Side Letter: Eurazeo’s APAC ‘acceleration’; Family offices eye PE; Kohlberg’s $5bn target

Eurazeo wants to accelerate its activity in Asia through the launch of a 'hub'. Plus: North American family offices are turning to private equity to mitigate macro headwinds and Kohlberg & Co is seeking $5 billion for its next mid-market fund. Here’s today's brief, for our valued subscribers only.

Just happened

Eurazeo’s Bavière: open to Asia M&A (Source: Eurazeo)

Eurazeo looks East
Europe’s Eurazeo has designs on Southeast Asia. The France-headquartered firm formally opens its office in Singapore today, roughly one year after it launched, head of investment partners Christophe Bavière tells Side Letter. Though Eurazeo already has a presence in Shanghai and Seoul, the Singapore office, which is now 10-strong, will act as Eurazeo’s “hub” in the region, he noted. In attendance at tonight’s event will be Jean-Pierre Raffarin, former prime minister of France.

The move comes amid plans to greatly “accelerate” Eurazeo’s allocation to the region through its venture capital and growth equity strategies. Among them is Smart City Fund II, which has so far gathered nearly €300 million against a €250 million target, Bavière said. Eurazeo has made five investments in Southeast Asia to date. It will also pursue growth in the region for its existing portfolio of European buyouts.

Eurazeo isn’t alone in prioritising Asia-Pacific expansion. Fellow European firm EQT acquired regional heavyweight Baring Private Equity Asia this year to cement a position in the region. When asked whether Eurazeo – which itself has pedigree in M&A thanks to its 2018 acquisition of Idinvest Partners – might follow a similar path, Bavière said it was “still an open discussion”. “We are looking regularly at these kinds of opportunities. It takes time to build a common investment culture and we have no immediate plan, but we’re always open to potential partnerships.”

On the subject of M&A…
Fintech investor Motive Partners this morning agreed to acquire European early-stage VC platform embedded/capital, per a statement. Details are scant and a Motive spokesperson declined to comment beyond the release. What we do know about embedded/capital is that it is based in Berlin and launched in January by Ramin Niroumand, founder and former chief executive of VC manager finleap. Side Letter also understands that the combined assets under management, post-acquisition, of Motive Ventures and embedded/capital will be a little over $200 million. Motive Ventures forms just a small part of New York-headquartered Motive Partners, which has about $4.8 billion of AUM.

Family values
Family offices are hungry for private equity. That was one key takeaway from Campden’s Wealth’s latest North American Family Office Report, which found that wealthy families are leaning into the asset class in response to macroeconomic headwinds. Here’s what you need to know:

  • Some 81 percent of North American family offices said investment risk is their greatest concern, driven in part by inflationary issues.
  • North American family offices delivered a 15 percent average portfolio return last year, compared with 13 percent in Europe and 10 percent in APAC. This was driven by outsized returns from VC (26 percent), PE funds (22 percent) and direct PE (21 percent).
  • The average family allocates 27 percent of their portfolio to PE and private debt, comprising 9 percent direct PE, 9 percent PE funds, 6 percent VC and 3 percent debt.
  • Nearly half (46 percent) intend to increase their allocations to PE funds moving forward: 41 percent to direct deals, and 35 percent to venture capital.
  • Over one-third (37 percent) of North American family offices engage in sustainable investing, compared with 47 percent globally.

Essentials

Kohlberg’s cash
US mid-market firm Kohlberg & Co is seeking $5 billion for Kohlberg Investors X, our colleagues at Buyouts report this week (registration required), citing materials prepared for Plymouth County Retirement Association. If the target is met, Fund X would be almost 50 percent larger than the 2021-vintage Fund IX, which closed last year on $3.4 billion. The vehicle is expected to wrap up in the second half of next year.

Kohlberg was initially founded as the family office of the Kohlberg family and reconstituted as an institutional third-party manager in 2001. Kohlberg Investors IX delivered a 1.3x net multiple and a 49.8 percent net IRR as of March, according to PCRA documents. Its 2016-vintage Fund VIII was generating a 1.7x net multiple and a 23.5 percent net IRR.

Dig deeper

Institution: International Finance CorporationHeadquarters: Washington, DC, USAUM: $45 billion

The International Finance Corporation has proposed a $60 million commitment to Multiples Private Equity Fund IV.

The IFC’s recent commitments have focused on the healthcare, TMT, transport and financial services sectors in Asia-Pacific, Latin America and Africa.

For more information on IFC, as well as more than 5,900 other institutions, check out the PEI database.


Today’s letter was prepared by Alex Lynn with Helen de Beer.