Privately Speaking: Bain Capital

Bain Capital’s Hong Kong office sits in one of the city’s most coveted pieces of real estate, Cheung Kong Center, owned and frequented by Chinese billionaire tycoon Li Ka Shing. With stunning views of Victoria Harbour, the firm shares walls and floors with the likes of Goldman Sachs and BlackRock Asset Management – some of the best-known names in financial services.

Like its illustrious neighbours, Boston-headquartered Bain Capital has become a household name, having been founded in 1984 by partners of consultancy Bain & Co, including former US presidential candidate Mitt Romney. Romney’s 2012 run certainly made Bain a talking point for ‘Main Street’. But on Wall Street and its environs, Bain, which manages around $80 billion of capital globally, has long been considered a private equity powerhouse building out its global brand.

“Bain as a firm has always taken a very strategic view on how we approach different markets and different opportunities,” managing director Jonathan Zhu says, as Hong Kong’s harbour bustles behind him. The firm started back in 1984 in Boston and last year was its 30th anniversary – but Asia, according to Zhu, “came a little bit slower; it was sort of the last piece of the puzzle.”

To date, the firm has raised two funds dedicated to the region: the $1 billion Bain Capital Asia Fund I, which closed in 2007, followed by the $2.3 billion Bain Capital Asia Fund II, a 2012 vintage.

TUNE IN TOKYO

It was around 2004-2005 that Bain actively started pursuing the Asia opportunity, enlisting managing director David Gross-Loh, who at the time was based in New York, to develop the firm’s strategy for the region.

“We always thought that if we want to do something well, we need to be very focused. So we decided we wanted to be focused initially on China and Japan. Those were the two largest economies in Asia; we thought those two markets would give us the greatest amount of opportunities,” recalls Zhu, who joined the firm in 2006 after serving as CEO of Morgan Stanley’s investment banking operations in China.

“We wanted to build a scaled team that covered these two markets – so when we started we went pretty aggressively into hiring mode and built a pretty large team in Japan and hired a large team in China.”

The focus on Japan turned out to be a good decision; Bain has garnered admiration for its work in the country, whose buyout market has proven difficult for other global firms to navigate.

“Bain really chose Japan and decided to do something about it. There is respect [in the market] for what they’ve done there,” one rival GP acknowledges.

Gross-Loh, who now resides in Tokyo half the year and spearheads Bain’s activity in the country, recalls why Bain was initially drawn to Japan.

“The raw potential to improve business performance seemed like it was enormous and in many ways reminded us of the buyout business in the 1980s in the US, when US businesses were facing productivity challenges and foreign competition,” he says. “That was a really successful time for the buyout industry.”

Bain took a different approach to its peers, many of which were looking at the market opportunistically.

“We had enough people in the firm who knew Japan and knew it wasn’t a market you could just dabble in,” Gross-Loh continues. “We recognised you have to have a very deep, Japanese-speaking team and a lot of resources dedicated to sourcing because you couldn’t rely on investment banks to find you deals. Then you need people on the ground who can help drive change and go and help these under-managed companies.”

The firm built a team that grew to 17 people by the end of its second year there in 2007. Now, Bain operates a fully-fledged Japanese investment platform, 25-people strong.