L Catterton changed key person clause on Asian fund before senior departures

The changes followed a proposed management buyout that was rejected in a London meeting of the LPAC in the first half of last year, PEI has learned.

The Asia unit of L Catterton, one of private equity’s most prominent consumer-focused firms, made changes to the key person clause on its third flagship fund prior to a number of senior departures.

The firm’s 2017-vintage L Catterton Asia III fund was initially marketed with seven key persons, according to a JP Morgan Private Bank marketing document from May 2017 seen by Private Equity International.

Managing partner and chairman Ravi Thakran, who founded L Capital Asia in 2009 before its merger with US consumer-focused PE firm Catterton in 2016, was a singular key person, meaning his departure alone could trigger a key person event, the document shows. The loss of any three of the other six managing directors would also trigger a key person event.

Two of the six MDs – Sanjay Gujral and Frankie Chan – left the firm in 2018, according to their respective LinkedIn profiles. The former re-joined Singapore’s Everstone Group after seven years with L Catterton Asia and L Capital Asia.

The other key persons were managing directors Narayan Ramachandran, Shantanu Mukerji, Hanji Huang and Jun Wang, the document shows.

L Catterton secured permission from its Limited Partner Advisory Committee to replace these six MDs as key persons and remove Thakran as a singular key person prior to final close, according to three sources familiar with the matter. This meeting was held in the third quarter of last year, two of the sources said.

The firm’s Asia funds have invested in companies such as Australian footwear brand RM Williams, pan-Asian restaurant chain Crystal Jade and China-listed skincare producer Guangzhou Marubi, which is trading at more than double its value at IPO last year.

“Following the combination of Catterton and L Capital in early 2016, we took time to understand the region and team in place,” a senior spokesperson for L Catterton told PEI.

“As it has been for more than 30 years, our objective is to ensure the highest performance of our funds, supported and enhanced by a best-in-class team of professionals. As a result, there have been changes to our Asia franchise in order to top-grade our team, all with the full support of our LPACs and investors. We continue to add resources across all aspects of our firm from administration, portfolio operations and investment professionals, while instituting process disciplines consistent with the firm as a whole.”

JP Morgan Private Bank was Fund III’s largest single LP and sat on the LPAC, the sources said. High-net-worth clients of the New York-headquartered bank committed via a conduit fund, and the bank charged L Catterton an initial fee, as well as an ongoing servicing fee, according to the marketing document.

JP Morgan Private Bank declined to comment.

The changes followed a proposed management buyout that was rejected in a London meeting of the LPAC in the first half of last year, the sources added. Thakran had been one of 12 partners intending to spin out and launch a growth fund. That news was first reported by AVCJ in May last year.

Fund III had secured at least $1.29 billion from 55 investors prior to the key person changes, according to a filing with the US Securities and Exchange Commission from June last year. It went on to close on $1.45 billion in the second half of last year, and in a November interview, Thakran told PEI the firm had resolved its “issues”.

Since then, former key persons Ramachandran and Mukerji have left the firm and Thakran is stepping aside as managing partner, the sources said. Head of operations Harry Markl and managing directors Frank Zhou, Colvyn Harris and Haichen Zhang are also understood to have departed in this time.

These exits were first reported by DealStreetAsia last month.

Of the above seven executives, only Thakran was listed on L Catterton’s website as of Thursday.

L Catterton appointed Chinta Bhagat, former head of private markets for South Asia at Malaysian sovereign wealth fund Khazanah Nasional, as managing partner and head of Asia funds in H2 2019, Thakran told PEI last year.

PEI understands that L Catterton Europe executives are also supporting its Asia funds.

L Catterton was formed in 2016 after luxury retailer LVMH combined its private equity unit with Greenwich-headquartered Catterton. L Capital Asia, LVMH’s regional investment unit, became L Catterton Asia. The combined entity has completed more than 200 deals and oversees more than $20 billion of equity capital, according to its website.