Private equity favours Asian stakebuilding
Sundeep Tucker | Tuesday, 22 July 2008
FT Syndication Service
HONG KONG: Private equity firms ramped up the level of minority investments in Chinese and Indian companies in the first half of the year amid a fall in buy-out opportunities in Asia and beyond, according to a study.
The total value of investments by private equity firms in deals involving a stake purchase but not a change in control climbed almost 20 per cent in both China and India, according to the Centre for Asia Private Equity Research.
The surge contrasts with the total value of buy-out investments, which fell 35 per cent in China and 85 per cent in India.
The figures underscore the opportunities in Asia for private equity firms outside the buy-out arena, which has suffered a fall in activity in the aftermath of the global credit crunch.
Kathleen Ng, managing director of the Centre for Asia Private Equity Research, said the data testified to the demand from Chinese and Indian companies for expansion capital in light of continuing strong domestic economic growth of almost 10 per cent a year.
The data, based on completed deals, shows minority investments in China climbed to $3.8bn, compared with $3.2bn in the same period last year. So-called "non-control" deals in India attracted $4.3bn of private equity investment, up from $3.6bn.
The largest single minority investment in Asia in the six months to June was made by Providence Equity Partners, a US firm, which invested $640m for a 20 per cent stake in India's Aditya Birla Telecom.
Ms Ng added: "The leading global buy-out firms are conspicuously absent from the control deals in Asia."
However, private equity groups have amassed a war chest of tens of billions of dollars to invest in Asia, and claim they are prepared to deploy capital as fast as conditions allow.
Ronan Agnew, Credit Suisse head of financial sponsors for Asia-Pacific, forecast that Asia would continue to be a hunting ground for non-control deals, because of historical and cultural reasons. State-backed and family-owned businesses in China and India have traditionally been averse to ceding control.
The research shows that private equity investment in Asia, excluding Japan, totalled $19.3bn in the first half of 2008, a 6.0 per cent rise on the same period in 2007. Non-control deals accounted for $9.9bn. There were 387 deals, 91 per cent of which involved minority investment.
HONG KONG: Private equity firms ramped up the level of minority investments in Chinese and Indian companies in the first half of the year amid a fall in buy-out opportunities in Asia and beyond, according to a study.
The total value of investments by private equity firms in deals involving a stake purchase but not a change in control climbed almost 20 per cent in both China and India, according to the Centre for Asia Private Equity Research.
The surge contrasts with the total value of buy-out investments, which fell 35 per cent in China and 85 per cent in India.
The figures underscore the opportunities in Asia for private equity firms outside the buy-out arena, which has suffered a fall in activity in the aftermath of the global credit crunch.
Kathleen Ng, managing director of the Centre for Asia Private Equity Research, said the data testified to the demand from Chinese and Indian companies for expansion capital in light of continuing strong domestic economic growth of almost 10 per cent a year.
The data, based on completed deals, shows minority investments in China climbed to $3.8bn, compared with $3.2bn in the same period last year. So-called "non-control" deals in India attracted $4.3bn of private equity investment, up from $3.6bn.
The largest single minority investment in Asia in the six months to June was made by Providence Equity Partners, a US firm, which invested $640m for a 20 per cent stake in India's Aditya Birla Telecom.
Ms Ng added: "The leading global buy-out firms are conspicuously absent from the control deals in Asia."
However, private equity groups have amassed a war chest of tens of billions of dollars to invest in Asia, and claim they are prepared to deploy capital as fast as conditions allow.
Ronan Agnew, Credit Suisse head of financial sponsors for Asia-Pacific, forecast that Asia would continue to be a hunting ground for non-control deals, because of historical and cultural reasons. State-backed and family-owned businesses in China and India have traditionally been averse to ceding control.
The research shows that private equity investment in Asia, excluding Japan, totalled $19.3bn in the first half of 2008, a 6.0 per cent rise on the same period in 2007. Non-control deals accounted for $9.9bn. There were 387 deals, 91 per cent of which involved minority investment.