optimistic about the prospects for deployment, citing attractive valuations. However, he and others flagged slower economic growth in Asia, noting that value-creation capabilities are increasingly important in delivering returns.

“People used to put out 100-day plans after six months. Today, you have to do the value creation plan alongside due diligence work,” Tang said, adding that deals may not get approved by vendors in the absence of sufficiently detailed plans.

Pan observed that underwriting cases can be further strengthened by focusing on areas of familiarity. PAG recently acquired Pravesha Industries, an India-based pharmaceutical packaging provider, having gained insights into the business through an existing country portfolio that includes pharmaceutical products manufacturers Optimus and Anjan Drug.

“This reduces the downside base case risk and reduces the downside EBITDA risk,” he explained.