The Asian A-list

PEI Asia presents the 2009 Asian winners in the tenth annual Private Equity International Awards.

Last year is a year many firms would probably prefer to forget. But the firms on the following six pages not only weathered the storm of the financial crisis, but also managed to stand out from the crowd in the process.

A key trend at the end of 2008 and first half of 2009 was the retreat from Asia of international firms – be it banks or private equity managers – with a number either trimming their presence or shuttering operations completely. However, among the most notable themes emerging from this year’s Asian awards winners is the fact that large, branded, global firms that have stayed the course and built up a substantial presence in the region are giving domestic firms a forceful run for their money. 

Kohlberg Kravis Roberts, Oaktree Capital Management and Partners Group were the big winners in Asia in the Private Equity International Awards 2009, taking two awards each and dislodging incumbent local firms in the process. These wins represented only a few of the hotly contested Asian contests in the PEI Awards, but they serve as an important reminder that while local Asian firms continue to flourish and gain ground with LPs, global private equity firms are by no means taking a back seat anytime soon.

Below, PEI Asia’s team of journalists takes you through all the Asian awards results and offers thoughts on why the industry chose the winners it did.

ASIAN PRIVATE EQUITY FIRM OF THE YEAR

1. Kohlberg Kravis Roberts
2. Affinity Equity Partners
3. Bain Capital

While some firms stood still – or even beat a retreat from Asia – in 2009, Kohlberg Kravis Roberts went ahead, under the leadership of Asia head Joe Bae, and closed the largest buyout of the year, Oriental Brewery (see also: Private Equity Deal of the Year in Asia).
And though Oriental Brewery was undoubtedly the high point for the firm, it was by no means the only Asian string added to KKR’s bow. In October, the firm led a consortium including GIC Special Investments and CICC Private Equity in a $160 million investment in International Far Eastern Leasing Company, a Chinese financial leasing provider. One month earlier, it had upped its stake in Indian communications software firm Aricent to 79 percent by investing a further $255 million in the company alongside Canada Pension Plan Investment Board (CPPIB).
The firm also beefed out its advisory presence in the region in 2009, with one notable appointment being that of Singapore-based former Standard Chartered chief executive officer, Michael Denoma, to advise on Asia, the Middle East and Europe.

ASIAN GROWTH INVESTOR OF THE YEAR

1. SAIF Partners
2. Baring PE Asia
3. The Carlyle Group

Last year it won Asian Venture Capital Firm of the Year. This year SAIF Partners has taken the Asian crown for investments of a slightly larger scale.
Having closed deals in companies as diverse as a goat milk products manufacturer in China (Yayi International) and an Indian media conglomerate (Network 18) in 2009, SAIF has clearly established itself as a go-to firm for growth capital in its core markets of China, India, Hong Kong and Taiwan.
It also made the most of a jump in performance of the Bombay Stock Exchange to exit PIPE investments in engineering firm Thermax and IT solutions company MindTree. Both exits generated more than 2x returns for the firm.
Its approach is winning influential fans, like the California Public Employees’ Retirement System, which in December committed $120 million to SAFI IV. Though the firm keeps details of its fundraising activities a closely guarded secret, it is reportedly targeting $1.2 billion for this latest fund.

ASIAN VENTURE CAPITAL FIRM OF THE YEAR

1. Sequoia Capital India
2. Intel Capital
3. Norwest Venture Partners

Though also a growth investor, it is for its venture capital investments that Sequoia Capital India has caught PEI readers’ attention this year.
The year 2009, however, was a relatively quiet one for venture investments: in January the firm led a second round of financing in internet and mobile consumer services company Apnapaisa, and in November the firm committed $13 million to Hyderabad-based mobile services company IMImobile.
However, it is the portfolio of investments the firm has built up over a decade in the country that have secured it the prize in this year’s awards: Sequoia has made 48 early stage investments across the mobile, internet, outsourcing, healthcare, consumer services and financial sectors.
And with the addition of a New Delhi office in 2009 – the firm’s third in India – that number of investments looks set to grow even more in 2010.

THE BEST PRIVATE EQUITY FIRM IN AUSTRALIA

1. Pacific Equity Partners
2. Archer Capital
3. Goldman Sachs JB Were
 
Last year was a mixed bag for Pacific Equity Partners (PEP). The Sydney-based firm hit the headlines when it settled a much publicised dispute with advertising group WPP, to which it had sold former portfolio company The Communications Group, only to have WPP’s chief executive subsequently tell an Australian newspaper that more legal action would be initiated.
On a happier note, however, the sixth largest private equity firm in Asia, according to 2009’s PEI Asia 30, clinched a close to 50 percent stake in Australian energy company Energy Developments. It had pipped private equity firms Archer Capital, and reportedly 3i, to a partial stake in the company, which had been the object of private equity advances since June 2009.
PEP, led by co-founder and managing partner Tim Sims, is currently investing from its fourth and largest fund, the A$4 billion (€2.5 billion; $3.5 billion) PEP Fund IV, which closed in March 2008.

THE BEST PRIVATE EQUITY FIRM IN CHINA

1. CDH Investments
2. The Blackstone Group
3. Hopu Investment Management

While many other fund managers are struggling with a tough fundraising environment, China-focused CDH Investments is working out investor allocations for its heavily-oversubscribed fourth fund CDH Fund IV, two sources told PEI Asia.
According to one of the sources, the fund was originally targeting $2 billion but lowered its target in light of the difficult fundraising environment last year – a decision, which seemed unnecessary on hindsight.
Under pressure from the fund’s lead investors, it was capped at $1.4 billion. However, CDH could have easily have raised double that amount, a source said. The fund is expected to hold a final close in the first quarter of 2010. This is the second win in a row for CDH, led by key partners including Stuart Schonberger and ShangZhi Wu.

THE BEST PRIVATE EQUITY FIRM IN JAPAN

1. The Carlyle Group
2. Bain Capital
3. Unison Capital

The Carlyle Group is widely acknowledged by industry practitioners as one of the most successful Western private equity firms in Japan, a notoriously difficult market to penetrate. While other Western firms shuttered their operations in Japan amid the financial crisis, largely due to a lack of deal flow, Carlyle has consistently invested in the country over time. Last year Carlyle continued to deploy its massive Japan focused buyout fund, the ¥215.6 billion (€1.7 billion; $2.4 billion) Carlyle Japan Partners II, acquiring auto software provider Broadleaf and restaurant and pub operator Chimney Co for an estimated ¥19.5 billion and ¥20.7 billion respectively.
While things for Carlyle have not been such smooth sailing so far this year, with February seeing the bankruptcy of portfolio company Willcom, a mobile phone provider, losing the firm around $300 million in equity, a spokeswoman for the firm said Carlyle Japan Partners nonetheless remains “one of the best-performing funds” at the firm.
To date, Carlyle’s Tokyo-based Japan buyout team, co-headed by Tamotsu Adachi and Masao Hirano, has invested more than $1 billion of equity in more than 12 companies in Japan. The team is currently investing from its second fund, Carlyle Japan Partners II, which was launched in 2006 and raised ¥215.6 billion.
On the growth side. despite the departure of Haruyasu Asakura, growth capital team head, in August 2009, Carlyle has stated that it is continuing its investments in the country’s SME space.

THE BEST PRIVATE EQUITY FIRM IN INDIA

1. IDFC Private Equity
2. India Value Fund
3. SAIF Partners

IDFC Private Equity was started in 2002 by current president and chief executive officer, Luis Miranda. “I knew nothing of infrastructure in India, other than that it was terrible and a lot of people were investing in India and expecting huge growth that wouldn’t happen unless infrastructure improved,” he told magazine Business India in an interview at the end of 2009.
Miranda’s knowledge has no doubt developed rapidly since those early days as the firm, which is wholly owned by IDFC (Infrastructure Development Finance Company), now purports to be India’s largest and most active infrastructure-focused private equity investor. It is now investing its INR28.3 billion (€508 million; $700 million) third fund and manages more than INR57 billion.
During 2009 IDFC PE the firm executed a share swap deal with Bombay-listed GMR Infrastructure, exiting its stake in Delhi International Airport. It also added to its clean technology portfolio last year when it acquired BP Energy India, a subsidiary of the oil major.

THE BEST PRIVATE EQUITY FIRM IN THE MIDDLE EAST

1. Abraaj Capital
2. Citadel Capital
3. Investcorp

Though 2009 saw this MENA giant lie relatively low as far as new investments were concerned, it did not stop Abraaj Capital from pushing forward aggressively in other ways.
First off, in June, the firm opened its fourth office outside the UAE, appointing Sari Anabtawi to lead a seven-strong team in Riyadh.
Then, in November, Abraaj raised $375 million through a rights issue to existing shareholders and used the capital to acquire Riyada Ventures, a Jordanian MENA-focused venture capital firm. The acquisition formed the core of the firm’s new push into the small and medium enterprise space, into which it intends to invest “hundreds of millions of dollars”, according to a statement released by Abraaj at the time.
The only blip for this firm seems to be the slow fundraising environment affecting much of the market. Spokespeople for Abraaj indicated in the second half of the year that it may not reach the $4 billion fundraising target it set for its fourth, buyout-focused fund. 

THE BEST LAW FIRM (FUND FORMATION) IN ASIA

1. Debevoise & Plimpton
2. Clifford Chance
3. Goodwin Proctor

Despite 2009 being a difficult year for fundraising globally, Debevoise & Plimpton is currently wrapping up some large fund raises, according to sources. This fact has clearly not escaped the voters’ attention, as the firm retains its title for the second year running.  
With offices in Hong Kong and Shanghai, Debevoise is led by Hong Kong-based managing partner Andrew Ostrognai. Including Ostrognai, Debevoise has a five-strong team dedicated to fund formation in Asia.
As global private equity firms increasingly view Asia – and more specifically China – as a new focal point for global private equity, the establishment of RMB funds is increasingly seen as the key to tapping China’s enormous pools of capital. Debevoise is accordingly getting increasingly involved in the raising of RMB funds, says Ostrognai.

THE BEST LAW FIRM (TRANSACTIONS) IN ASIA

1. Clifford Chance
2. Paul Hastings
3. Paul, Weiss, Rifkind, Wharton & Garrison

As the Asian private equity market continued on its trajectory of growth, 2009 saw Clifford Chance beef up its private equity team across the region, where it has offices in Bangkok, Beijing, Hong Kong, Shanghai, Singapore and Tokyo.
Last year the law firm: promoted Hong Kong-based Neeraj Budhwani to counsel; relocated London-based partner Simon Cooke to Hong Kong and promoted Beijing-based Terence Foo to partner. Hong Kong-based Andrew Whan leads the practice in Asia and is supported by Cooke, Foo and Lee Taylor in Singapore.
Private equity deals Clifford Chance advised on last year included the $200 million buyout of Beijing Leader & Harvest Technology by Affinity Equity Partners and the privatisation and consolidation of the listed businesses of oil and gas services provider KS Energy into a S$320 million ($227 million; €163 million) joint venture with Actis.

THE BEST DEBT PROVIDER IN ASIA

1. Standard Chartered
2. JPMorgan
3. HSBC

Standard Chartered’s strong standing in 2009 can be attributed to its strong balance sheet and the fact that many of its key markets across Asia and Africa were less affected by the financial crisis than many of those of its peers.
The bank was part of the 16-strong consortium of banks that handled $850 million in financing for Kohlberg Kravis Roberts’ $1.8 billion acquisition of South Korea’s Oriental Brewery from Anheuser-Busch InBev, Asia’s largest private equity transaction of 2009. It wasn’t just the headline-grabbing deals like Oriental Brewery, however, in which StanChart participated. It remained active among smaller transactions, providing financing packages such as a $51 million facility for Actis’ acquisition of a stake in Egypt’s Commercial International Bank.
Sumit Dayal, the global head of Standard Chartered’s leverage finance team, leads 30 professionals around the world, of which more than 75 percent focus on Asia.

THE BEST M&A ADVISOR IN ASIA

1. Goldman Sachs
2. Deutsche Bank
3. Nomura International

Asia did not see too many large buyout transactions in 2009, but when it did, Goldman Sachs was in the thick of the action. This is the third consecutive year the investment banking giant has won PEI’s Asian M&A advisor of the year award.
Goldman was involved with three of the largest Asian private equity buyouts in 2009. It was the exclusive financial advisor to Kohlberg Kravis Roberts for its $1.8 billion buyout of Oriental Brewery, the largest ever Korean LBO. In Japan, the bank advised Citigroup Capital Partners Japan on the sale of its 93.5 percent stake in BellSystem24 to Bain Capital for ¥100 billion ($1.1 billion). It also advised its principal group and MBK Partners on the acquisition of theme park Universal Studios Japan.
Elsewhere, in Australia, Goldman Sachs JBWere was the joint financial advisor and joint lead manager for the sale of United Malt Holdings by CHAMP, which fetched A$757 million ($655 million).
PHOTO: Goldman Sachs building (see page 64 of PEI Annual Review)
Goldman: towering over the competition

THE BEST PLACEMENT AGENT IN ASIA

1. Capstone Partners
2. MVision Private Equity Advisers
3. CP Eaton Partners

Nine-year-old Capstone Partners in 2009 joined the lengthening list of Western placement agents seeking a foothold in the Asian market. To lead operations from its Shanghai office, the firm hired Sheng Lu, previously a partner at recruitment specialists Heidrick & Struggles, where he headed the firm’s Asia fund placement initiative.
Capstone plans to increase the number of Asian real estate and private equity funds on its books and also build closer relationships with Asian investors. “GPs in Asia, particularly in the emerging markets, have been very underserved in the past,” Lu told PEI Asia.
The firm also anticipates working more closely with Asian LPs. “A lot of GPs in North America and Europe are looking outside of their region to raise money – Asia has quickly become a source of money,” Lu said, noting Japan and Australia, the Middle East and China are quickly rising to prominence as stops on the fundraising route.

THE BEST FUND OF FUNDS IN ASIA

1. Partners Group
2. Asia Alternatives
3. Squadron Capital

After coming in a close second in the 2008 awards, Partners Group replaced Squadron Capital as the best fund of funds manager in Asia for 2009.
The Zug, Switzerland-based firm has steadily expanded its presence on the ground in Asia and now has offices in Singapore, Beijing, Sydney and Tokyo, giving it one of the largest teams of any funds of funds managers in Asia.
Philipp Gysler leads the Asia team, which makes primary fund commitments across the Asia-Pacific region and invests in secondary and direct transactions, as well. The firm is currently investing out of its second dedicated Asia-Pacific “programme” for which it raised $1.1 billion in December 2008, exceeding its $1 billion target.
In 2009, Partners Group also saw the successful IPO of one of its portfolio companies, China Forestry Holdings, which is also backed by the Carlyle Group as an investor. China Forestry raised $200 million through its IPO.

THE BEST SECONDARIES FIRM IN ASIA

1. Partners Group
2. AXA Private Equity
3. Paul Capital

Partners Group also took honours in Asia for best secondaries firm of the year. While secondary investments are still a relatively new phenomenon in Asia, the firm received a large stamp of approval from one of the region’s limited partners most active in alternative investments: the Swiss manager was awarded a $100 million mandate to invest in secondaries on behalf of sovereign wealth fund Korea Investment Corporation.
Partners Group also secured a notable commitment from Australian superannuation fund HOSTPLUS, which represented the institutional investor’s first foray into the secondaries market. HOSTPLUS committed A$100 million ($84 million; €59 million) to Partners Group Secondary 2008, the firm’s third global secondaries fund that hit its €2.5 billion hard cap in December.
As interest levels continue to rise in this segment of the private equity market in Asia, it would seem more good news is likely on the horizon for Partners Group.

THE BEST DISTRESSED DEBT FIRM IN ASIA

1. Oaktree Capital Management
2. Lone Star Funds
3. Pacific Alliance Group

Oaktree Capital Management has steadily beefed up its presence in Asia since it was set up in 1995. The firm’s Asian operations were established in 1998 with the opening of offices in Singapore and Tokyo. In 2005, the firm best known for its distressed debt prowess opened another office in Hong Kong and followed it up a couple of years later with an office in the Chinese capital.
Despite a slowdown in fundraising globally, the firm has been fervently fundraising. It raised nearly $11 billion a global distressed debt fund closed in May 2008, while it continues to rake in commitments from leading institutional investors for Oaktree Principal Fund V, which is targeting commitments of $5 billion. That global fund employs a “loan-to-own” strategy, in which investors try and gain control of a troubled company by buying its debt at a discount and then taking control in a bankruptcy process. Expect Oaktree’s regional network to help it stand out from the crowd once it goes about deploying its fund in Asia.

THE BEST SPECIAL SITUATIONS/TURNAROUND FIRM IN ASIA

1. Oaktree Capital Management
2. Goldman Sachs
3. Mount Kellett Capital

In addition to taking home the award for the Asian distressed firm of the year, Oaktree Capital Management was also voted the Asian special situations firm of the year.
The global firm established its “Asia Special Situations Strategy” in 2007. In the same year, it acquired a pan-Asian real estate investment firm Pangaea Capital Management, which had offices in Seoul, Shanghai, Tokyo and Singapore, giving Oaktree an even wider network across the region. With the acquisition of Pangaea, the firm also obtained the services of Pangaea founder Bob Zulkoski, who currently heads up the Asian special situations and real estate teams at Oaktree and is a managing director.
In late 2009, Oaktree’s strategy has been endorsed by one of the region’s largest limited partners,  sovereign wealth fund the China Investment Corporation. CIC reportedly planned to invest up to $1 billion with Oaktree to invest across several strategies.

THE BEST MEZZANINE FIRM IN ASIA

1. Asia Mezzanine Capital Group
2. ICG Asia
3. CLSA Capital Partners

As new investments in Asia in 2009 slowed down due to uncertainty in the market, the demand for mezzanine capital was negatively affected, as well. However, a few opportunities did emerge as banks and hedge funds, which had been highly active in providing shorter-term mezzanine-type loans, began pulling back.
Asia Mezzanine, which typically invests between $15 million and $50 million per transaction, was among those to capitalise on the gap in the market. The firm provided $25 million in mezzanine financing for Chinese steel component part manufacturer, Anhui Yinglui Group, whose other investors include private equity firms CDH Investments and China Everbright Investment Management.
Investing from its Asia Strategic Capital Fund on behalf of Japan’s ORIX Corporation and other institutional investors like New York Life Insurance, Hong Kong-based Asia Mezzanine is headed by Jospeh Ferrigno and staffed by former credit-oriented ex-bankers and private equity professionals. It is the second straight year the firm has won this category.

THE BEST LIMITED PARTNER IN ASIA

1. Government of Singapore Investment Corporation (GIC)
2. National Social Security Fund (China)
3. Australian Government Future Fund 

The Government of Singapore Investment Corporation (GIC) regains the top spot from fellow Singaporean sovereign wealth fund Temasek Holdings, after a tumultuous fiscal 2008/2009, which saw its portfolio shrink by more than one-fifth.
The state fund, which manages assets estimated at more than $300 billion, also saw off competition from China’s mammoth RMB563 billion ($82 billion; €59 million) National Social Security Fund, which is currently only allowed to invest in domestic private equity funds.
Fortunately, GIC recovered more than half of the losses incurred in 2008 by March last year. Already an active investor in private equity, the fund also increased its exposure to the asset class to 11 percent from 8 percent as part of a wider push to up its allocation to alternatives. GIC makes direct investments as well and has a portfolio of more than 200 companies globally.

ASIAN PRIVATE EQUITY DEAL OF THE YEAR

1. Oriental Brewery: Kohlberg Kravis Roberts
2. Beijing Leader & Harvest Electric Technologies: Affinity Equity Partners
3. BellSystem24: Bain Capital

It probably won’t shock you to learn that Kohlberg Kravis Roberts’ $1.8 billion purchase of Oriental Brewery  from Anheuser-Busch InBev – hands down the most talked about private equity transaction in Asia – was voted private equity deal of the year:
To finance what was the largest Asian buyout transaction in 2009, the firm received a vendor note worth $300 million, paid $800 million in equity and the remainder was raised from a consortium of 16 international and Korean banks. Such debt syndication was no mean feat in an environment hostile to such lending.
KKR subsequently offloaded half the company’s equity to Asian private equity firm Affinity Equity Partners. The roping in of Affinity, which has experienced significant success in Korea, struck market observers as a win-win for all parties: it gave Affinity a highly sought after asset and for KKR, it was an effective way to de-risk a transaction in a geography where it had no prior experience.

ASIAN VENTURE CAPITAL DEAL OF THE YEAR

1. Borqs: Norwest Venture Partners/ GSR Ventures / Keytone Ventures
2. wiMAX: Intel Capital
3. SINA: CITIC Capital Holdings / FountainVest Partners / Sequoia Capital China

It’s perhaps not surprising that one of the most active investors in Asia’s venture capital market – Norwest Venture Partners – and one of the hottest growing industries in the region – mobile phone technology – were the key ingredients behind Asia’s venture capital deal of the year. Taking the honours was the $17.4 million Series B round in Chinese mobile software company Borqs. The financing was led by  Silicon Valley-headquartered with participation from Chinese venture capital firms GSR Ventures and Keytone Ventures.
Borqs, an open source mobile application software provider and integrator, develops software for wireless providers, network operators and handset manufacturers. The company is poised to expand its customer base in China, a country with more than 700 million mobile users, comfortably the most in the world. Norwest said Borqs’ “significant traction” with China Mobile, the world’s largest phone operator, was one of the key factors in the firm’s decision to back the company.

ASIAN PRIVATE EQUITY EXIT OF THE YEAR

1. Shenzhen Development Bank: TPG
2. Kathmandu: Goldman Sachs JBWere, Quadrant Private Equity
3. United Malt Holdings: CHAMP Private Equity

Though it has yet to complete, the agreement last June by Chinese insurer Ping An Insurance to acquire TPG’s stake in Shenzhen Development Bank (SDB) is widely tipped to become one of the most successful Asian exits ever recorded.
In fact, there are many that say it will rival the 10x returns – but perhaps not the notoriety – recorded by US firm Ripplewood Holdings when Japan’s Shinsei Bank floated in 2003.
However, it was not a deal that had easy beginnings. The 2004 deal, carried out by TPG’s then Asian affiliate Newbridge Capital, was a landmark transaction in Chinese private equity, for it was the first ever sale of a controlling stake in a Chinese bank to a foreign investor and took two years to materialize.
After much wrangling and a lawsuit – against Taiwanese bank Chinatrust Commercial Bank, which TPG accused of interfering with the firm’s purchase plans – TPG finally acquired a roughly 18 percent stake in SDB for $145 million.