Asian private equity surges ahead

Fundraising and new investments are continuing to rise in the Asian private equity market while large and profitable exits are being seen for the first time, says a new report.

A survey on the current state of the Asian private equity market by the Asian Venture Capital Journal has produced upbeat results, with fundraising, new investment and exit opportunities all on the increase.

The survey found that private equity firms in Asia raised more than US$5 billion in the first half of 2004, compared with US$3.3 billion in the whole of 2003 and US$3.0 billion in the whole of 2002.

Australian and Japanese fundraisers are leading the way. In Australia, US$806 million was raised in the first half of this year, more than four times the total amount raised in the country in 2003. In Japan, almost US$3 billion was raised in the six-month period, against US$1.4 billion in the previous year.

The survey said Asian private equity’s total capital under management has now broken the $US100 billion mark. And it seems the fundraising boom is far from spent: funds currently being raised include Nikko Citigroup Japan Fund, CVC Asia Pacific Fund 2 and JP Morgan Partners Asia II.

Investment across Asia reached US$8.6 billion in the first six months, ahead of the US$7.1 billion total reached at this time last year. Buyouts accounted for 55 percent of the total, with headline deals including Carlyle Group’s $1.9 billion acquisition of DDI Pocket and Citi Venture Capital/CVC Asia Pacific’s US$803 million purchase of assets owned by Korea’s Hynix Semiconductor.

The survey hailed the completion of some prominent exits during the period as a “new development” in Asia. They included two deals by Ripplewood Holdings of the US: the US$2.2 billion IPO of Shinsei Bank and the $US3 billion sale of Japan Telecom to Softbank Corp. Others included Carlyle Group’s US$2.7 billion sale of Korea’s KorAm Bank to Citigroup and the $US957 million IPO of Australia’s Pacific Brands.

The much-hyped Chinese market sent out mixed signals in the first six months. Fundraising by Chinese GPs totalled a disappointing $US380 million, with foreign firms still dominating. But new investments jumped to US$1.2 billion – more than five times that invested in the same period last year (which was affected by the SARS outbreak).

In Southeast Asia, Thailand and Malaysia saw dramatic increases in activity. Thai funds invested almost US$200 million in the six months, compared with US$23 million in the first half of 2003, while investment in Malaysia over the same period increased from US$30 million to US$459 million. By contrast, Singapore and Indonesia showed declining levels of investment during the first half.

Commenting on the survey, AVCJ publisher Dan Schwartz said: “Asian private equity has always been and will continue to serve up a volatile brew. But with markets like India and China generating real wealth through global value add, and countries like Korea and Japan continuing to restructure, the time seems right to initiate an Asian investment strategy.”