Asian GPs to prioritise geographic expansion

General partners in the Asia-Pacific region will focus more on geographic expansion as the market matures and accumulates capital, according to a survey by law firm Dechert.

The strategy will give firms faster exposure to growing regions and economies, as well as allow portfolio companies to better leverage their networks globally, said the authors of Dechert’s 2019 Global Private Equity Outlook, which surveyed more than 100 senior staff  at global private equity firms.

David Cho, a Hong Kong-based partner at Dechert, noted an increase in regional and country-focused funds going beyond their initial mandate, such as Chinese or Japanese vehicles looking at deals in South-East Asia and Korean funds looking at China.

Japan-focused firms Advantage Partners and Polaris Capital Group are two examples. Advantage closed its debut fund focused on South-East Asia and China on $380 million in May and bought Malaysian plastic bottle manufacturer Plastic Centre, while Polaris is reportedly planning to launch a $130 million Asian investment fund. Tokyo-based Unison Capital wants to raise about $300 million for its second Korean fund.

Japan has also become a land of opportunity. Cho said large international funds that previously had not had a presence in the country now include it as one of their target markets.

Apollo Global Management is hiring a team of dealmakers and opening an office in Japan, according to the Financial Times. In the last two years, private equity giants KKR, Blackstone and CVC Capital Partners have also ramped up investments and expanded their presence in the country by hiring heads of Japan.

Meanwhile, South-East Asia, Japan and Korea will be the beneficiaries from the US-China trade war, prompted by the increasing willingness of private equity funds to work with financial investors, Cho added.

“This trend is growing in Asia, especially with the US-China trade war and some of the limitations Chinese investors are facing,” he said.

Spencer Park, a Hong Kong-based counsel at Dechert, added that China’s current challenges on closing US transactions will provide investment opportunities for its North Asian neighbours. “With increased review risk from the Committee on Foreign Investments in the US, Chinese bidders will be disadvantaged… Japan and Korea do not present those risks,” he said.