"Only Certain Deals"... Private Equity Firms Prioritize Quality Over Quantity Amid Growing Uncertainty

원본보기 아이콘

As global private equity (PE) markets face a downturn in deal activity, the landscape is shifting towards large-scale, high-quality transactions. This trend is being driven by investors who, in response to heightened geopolitical uncertainty, are increasingly prioritizing quality over quantity in their investment strategies.

According to the "Q1 2026 Private Equity (PE) Investment Trends" report released by KPMG, a global accounting and consulting firm, on April 30, the total value of global PE investments in the first quarter of this year was $436.3 billion (approximately KRW 647.4256 trillion) across 4,168 deals, marking a moderate slowdown from the previous quarter. As a result, the 12-month cumulative investment value declined slightly from $2.2 trillion to $2.1 trillion. Notably, the number of deals dropped from 21,026 to 19,682 over the same period, the lowest level since the first quarter of 2021.

The report analyzes this trend as investors concentrating on "big deals" they can be confident in. In fact, as uncertainty surrounding the Iran conflict intensified toward the end of the quarter, small- and mid-sized deals contracted, while strategic large-scale transactions maintained comparatively robust momentum.

원본보기 아이콘

The market for investment exits has recovered more slowly than anticipated. In the first quarter, global exit volume amounted to $294.2 billion across 635 deals, falling well below last year’s numbers. When it comes to initial public offerings (IPOs), there were only 31 deals worldwide, according to the analysis.

By region, the Americas led the market with $247 billion across 1,980 deals. Of this, the United States accounted for a dominant share with $228 billion across 1,811 deals. A representative case is the $41 billion transaction in which the American power company AES was taken private.

The Europe, Middle East, and Africa (EMA) region recorded $154.9 billion across 1,816 deals, while the Asia-Pacific (ASPAC) region came in at $26.1 billion across 255 deals.

Within the ASPAC region, Japan led with $7.6 billion, followed by Australia ($4 billion), Korea ($3 billion), and China ($1.7 billion). Notable ASPAC top 10 transactions included Korea Investment Partners’ acquisition of defense and space component specialist M&C Solution (about KRW 945 billion) and Kyobo Life Insurance’s acquisition of SBI Savings Bank (KRW 900 billion).

원본보기 아이콘

By industry, the TMT (Technology, Media, and Telecommunications) sector accounted for the largest share at $127.5 billion. However, the most notable growth in investment was seen in the energy and natural resources, clean/climate technology, and infrastructure and transportation sectors. The expansion of demand for artificial intelligence (AI) infrastructure, coupled with energy supply issues, is driving capital flows into these related sectors.

The fundraising market is also experiencing a cooling phase. In the first quarter, newly raised funds amounted to $85.9 billion across 122 funds, dropping to $373.9 billion across 549 funds on a 12-month cumulative basis-the lowest level since 2017. The analysis points to accumulated dry powder in the market and mounting pressure to exit existing investments as constraints on the formation of new funds.

Looking ahead, the trend toward "selective investment" is expected to strengthen further. In the second quarter, capital is likely to concentrate on AI-adjacent areas such as energy, data centers, and digital infrastructure. The defense industry is also emerging as an attractive investment destination due to rising geopolitical risks.

However, the key variable remains geopolitical risk. In particular, since the outcome of the Iran conflict will directly impact oil prices and energy supply and demand, investors are likely to maintain a conservative approach to energy-intensive industries for the time being.

Jinwon Kim, Deputy CEO of Samjong KPMG, stated, "Although there is a significant amount of dry powder in Korea's PE market as well, growing uncertainty is prompting asset managers to maintain a cautious investment stance. For the time being, investment flows are expected to focus on the mid-market, with intensified risk management and fierce competition to identify high-quality small and mid-sized deals."

원본보기 아이콘

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.