Private equity houses, including U.S. firms Blackstone and KKR, are showing greater flexibility in approaching target assets as they face more pressure to deploy their capital, an M&A banker said.

After doing nothing in the months following the credit crisis, private equity firms have, since the middle of this year, started to seriously look at targets that will lead to transactions in 2010, Michael Bracken, a managing director at Royal Bank of Scotland, said on Wednesday.

We expect PEs may need to be flexible -- both in structure and sector. There is more willingness to look at investment opportunities beyond the traditional sectors and structures, he told Reuters on the sidelines of the World Knowledge Forum in Seoul.

What may drive their investment focus may more often be what is available.

Bracken, in charge of RBS' M&A and corporate finance business in Asia, pointed out private equity funds were more open to smaller-size stake purchases, a departure from their previous strategy of taking control.

They are also more flexible about funding structures, as they have been far away from cheap financing.

He sees multiple billions of dollars as becoming available from private equity funds for Asian deals, as fundraisings in the past few years dwarfed the $300-500 million raised by some big Asian funds a decade ago.

Bracken estimated that Asian deals led by private equity firms in 2010 may start approaching the levels of 2006 and 2007 when US$50 billion worth of transactions occurred, adding that many of their upcoming deals in Asia would be in cash.

He expects Asian investors' pursuit of deals beyond the region to keep outbound deals buoyant, led by China. Resources assets will remain most sought after, while anti-trust regulations would remain a risk to outbound deals.

RBS, ranked eighth for Asia's cross-border M&A advisory this year, worked for Warburg Pincus' WP.UL $250 million investment in Taiwan's Chunghwa Picture Tubes in 2007, the largest private equity investment in the display sector.

He expects private equity firms' return to the M&A market to help revive the deal market. Asia's M&A deals have contracted to $93.7 billion year to date, versus $195.5 billion for all of 2008, with Australia accounting for 40.8 percent or $38.2 billion, according to Thomson Reuters data.

(Editing by Ken Wills)