H&Q Asia goes later-stage

Following H&Q Asia Pacific’s announcement of a co-investment partnership with THL Partners last September, PEO’s Judy Kuan speaks with H&QAP founder Dr Ta-lin Hsu about the evolution of the firm and the direction it is taking going forward.

As the private equity markets in China and other North Asian markets develop, so too are the firms active in this region evolving to meet the changing opportunity set.

Hsu: a friendly but independent relationship with THL 

One notable example is H&Q Asia Pacific. The firm announced earlier this week that it has successfully closed on $500 million (€407 million) for two new funds targeting buyout deals in North Asia. The buyout focus of these two funds – the $200 million Asia Pacific Growth Fund V LP (APGF V) and the $300 million H&Q-NPS Fund I – is distinct from that of H&QAP’s previous funds, and it reflects the changing investor appetite and investment environment that the firm now finds within the context of Asian private equity.

H&QAP started off twenty years ago as a venture-focused organisation, but has since grown part of its business into the buyout arena. According to H&QAP founder and chairman Dr Ta-lin Hsu, when the firm raised its previous generation of funds, it took inspiration from the Warburg Pincus approach to investments – that of using one fund to invest in all types of private equity.

“Some of our investors didn’t quite agree with us and thought we should focus,” says Hsu. “So we decided to treat our Taiwan team as a separate, small team to manage our venture funds. APGF V will be limited to only mid-cap buyouts and will not do any venture investing.”

The recent announcement follows the one made last September when H&QAP established a partnership with Boston-based buyout shop Thomas H. Lee Partners. Hsu explained to PEO that THL Partners can co-invest with H&QAP in large deals that are outside of the latter’s investment range. “They have a lot of experience in buyouts, especially larger sized deals that we have less experience with.”

A number of deals have also been sourced from the partnership. “They have referred two or three deals to us that they sourced in Boston, and we have referred three or four deals to them also. On top of that, they have many portfolio companies that can use offshore manufacturing and outsourcing, and they refer those needs to us,” adds Hsu.

Only time will tell which direction the H&QAP and THL relationship will ultimately take. However, it is almost certain that many observers – particularly those considering entering the North Asian buyout market through joint ventures with local firms – will be closely watching how this partnership pans out.