Despite the complexities of cross-border transactions and a series of major political events, 2016 was a year of big-ticket outbound deals that started with KKR-backed Panasonic Healthcare’s €1 billion acquisition of Bayer’s diabetes unit.
From stakes in English and French football teams to industrial robotics and software companies, Chinese private equity firms teaming up with strategic investors were the big buyers of overseas assets.
Chinese-European firm Asia Germany Industrial Promotion Capital (AGIC) struck two large European deals this year with its €925 million purchase of German machinery company KraussMaffei Group and its about €150 million acquisition of Italian manufacturer Gimatic. Hong Kong-based PAG Asia Capital and Apex Technology also paired up in an all-cash deal for US printer manufacturer Lexmark, valuing the company at $3.6 billion.
“Chinese investors are indeed getting more sophisticated, especially in their ability to use internationally accepted acquisition financing structures,” Michael Chin, a Shanghai-based partner at Hogan Lovells said. “We are seeing some of the structuring of those deals using high yield bond techniques as well as a couple of light Term B loans – these are sort of structures that in years gone by you wouldn’t even expect Chinese private equity firms to deploy, but they are clearly doing that now.”
A quickly growing middle class in Indonesia and China and restructuring of state-owned enterprises in China and Vietnam helped drive investments in those countries, while many market participants see Vietnam and India as poised to become the next Asian tigers. According to EMPEA’s latest Global Limited Partners Survey, 34 percent of LPs are planning to begin or expand their investment in South-East Asia in the next two years.
Meanwhile, Asian insurers have become big LPs in private equity this year as they seek to bolster returns. Chinese insurers such as China Life Insurance and Ping An Insurance have continued handing out mandates for private equity portfolios; China Life said it will invest up to 5 percent of its 2.4 trillion yuan ($357 billion; €325 billion) in buyouts and co-investment opportunities in the next 12 months; Ping An is a major backer of a 100 billion yuan Sino-Singapore fund.
Taipei based insurer Cathay Life Insurance, which has around $3 billion in private equity and hedge funds, is looking to invest another $1 billion during 2017; Tokyo-based Japan Post Insurance launched an alternatives division in September. Global asset manager Hamilton Lane is also seeing a big market opportunity with Asian insurers and said it will be a big source of private equity capital over the next decade.
Gavin Anderson, an international counsel at law firm Debevoise & Plimpton, told Private Equity International in October that the firm is starting to see Chinese insurers come into offshore private equity funds, which could be a “very big development considering the amount of capital they have”.