Asia’s News Source avcj.com July 22 2014 Volume 27 Number 27

EDITOR’S VIEWPOINT Philippines: Southeast Asia’s rising star Page 3 NEWS Baring Asia, Carlyle, Coller, EIG, GPIF, IDG, IFC, Northstar, Orix, SAIF, Samara, Tata, Tiger Global, West Summit Page 4 DEAL OF THE WEEK online property platform gets $80m Page 12 VCs back India customer intelligence platform Page 12 Zoyi takes Taiwan pork into Asia’s niche markets Page 13 PROFILE Consolidation king? Anthem Asia’s Josephine Price on PE in Myanmar Why Chinese corporates are teaming up with GPs to form M&A funds Page 7 Page 15

FOCUS DEAL OF THE WEEK

Cautious optimism A slice of happiness Investors see positives in India’s budget Page 10 Hony eyes China growth for Pizza Express Page 13 AVCJ SPOTLIGHT: 2nd Annual Real Assets Forum Private equity investment in infrastructure, energy and real estate 28 August, 2014 • Four Seasons Hotel, Singapore

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28 August, 2014 • Four Seasons Hotel, Singapore Managing Editor Tim Burroughs (852) 3411 4909 Staff Writers Andrew Woodman (852) 3411 4852 Winnie Liu (852) 3411 4907 Thriller in Manila Creative Director Dicky Tang Designers Catherine Chau, Edith Leung, Mansfield Hor, Tony Chow

Senior Research Manager Helen Lee Research Associates Herbert Yum, Isas Chu, THE PHILIPPINES IS THE FIFTH LARGEST SPi Global for $300 million, the largest ever PE Jason Chong, Kaho Mak economy in the Association of Southeast Asian seen in the Philippines. Three transactions Circulation Manager Nations (ASEAN) and has the second-largest account for the bulk of the sum invested so far Sally Yip UNLOCKING THE REAL ASSETS POTENTIAL population. GDP growth is among the fastest this year. GIC Private was responsible for two Circulation Administrator Prudence Lau in Asia. But in terms of inbound and outbound deals, backing Metro Pacific Investments’ hospital Subscription Sales Executive LAST CHANCE TO SAVE ON ADMISSION: SAVE commerce the country trails its comparable business in a deal that could be worth $234 Jade Chan US$200 million and committing $76.6 million to Century peers. It ranked sixth in ASEAN for total trade in Manager, Delegate Sales if you book before this Friday. SIGN UP NOW! 2012 with the nearly half the dollar value of fifth- Canning Corporation (CCC) ahead of an IPO. Pauline Chen placed Vietnam. The Philippines was also sixth for The third came as TPG Capital and Malaysia’s Director, Business Development foreign direct investment; Vietnam, again in fifth, Khazanah Nasional invested $132 million in Darryl Mag Hear from the experts, including: attracted more than twice as much capital. housing developer 8990 Holdings. Manager, Business Development The country has a small number of very large While SPi Global represented a bet on an David Mann KEYNOTE Simon Hopkins Anil Nathani, Samuel Lau corporations, but given the resources at their outsourcing industry in which the Philippines is Head, Asia Macro Research CEO and Founder Sales Coordinator disposal, these players have generally been wary an established international force and a company STANDARD CHARTERED MILLTRUST INTERNATIONAL Debbie Koo GROUP of stepping beyond their own borders. Since that has experienced PE ownership before, 2003, outbound M&A by Philippines companies the three more recent deals suggest a broader Conference Managers Jonathon Cohen, Sarah Doyle, comes to $6.1 billion and close to 40% of that investment thesis. Two are clear plays on rising Conference Administrator Yan Yang Li Yao was deployed by San Miguel Corporation alone, domestic consumption and more transactions Amelie Poon Director Chief Executive Officer according to S&P Capital IQ. along these lines are sure to emerge. Conference Coordinator Fiona Keung, Jovial Chung BLACKROCK PRIVATE EQUITY CHINA-ASEAN INVESTMENT Similarly, private equity firms have been wary Dennis Montecillo, president of BPI Capital PARTNERS COOPERATION FUND (CAF) of stepping in. AVCJ Research data shows that Corporation – the unit Publishing Director traditional PE investment – one sizeable hedge of Bank of the Philippine Isles – told the AVCJ Allen Lee David Luboff Natalie Meyenn fund deal was discounted – in the Philippines Singapore Forum last week that plenty of PE Managing Director Senior Managing Director, Investment Head of Private Equity for the same period is $2.6 billion, 3.3% of the investors are coming through town in search of Jonathon Whiteley Committee Member MLC regional total. deals. He identified three transactional themes: SBI MACQUARIE INFRASTRUCTURE However, times may be changing. Since the new business created by generational shifts in MANAGEMENT start of 2012, 40 outbound M&A deals have been the population; public markets volatility resulting Incisive Media Richard Paine Brenden Woods announced, compared to 60 in the six years in attractive entry valuations; and structural Unit 1401 Devon House, Taikoo Place Managing Director, Partner before that. Ten of the 20 largest outbound deals arbitrage, given that comparatively few domestic 979 King’s Road, Quarry Bay, Hong Kong Investment Management Asia STEPSTONE GROUP from the last decade came from 2012 onwards. companies are publicly traded. T. (852) 3411-4900 LEND LEASE They include Universal Rabina Corporation’s A fourth has since emerged, with the removal F. (852) 3411-4999 E. [email protected] ... and many others! (URC) acquisition of New Zealand-based Griffin’s of both the 60% cap on foreign investment in URL. avcj.com Foods from Pacific Equity Partners for NZ$700 the Philippines banking industry and the rule For the latest programme and speaker line-up, visit: avcjrealassets.com Beijing Representative Office million ($608 million). The deal, which was restricting the number of wholly-owned overseas No.1-2-(2)-B-A554, 1st Building, announced this week, represents the company’s lenders permitted to operate in the country to No.66 Nanshatan, Registration enquiries: Sponsorship enquiries: Chaoyang District, Beijing, largest disclosed outbound investment. It is 10. A number of private equity firms are already People’s Republic of China Carolyn Law T: +852 3411 4837 Darryl Mag T: +852 3411 4919 T. (86) 10 5869 6203 Enquiry a powerful statement of intent to become a said to be on the lookout for potential targets, F. (86) 10 5869 6205 E: [email protected] E: [email protected] significant regional player in food and beverages. although they will inevitably face competition E. [email protected] There is cause for optimism among private from strategic players. Asia Series Sponsor Co-Sponsors equity investors as well. The $572.1 million The Singapore-Manila route is going to deployed in the Philippines in 2013 was a record become as popular as Singapore-Jakarta – if it’s The Publisher reserves all rights herein. Reproduction in whole or in part is permitted only with the written consent of high, yet it could be surpassed this year with not already. AVCJ Group Limited. $443.8 million invested and more than five ISSN 1817-1648 Copyright © 2014 months still to go. Encouragingly, there has also been a change Supporting Organisations Media Partner in the spread and nature of deal flow. The 2013 Tim Burroughs total was dominated by CVC Capital Partners’ Managing Editor acquisition of business process outsourcing firm Asian Venture Capital Journal Scan this QR code to review the latest Join your peers programme and speaker line-up avcjrealassets.com Tweet #avcjrealassets Number 27 | Volume 27 | July 22 2014 | avcj.com 3 NEWS

Control deals cast light on Garment. The -listed casual clothing GLOBAL manufacturer is acquiring a 70% interest in value creation credentials Fastrackids China for RMB1.02 billion ($165 Global secondaries deal PE investors are seeing more control deals in million). The VC investors own 70% of Everlearn emerging Asian markets traditionally dominated Holdings, Fastrackids’ parent company. flow set to break record by , which in turn gives LPs greater Global secondary transaction volume for 2014 is visibility as to GPs’ operational capabilities. Sohu’s Changyou invests in on course to break $30 billion for the first time Han Seng Low, executive director at United after reaching $16 billion in the six months of Overseas Bank, observed that between 2003 VC-backed MoboTap 2014, according to secondary market-focused and 2007 many Asian GPs proved themselves Changyou.com, an online gaming division of investment bank Cogent Partners. In its semi- as dealmakers but the nature of the market – Chinese internet company Sohu, has agreed annual secondary market pricing study released with investors often taking minority positions to acquire a 51% stake in MoboTap, a mobile this week, Cogent predicted a 10% year-on-year browser developer backed by several VC increase on transaction volume for 2013. investors, for $91 million. As part of the deal, Changyou will invest an additional $30 million in MoboTap by purchasing a five-year, zero-coupon ASIA PACIFIC convertible bond. If fully converted, Changyou’s stake in MoboTap will rise to 60%. Noble Group, EIG form energy joint venture Fosun ups stake as Bona Private equity firm EIG Global Energy Partners Film founder buys out Fox has teamed up with Asia-based agriculture and Fosun International will increase its stake in energy supply chain manager Noble Group to China’s Bona Film Group as part of an ownership acquire and operate upstream and mid-stream in companies and playing a largely passive role restructuring that will see the exit of 21st Century energy assets. Known as Harbour Energy, the before exiting at IPO – meant it was unclear Fox. Bona founder Dong Yu has agreed to buy platform will target assets that provide exposure whether they could add value. “Sitting here today back Fox’s entire 19.3% stake for $71.4 million, to key supply trends and potential off-take one can make a better judgment call. The bar is a upping his interest in the company to about 32%. arrangements, with Noble the preferred off- little higher because the opportunity set requires Fosun will then pay Yu $49 million for a 13.3% take and marketing partner. EIG will provide a more interventionist approach. There are stake. Fosun’s current ownership is 7.5%. management and deal execution support. enough data points for us as investors to take a better look,” Low told the AVCJ Singapore Forum. Zoyi invests in Taiwan’s IFC seeks $1b for emerging Jan Nielsen, senior managing director for private equity at The Blackstone Group, added Quaser Machine Tools markets fund-of-funds that his firm is seeing more control opportunities Greater China-focused mid-cap investor Zoyi International Finance Corporation (IFC) wants to in China, India and Southeast Asia – and sellers Capital has invested an undisclosed amount in raise a $750 million to $1 billion for an emerging increasingly recognize the role private equity Quaser Machine Tools, a Taiwan-based machine markets-focused fund-of-funds with a final close can play in corporate development. However, tool manufacturer. Set up in 1991, Quaser pegged for the end of this year or early 2015. The the relationship between control and value- manufactures and sells high-precision, multi-axis fund will be managed by IFC subsidiary Asset add is not necessarily binary. In more mature machine centers. Management Company (AMC) and IFC will make markets, where leveraged are the norm, an equity investment of $150 million. The fund it is a given, but PE firms with more exposure IFC leads $8m Series B for will back 20-25 PE and VC funds globally, and will to emerging markets unsurprisingly advocate a deploy at least 80% of its capital in a diversified flexible approach. The onus is not so much on the recycling site Aihuishou set of new funds alongside IFC. percentage ownership as the level of influence International Finance Corporation (IFC) has and building effective working relationships with led an $8 million Series B round of funding existing management and shareholders. for Aihuishou, a Chinese electronics recycling GREATER CHINA “It is less about control and non-control but start-up. IFC contributed $5 million in this round, more about whether we are making objective with existing investor Morningside Technologies PE investors complete decisions about what is best for the company,” providing the remainder. Morningside provided said Kabir Mathur, director for Southeast Asia at $2 million in Series A funding in 2011. Giant take-private KKR. Baring Private Equity Asia, Hony Capital and CDH IDG backs app developer Investments have completed the privatization of Giant Interactive in a deal that values the Semir to acquire 70% of VC- Landscape mobile US-listed Chinese online game developer at backed education group IDG Capital Partners has committed $1.85 million approximately $2.9 billion. Baring Asia and Yuzhu in seed funding to Landscape Mobile, the China- Shi, Giant’s chairman, initiated the process last DT Capital, The CID Group and iD TechVentures and US-based developer of mobile information November. Hony and CDH joined the consortium are set to exit Fastrackids as the children’s management app Sight. The company, which in January and May, respectively. education group is acquired by Zhejiang Semir is led by Zhuge Yue, formerly head of product

4 avcj.com | July 22 2014 | Volume 27 | Number 27 June 2014

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at Yahoo’s global R&D center in Beijing, will use Northstar in $500m first financial services player Shriram Group has so the new capital for product development and far developed about 10 million square feet of growing its business within the US market. close on SE Asia fund residential space across 24 projects and currently Southeast Asia-focused GP Northstar Group has over 50 million sq ft under development. SCG to exit e-commerce site has reached a first close of approximately $500 million on its fourth fund. A final close at the Samara set for partial exit via trade sale hard cap of $1 billion is expected no later than Shenzhen Capital Group (SCG) will exit Shenzhen December, according to sources familiar with the as Monte Carlo files for IPO Globalegrow E-commerce as the online platform situation. The drawdown for the first investment Monte Carlo Fashions - an Indian apparel brand use to sell Chinese products overseas is acquired will also come later this year. Northstar declined backed by Samara Capital and promoted by the by Shanxi Baiyuan Trousers Chain Management. to comment on fundraising. Nahar Group - has filed for a domestic IPO. The Shenzhen-listed apparel maker Baiyuan Trousers The private equity firm, which is float will provide Samara with a partial exit, two will acquire Globalegrow for RMB1.03 billion headquartered in Singapore but primarily invests years after its initial investment. ($166 million) via cash payment and stocks swap in Indonesia, raised $820 million for its third fund with existing shareholders. in 2011. Initial projections put Fund IV at roughly Steadview leads $21m the same size as its predecessor but the hard round for Urban Ladder NORTH ASIA Hong Kong-based hedge fund Steadview Capital has led a $21 million Series B round of financing Orix-led consortium to buy for Urban Ladder, an Indian furniture online retailer. Existing investors Kalaari Capital and SAIF Hyundai logistics unit Partners also participated. A consortium led by Japanese financial group Orix Corp. has agreed to acquire a majority stake WestSummit, SAIF back in South Korea’s Hyundai Logistics. The group will pay KRW600 billion ($580 million) for an 88.8% social analytics firm stake via a special purpose vehicle (SPV) jointly WestSummit Capital and SAIF Partners have established with Hyundai Merchant Marine invested $15.2 million in NetBase, a US-based (HMM), a shareholder of Hyundai Logistics. cap was subsequently increased to $1 billion in company that tracks social media. Existing response to strong LP interest. investors Thomwest Ventures and Altos Ventures Coller’s Mizuno joins GPIF Northstar was founded by Patrick Walujo also participated. This latest round brings and Glenn Sugita in 2003. The firm raised $110 NetBase’s total investment to $51.8 million. investment committee million for its first fund and followed up with Japan’s Government Pension Investment Fund a second vehicle worth $285 million in 2008. Tiger Global, Nirvana lead (GPIF) has appointed Hiromichi Mizuno, a partner Early investments included Bank Tabungan at secondaries specialist Coller Capital, to its Pensiunan Nasional (BTPN), from which Northstar, Series B round for Zopper investment committee. Mizuno will serve a two- TPG Capital and their co-investors secured a Tiger Global Management and Nirvana Venture year term. He replaces Kimikazu Nomi, CEO of the partial exit last year as Sumitomo Mitsui Banking Advisors have led a $5 million Series B round of Innovation Network Corporation of Japan (INCJ), Corporation (SMBC) agreed to buy up to 40% of investment for Delhi-based Solvy Tech Solutions, whose term finished earlier this month. the lender for $1.56 billion. which operates products review portal Zooper. One LP that has backed Northstar told AVCJ com. Recently rebranded from Reviews42. Japan fish app start-up that Funds I and II were on course to deliver com, Zopper is a community-based site that returns of around 3x and 2x, respectively. The LP aggregates user reviews across numerous raises $4.5m added that it was too early to pass judgment on consumer products categories. Hachimenroppi, a Japanese start-up that Fund III. operates an IT-enabled fresh fish distribution platform, has secured JPY450 million ($4.4 SOUTHEAST ASIA million) in funding from Recruit Holdings, YJ India’s Repco Home Finance (RHF) for INR4.72 Capital, DeNA, and Monex Ventures. This latest billion ($78.4 million) via an open market Online grocery retailer investment follows a JPY150 million round transaction. The sale is understood to represent involving early-stage investor Value Create, Vector a 9x return for the GP, which first backed the RedMart raises $23m Group International and logistics firm Winroader. company in seven years ago. Singapore-based online grocery store RedMart has raised a $23 million Series B round led by Tata fund invests $80m in gaming firm Garena, with participation from SOUTH ASIA SoftBank Ventures, Visionnaire Ventures and Shriram Properties Facebook co-founder Eduardo Saverin. While Carlyle exits India’s Repco Tata Opportunities Fund (TOF), the flagship SoftBank and Visionnaire are new investors, vehicle of Tata Capital, has invested INR4.68 Garena and Saverin also featured in earlier Home Finance billion ($80 million) in South Indian real estate rounds. RedMart has now raised $27 million from The Carlyle Group has fully exited its stake in developer Shriram Properites. The unit of the VC investors.

6 avcj.com | July 22 2014 | Volume 27 | Number 27 COVER STORY [email protected] Double team Keen to consolidate their fragmented industries, Chinese companies are partnering up with PE firms to launch M&A funds. But do the GPs have the right skills and are third-party LPs willing to come on board?

AIER GROUP, CHINA’S LARGEST PRIVATE- Huatia United Securities, an investment arm of this year, at least 28 Chinese listed companies set owned chain of eye-care hospitals, is on the Huatai Securities, the vehicle targets industries, up M&A funds that between them are seeking acquisition trail – but it needs help. In the space including tech, media and telecom (TMT), retail, to raise more than RMB16 billion ($3 billion). of two weeks, the company formed two M&A medical services and pharmaceuticals. From new energy to culture and entertainment, funds in partnership with private equity firms. Finally – and not officially tied to the company they see these vehicles as a means of achieving Aier provides capital, the GPs do the deals – and – Aier’s controlling shareholders and CEO order in chaotic industries. There is even a fund hopefully other investors come along for the ride. together provided $160 million to set up the targeting stationery shop consolidation. As Zhijun Wu, secretary to the Aier board, Zhongrong Aier Healthcare Fund, managed by The GP partners are usually independent PE points out, the two funds serve very different Zhongrong International Trust. It covers almost firms or the direct investment arms of brokerages. purposes. A $32 million M&A vehicle launched every part of the healthcare sector. Shenzhen Capital Group, for example, has set up in conjunction with China Orient Asset Aier clearly doesn’t want to miss out on any media and entertainment industry M&A funds in Management is a platform for consolidating the M&A chances in its supply chain. “We used to association with three different parties – Hong ophthalmology industry. Aier put in 10% of the build our network and now we have 50 hospitals. Kong-listed Wisdom Group as well as BlueFocus capital and the fund is nearly fully deployed. But if we continue to scale up this way it will be and LeTV, both of which trade in Shenzhen. “We In the second fund Aier is one of three too slow,” says Zhijun Wu, secretary to the board have seen an explosion of non-state-owned anchor investors, alongside gaming company of directors in Aier. “It’s the right time to acquire enterprises having IPOs. These companies Ourpalm and public relations agency BlueFocus other industry players because ophthalmology is become very acquisitive,” Chris Burch, adviser to Communication, with each contributing a highly-fragmented segment in China.” the PE firm’s CEO, told the AVCJ China Forum last 10% of the $160 million corpus. Launched by Plenty of other others agree. In the first half month, by way of explanation. Through the GP’s deal sourcing and execution expertise, the corporate hopes to tap inorganic Trade sales of VC-backed rms to China-listed corporates expansion opportunities that allow it to preserve 1,500 20 its market leader status. Is this a realistic objective or are these funds merely an indulgence? 1,200 15 900 Policy play 10 The Chinese government has been championing 600 Deals industry consolidation initiatives since 2010. US$ million 5 300 Last year, Beijing once again released policy guidance for the consolidation of nine key 0 0 sectors: automotive, steel, cement, shipbuilding, 2009 2010 2011 2012 2013 2014 (ytd) electrolytic aluminum, rare earths, electronics and Disclosed deals Exit value (US$m) information, pharmaceuticals and agriculture. Source: AVCJ Research What these sectors have in common is overcapacity. And the combination of low barriers to entry, excess supply and rock-bottom Leading corporate-PE M&A funds prices exposes overdrawn companies once economic growth begins to slow. Fund PE partner Target size (US$m) Cleantech is a classic example of a sector Contemporary Eastern Huaan Culture Industry Fund Huaan Asset Management 8,000 in need of a shakeout to trim away the weaker Guanghe Landscape Culture Industry Fund Hangzhou Seven String Equity 3,000 players. Solar panel manufacturers have been particularly affected and for many it comes down Rastar Group M&A Investment Fund Fosun Capital 1,600 to a choice between being bought out and Wisdom Hongtu Sports Culture Industry Fund Shenzhen Capital Group 1,550 being wiped out. Industry giant Suntech Power Haitong Buyout Fund Managment Haitong Capital 493 filed for bankruptcy last year and was saved by a Dian Healthcare Fund South Korean’s SV Investment 300 local government bailout. “The solar energy industry has been Sailing Yingli Green Energy Fund Sailing Capital 160 distressed. We feel that the industry is going Beijing Huatai Ruilian M&A Fund Huatai United Securities 160 to consolidate,” says James Liu, CEO of Sailing Sources: AVCJ Research, public filings Capital. “Meanwhile, we expect that there will

Number 27 | Volume 27 | July 22 2014 | avcj.com 7 COVER STORY [email protected]

funds to restructure listed companies. “We don’t’ know have an investment team to do M&A deals but both Huatai and Orient State secrets: SOE Asset Management have a lot of experience in this,” says Aier’s Wu. “The GPs will follow Aier’s restructuring standards – in areas such as financial reporting – when restructuring target companies. In estructuring state-owned enterprises (SOEs) has been on the Chinese government’s to-do list China, almost all ophthalmology clinics are small Rfor years. Progress tends to come in fits and starts, depending on the prevailing policy winds. businesses set up by specialist doctors.” Right now it appears the winds are blowing in favor of change as the private sector is encouraged to get involved and help improve operational efficiency in these companies. Pillar industries Strategic shift singled out for reform include autos, equipment manufacturing, iron and steel. One of the reasons Aier has no in-house M&A Last week, the State-owned Asset Supervision and Administration Commission (SASAC) unit is that outsourcing the function to GPs is – which is responsible for China’s largest SOEs – selected six SOE parent groups to serve as cheaper and less risky. The Yingli-Sailing is an pilot projects for private investment. Pharmaceutical distributor Sinopharm and cement-to- exception because the corporate is committing engineering business CNBM will be the first to undergo restructuring. over half the total capital and will work with the Momentum is picking up at both central and local levels, Steven Sun, head of China equity GP in managing the fund. In most cases, the strategy at HSBC, said in a recent research report. However, industry participants are generally corporate accounts for 10-20% of the corpus and skeptical about words turning into deeds, noting that reforms take years to implement. sees its involvement as a way of learning about CITIC Capital Partners and Hony Capital were among the first Chinese private equity firms acquisitions and building up an M&A network. to pursue SOE restructuring deals. Hony has been involved in 31 such transactions, committing Partnership funds also benefit private equity around RMB14 billion ($2.25 billion) over the past 10 years. firms. According to AVCJ Research, 22 renminbi- Arguably the private equity firm’s most successful SOE restructuring is Jiangsu Glass Group, denominated funds received commitments of which used the proceeds of a Hong Kong IPO to support an acquisition spree of other state- $3.8 billion in the first half of 2014. Fundraising owned glass assets in order to expand market share and build up economies of scale. Hony’s has fallen dramatically from the 2011 peak of most recent SOE investment was hotel chain Shanghai Jin Jiang International, in which it acquired $28.1 billion with just $14.4 billion entering funds a 12.43% stake for RMB3.04 billion. in 2013. The high net worth individuals (HNWIs) “First we want to improve the governance and management systems, so the company who backed local managers fled as IPO exit becomes more competitive and market-driven. Then we will help the management team acquire multiples dropped and new listings slowed to a other properties domestically and internationally,” says John Zhao, Hony’s CEO. “We are going to crawl before the CSRC imposed suspended them see acquisitions and consolidation that make the company bigger, better and more efficient.” altogether in order to clean up the market. In addition to SOE restructuring, Zhao sees consolidation opportunities in the healthcare Renminbi managers must diversify to stay in sector. “Healthcare is one of segment to combine incremental and consolidation. We’re looking at business and M&A funds are one way of doing investing in hospitals, leveraging our skills to improve management and introducing industry best it. Pertinently, there is the expectation that practices to provide high levels of care,” he adds. corporate serving as anchor LP represents a Last month, the State Council said it would relax limits on foreign investment in joint-venture guaranteed trade sale exit channel. This may also hospitals as part of efforts to deepen healthcare reform. There are also plans to increase the be a selling point with third-party investors. number of medical service providers from Hong Kong, Macau and Taiwan able to set up private “The main differentiator between this type hospitals in China, and allow other qualified foreign investors to open wholly-owned medical of M&A fund and traditional ones is the PE firm centers in areas such as the Shanghai Free Trade Zone. can almost always secure an exit, selling the portfolios to the listed corporate after certain period of holding,” says Roger Liu, China and be more reliance on the renewable energy in sell them to Yingli in the future,” Liu adds. Hong Kong private equity deals leader at PwC. the future, especially in China. The demand of Overcapacity is not the only driver of In this context, the PE firm is subordinating renewable energy will increase.” consolidation. The government has announced a itself to the listed company, acquiring target Looking to capitalize on the trade-off range of healthcare reforms in recent years with firms that meet its strategic needs. There will between short-term distress and long-term a view to boosting service quality and private be areas in which the company wants to boost fundamentals, Sailing teamed up with Yingli sector involvement. For example, under the its exposure, for example vertically integrating Green Energy Holding, China’s largest solar-panel 12th Five-Year Plan, which covers 2011-2015, the upstream and downstream assets within the maker, to form a RMB1 billion ($160 million) private hospital share of total beds is expected to same industry. In this context, the corporate LP fund. Yingli will contribute about 51% of the increase from 10% to 20%. This explains why Aier is likely to play an active role in deal sourcing – total capital, with the rest coming from Shanghai and others are keen to get involved. effectively identifying the competitor it wants to Sailing Capital Investment Fund. The vehicle will Furthermore, the China Securities Regulatory buy and asking the GP to negotiate a deal. invest in ground-mounted and rooftop-installed Commission (CSRC) is drafting rules to make it However, this strategy is contingent on the solar-power projects, helping Yingli’s transition easier for listed companies to do M&A deals. They PE partner actually achieving control of the from a solar cell manufacturer into a broader will no longer need regulatory approval when target business. “It’s difficult to ask founders to renewable energy solutions provider. buying, selling or swapping assets, provided give up their business to the PE funds in China,” “There are many new energy companies are deals do not involve reverse takeovers. The CSRC says Xudong Qiao, head of research in Shenzhen queuing up to get access to the capital markets. has also encouraged private equity firms to set Capital Group. “So what GPs often do is to invest We see it as an opportunity to invest in them and up M&A funds or other types of industry-focused through minority stakes and then try to persuade

8 avcj.com | July 22 2014 | Volume 27 | Number 27 COVER STORY [email protected]

business owner to sell to the listed company.” third-party investors, there must be a high level Even if the PE firm is able to execute a buyout “It’s difficult to ask of information disclosure as to the nature of the strategy from the outset, managing companies GP-LP relationship.” as a controlling investor is alien to many Chinese founders to give up Shenzhen Capital Group’s Qiao adds that the investors. Having emerged in a minority growth key point of conflict will be whether a company capital environment, they are not familiar with their business to the is exited via IPO or trade sale. “It will depend on the restructuring, quality control, consolidation PE funds in China. So the level of influence corporates have on board and brand awareness that come naturally to decisions. And sometimes that depends on their Western buyout players. They may struggle if what GPs often do is to capital commitment in the fund,” he says. required to replace company management. Over time, Chinese companies will develop “The most challenging part is post-investment invest through minority their own M&A capabilities and they may no integration work after investing,” says Yangchun stakes and then try longer require the support of a GP partner. By this Yi, a partner at Hejun Consulting, which recently point the GPs may also have gleaned enough launched an $80 million fund with Shenzhen- to persuade business from the relationship to introduce their own listed stationery manufacturer Comix Stationery. owner to sell to the sector-specific value creation strategies. However, “Apart from finding the best projects for the in the short term, it is difficult to see how M&A listed company, we have to manage an investee’s listed company” – Xudong Qiao funds can meet their consolidation objective business culture and try to integrate resources when run by inexperienced managers with little with the listed company, making sure it will be a hope or idea of how to take full ownership. smooth transition.” in the commercial interests of HNWIs who just “From pre-IPO strategy to M&A funds, we The Hejun-Comix fund’s objective is to sell want to make money. Similarly, the corporate don’t see a fundamental change in domestic PE assets to Comix after a five-year holding period. often has right of first refusal on portfolio managers. They still act as investment bankers, companies – so what happens if another buyer is finding potential projects and then exiting Conflicts of interest willing to pay more for the business? through sales to listed firms,” says Sun Dayi, While on one level guaranteed exits might “Whether it is fundraising, investment or exits, managing director at Jade Investment. “Many GPs appeal to third-party investors, there is also the those funds seems to have a lot of conflicts of will fade away because they can’t sustain their risk that they will be left disenfranchised by M&A interest,” says Jenny Zeng, managing partner business during this transition, but it’s a positive funds. An investment that is in the best strategic at fund-of-funds Magic Stone Alternative development for the market. It pushes GPs to interests of the corporate sponsor might not be Investment. “If they want to raise capital from review their fundamental skills.”

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To subscribe, call Sally Yip at +(852) 3411 4921 or email [email protected] avcj.com FOCUS [email protected] Roadmap to recovery India’s recent Union Budget represents the opening salvo from a government that many in the business community hope will get the country moving again. The private equity industry is watching closely

WHEN THE RESULTS CAME IN ON MAY 12, statement of intent and an indication of how macroeconomic targets such as tackling the for many it signaled a fresh start for India. The the government plans to meet the expectations deficit by reducing subsidies and encouraging pro-business politician Nahendra Modi, leader of its supporters. Once Jaitley sat down, the growth through infrastructure investment. For of the Bharatiya Janata Party, swept to power public markets jumped up – and the significant private equity, the most positive development is with an overwhelming majority in the largest rebound was seen as evidence that the budget is liberalization of foreign direct investment (FDI) in democratic election the world has ever seen. investor-friendly. certain sectors. The budget outlines a substantial With India having suffered two years of Whether the document can more specifically increase in the FDI limit – from 26% to 49% – anemic growth, a falling rupee and a persistently be described as private equity-friendly, however, across the defense and sectors. high current account deficit and an ineffective rests on a few key issues. This is particularly significant for the insurance government, it is little wonder Modi is treated as “Given the government only had 45 days to sector, which struggled to consolidate due to a something of a second coming. Keen to live up present the budget, I see it more as a statement lack of investment; AVCJ Research data shows to the perception, he has coined the catchphrase, of intent” says Munish Dayal, a partner with that in the past five years there have been just “The good days are about to come.” Baring Private Equity Asia. “And it has clearly spelt five PE investments in this space totaling $150 After a six-week honeymoon period, Modi’s out the intentions of the new government.” million. administration faced its first biggest test – the “Insurance is a nascent sector, barely seven or Union Budget. Presented by Minister of Finance Liberalization agenda eight years old,” says Vikram Utamsingh, co-head Arun Jaitley on July 10, it was primed as a Most of the goals involve broader of Alvarez & Marsal (A&M) India and managing director of the firm’s transaction advisory group. “But if you look at the penetration and the product available, it is really in its first life cycle so Start-ups: Fresh impetus it is great sector to invest in for the long term.” Another sector likely to benefit from this or venture capital investors, the stand-out number in India’s 2014 Union Budget is the INR100 budget is manufacturing. Under new proposals, Fbillion ($1.6 billion) that the government has earmarked for a fund-of-funds intended to boost mid-cap manufacturing firms that invest more entrepreneurship and nurture start-ups. There is no information on allocation policy, but the fund than INR250 million in new plants and machinery will provide risk capital to young companies through a mixture of equity, and over a 12-month period will qualify for a 15% soft loans. government rebate. This was previously only “The details are not there yet but I think it is important the government has acknowledged available to larger companies. that supporting start-ups is key to job creation and that they are willing,” says Mohan Kumar, The budget also includes significant changes executive director with Norwest Venture Partners in India. that will lead to the recognition of the Real Estate This willingness to support the country’s venture ecosystem is reflected in a number of Investment Trusts (REITS) and Infrastructure other initiatives within the budget. They includes plans to establish a technology center to Investment Trusts (InvITs) in India. Jaitley promote innovation, entrepreneurship and agro-industry accompanied by a fund with a corpus confirmed the structures would have pass- of INR2 billion. The government also said it would to put aside other smaller pools of capital for through status – which means they are not liable early-stage investment, including INR1 billion for a “Start Up Village Entrepreneurship Program” for corporate tax – as well as receiving other targeting rural youths. “necessary incentives.” The move is intended In addition, Finance Minister Arun Jaitley proposed appointing a committee of representatives to create a single layer of tax for the structures, from the Finance Ministry, the Ministry of Micro, Small and Medium Enterprises (MSMEs) and the addressing investors’ concerns that they might Reserve Bank of India (RBI) to make recommendations on how the small businesses can be better be taxed at multiple points. financed. As part of this, Jaitley wants to review the official definition of MSME to provide a higher Coming on the back of new guidelines for capital ceiling, which would give companies easier access to credit. REITs issued last October, it is hoped that a A number of industry participants believe that sustaining investment in domestic start-ups new liquidity channel for investors – spinning depends on unlocking new pool of capital – notably high net-worth individuals (HNWIs). Indian completed properties into listed trusts that angel fund Your Nest recently recommended that measures be taken to encourage HNWIs, who generate consistent yields through rental income typically focus on assets like real estate, gold and fixed income, to act as angel investors and – is about to open up. put more capital towards venture capital and private equity. However, not all agree that this is a Dayal cites one of Baring’s portfolio matter of policy change. companies, real estate developer RMZ Corp, as a “Unlocking capital from HNWIs will be more a function of change in sentiment and the potential beneficiary. “RMZ has a large portfolio macroeconomics,” says Sanjeev Aggarwal, co-founder of Helion Venture Partners. “Better of leased commercial real estate which it is in sentiment drives more capital and vice-versa, and we are beginning to see signs of that cycle.” the process of doubling in size,” he says. “The company will benefit from using a REIT structure

10 avcj.com | July 22 2014 | Volume 27 | Number 27 FOCUS [email protected]

contentious issue ever since the government has been a strategic player from overseas who “My sense is that the sought to impose capital gains tax on Vodafone’s offers a valuation that allows a PE firm to make a acquisition of Hutchison Essar – an offshore 3x return after two years. If that happened today, government is trying to transaction involving onshore assets – after the the GP would find it very difficult to do that transaction closed in 2007. The government transaction.” better understand the has now said it will not bring new retrospective Clearly there is room for improvement, with needs of our industry litigation against companies, but this has not put some hoped for changes yet to come to fruition, the issue to bed. but the mood is one of cautious optimism. and more clarity will “For existing cases involving retrospective Utamsingh tempers his disappointment with taxation, the government is saying that the remark that it is still early days for the Modi come with time. We continuing with the current litigation is the best administration. can see they are intent was to resolve the issue,” says Sangeev Aggarwal, Helion’s Aggarwal, meanwhile, is looking for co-founder of Helion Venture Partners. “So there reform to bring with it a clearer grasp of the asset on engaging with the is relief for some investors but others have been class among bureaucrats. “My sense is that the left hanging.” government is trying to better understand the industry” – Sangeev Aggarwal One of the more worrying developments needs of our industry and more clarity will come for GPs – particularly in the context of exits – is with time,” he says. “We can see they are intent on as this will facilitate the listing of this asset when new rules concerning long-term capital gains engaging with the industry.” the time comes to exit.” tax. Under the previous regime, holding either a Baring’s Dayal also endorses this wait-and-see listed or unlisted security for period of more than approach. He stresses that while the details of the Taxing issues 12 months meant that it qualified for long-term budget are important, the overall message is that Investors are less positive about broader taxation capital gains tax of 20%. But new legislation the new government is pro-business, which can policies, where greater clarity is required. “While states that unlisted securities will only receive only be good for private equity on a broad level. the government did express a commitment long-term treatment after a minimum three “I think this budget will start a growth cycle in to resolving large-scale bottle necks, such as years. An exit within this period would trigger a India which will see capital expenditure increase, taxation, it did not outline specific policies short-term capital gains tax of 40%. offering opportunities in manufacturing, real on these issues,” says Roopa Purushothaman, “It is pretty crippling, actually,” says A&M’s estate, infrastructure and financial services,” says managing director at Everstone Capital. Utamsingh. “We have seen some PE transactions Dayal. “All of these will revive the growth cycle Retrospective taxation has been a where a GP has invested in a company and there and facilitate overall consumption.”

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avcj.com DEAL OF THE WEEK [email protected] / [email protected] Vision Knight bets big on property site

VISION KNIGHT CAPITAL EXPECTS Fangdd helps them penetrate lower-tier cities founder then changed his decision and let us massive growth in three segments of China’s in China, offering group buying discounts among become the largest investor in this round,” Wei e-commerce market over the next three years – other promotions. It receives a commission on says. property, autos and home decorating. Hence the each transaction. In the first six months of this Fangdd offers properties in 30 Chinese cities, private equity firm’s willingness to provide the year, the company has processed more than covering more than 500 projects. The new capital largest portion of a $80 million Series B round of RMB50 billion ($8 billion) worth of real-estate will be used to expand its network and develop funding for real estate portal Fangdd.com. transactions, compared to a new business line selling “We believe that people who born in 1985 RMB30 billion in 2013 as a whole. secondary market property. or after will make almost all their consumption Fangdd’s target for 2014 is now Wei adds that part of the decision online. This group of people is willing to RMB150 billion. company’s appeal was its pure spend more in these three segments,” says David Wei says the business is e-commerce model. Fangdd Wei, co-founder of Vision Knight. already profitable and the is essentially a real estate Fangdd is the first deal from the private equity founder is in no hurry to raise marketplace, which means it firm’s second China fund, which closed at the fresh capital. CDH invested can achieve scale by offering hard cap of $550 million in April. Lightspeed RMB50 million ($8 million) in July China property: Tough sell? properties from multiple China Partners and existing investor CDH Venture of last year. Prior to that, Fangdd developers. In this sense, Wei also participated in the round. got RMB10 million from Decent Venture Capital. compares the business to Alibaba, where he The three-year-old real estate site serves as a Ahead of its investment, Vision Knight formerly worked as CEO of the B2B unit. launch pad for leading property developers such provided free consulting services to the “It’s very similar to Alibaba when it was as China , China Poly Group and Greenland company, helping it hire senior executives difficult for Chinese manufacturers to export Holding. As the government has imposed tighter and refine its strategy to incorporate mobile overseas. Everyone started using Alibaba and the controls on the housing market as part of efforts internet. “We came as the late-comer to meet platform was booming,” Wei says. “The exporters to stem price growth, developers and agencies the management but we managed to convince needed to find new channels to sell their have founder it harder to sell their stock. them that we can help them operationally. The products.” Norwest backs Capillary retail solution

BUY ANYTHING ONLINE TODAY AND THERE clientele via a point-of-sale customer relationship East, South Africa and Asia Pacific. is a good chance the seller not only knows what management (CRM) platform as well as through “When we invested in the last round the you bought, but who you are, where you are digital loyalty card schemes and social media company was primarily India-focused, with 80- and what you like. E-commerce firms can now campaigns. Boasting users such as Benetton, 90% of its revenue coming from India,” explains mine a wealth of information on their customers; Nike, Puma and Pizza Hut, the start-ups claims Kumar. “In the last two years that has fallen to traditional brick-and-mortar retailers, meanwhile, that its software contributes to a 15% increase 40%. This expansion and the firm’s ability to win are left behind. in average basket value and a 30% increase in new customers is what made us want to do “Many offline retailers have no idea who is customer retention rates. another round.” walking in the door and it is a universal issue, Kumar stresses that the appeal This round of capital will they just don’t know,” says Mohan Kumar, goes well beyond traditional be used to improve Capillary’s executive director with Norvest Venture CRM. “Not only does Capillary cloud-based marketing platform Partners. “In today’s world they are fighting with put in a system to help retailers and expand its partnerships, websites who do know, so they end up at a big understand who their loyal which already include Blue Label disadvantage.” customers are, but it also helps Engage in South Africa and the Capillary Technologies has been working them target those customers Retail: Know your customer American Express US Global to redress the balance. The Indian company’s more affectively,” he says. Merchants Services group. success in developing artificial intelligence Capillary secured its first institutional funding Kumar adds that as the e-commerce sector technology through which retailers can in 2012 when Sequoia and Norwest led a $17 grows so will the need for brick-and-mortar understand customer behavior recently million Series A round. In addition to the Series retailers to keep pace with the data revolution. convinced Norwest and Sequoia Capital to B, the company raised an additional $4 million “There are 2-3 million retailers in Asia and provide $14 million in Series B funding. in February from American Express Venture. The everyone would like to know who is walking in Set up in Bangalore in 2008, Capillary provides earlier funding helped build Capillary’s global and how to retain them.” he says. “With 20,000 a suite of cloud-based subscription software that presence. The platform now claims to power stores covered and 100 million consumers, we allows users to collect and analyze data on their more than 150 brands across the US, UK, Middle still have a long way to go.”

12 avcj.com | July 22 2014 | Volume 27 | Number 27 DEAL OF THE WEEK [email protected] Zoyi’s premium pork play

NEARLY A DECADE AGO, IN HIS FORMER but building distribution channels in high-end towards the construction of a new factory. career as an investment banker with J.P. Morgan, markets is difficult. We know overseas markets, The facility will allow TFI to meet the Andrew Kuo worked on the deal that saw CDH we have local partners there.” standards required by its target export markets Investments and Goldman Sachs back Chinese Of the course of its 47-year history, TFI has and also double capacity. The current factory pork producer Shuanghui International. Now carved out a 20-25% share of Taiwan’s branded was built 35 years ago and operates at 90-95%, known as WH Group, the company has grown meat processing industry. Offering a wide range forcing TFI to turn down customers because organically and inorganically – it acquired US- of low and high temperature processed pork the demand was based Smithfield Foods last year – into the largest products as well as chilled and frozen raw pork more than it could pork player in the world. A Hong Kong IPO is in products, it occupies a market segment several handle. the works. layers above the mom-and-pop suppliers. The While the Kuo, meanwhile, has reentered the pork bulk of TFI’s $50 million in annual revenues target market is space as an investor in his own right, but the come from the B2B side through long-term evolving, TFI will strategy is niche market rather than mass market. relationships with distributors who sell to remain faithful to Zoyi Capital, the PE firm Kuo set up last year wholesale customers such as hypermarkets and the B2B model after leaving his position as Greater China vice restaurant chains. Prime cuts: TFI targets quality that has so far chairman for The Blackstone Group, has acquired Kuo describes the investment as part served it well. a stake in Taiwan Farm Industry (TFI), a leading succession-planning opportunity and part Right now there is no desire to try and replicate Taiwanese meat producer. Cracking the mainland recognition that professional management can WH Group’s predominantly B2C model. “We market may be a long-term objective, but TFI’s help take the business to the next level. Zoyi is want to focus on niche markets where there is immediate focus is Japan, Singapore and Hong not the majority shareholder but of the three demand for high-quality products and we can Kong. ownership groups – the others are the founding build trust,” Kuo adds. “It is difficult to enter China. “It’s not so much a matter of the money as family and the employees – it has the largest The distribution channels are not easy to build who is going to take the company into these stake. The PE firm is understood to have invested and advertising and branding costs are high. We markets,” says Kuo. “Making products is one thing more than $10 million, most of which will be put are taking a step-by-step approach.” Hony’s pizza takeaway

IMMEDIATELY AFTER TDR CAPITAL AND the business at 10x EBITDA - with a view to Debt servicing has prevented Gondola from Capricorn privatized Pizza Express in 2003, supporting management’s China expansion plan. achieving net profit but it has always been cash the UK-based restaurant chain’s international “It is a brand that is very well established in generative. The debt maturities were extended in franchise operations were shifted into separate the UK and the UK business is still growing,” John October 2013 while the sale of Gondola’s Byron entity as part of the “non-core group.” Zhao, Hony’s CEO, tells AVCJ. “More importantly burger business at the end of the year saw some The PE firms wanted to create the UK’s and excitingly, it is well accepted in China in debt paid down and a dividend taken out. leading casual dining group and they succeeded. markets like Hong Kong and Shanghai. We think Hony plans on retaining the existing, With the addition of the ASK and Zizzi brands, the it has the potential to have many more stores experienced management team and rely on company – Gondola Group – had 497 restaurants here. There is a very large unmet demand from it to keep the across the UK and the Republic of Ireland by China’s rising middle class.” business ticking June 2005, more than six times the number of its There are now 436 Pizza Express restaurants over in the UK nearest competitor in the premium pizza-pasta in the UK and 68 overseas, including 12 in Hong while providing space. The non-core assets were transferred out Kong, nine in Shanghai and one in Beijing. assistance in of the group ahead of its IPO later that year. According to Zhao, sales came to more than China. Cinven took Gondola private again in 2006 GBP370 million last year and EBITDA exceeded The PE firm through a GBP900 million ($1.53 billion) deal, GBP92 million. Hony is in the process of has three core but it wasn’t until 2010 that the domestic and arranging debt financing for the acquisition. Pizza: For China’s middle class investment international Pizza Express businesses were Equity will come from Hony’s fifth US dollar- targets: state- reunited. Gondola and Cinven re-engaged with denominated fund, which has a corpus of $2.35 owned enterprises in need of restructuring; the international partners and set about bringing billion and is now over 50% deployed. private companies with succession planning the business up to date. Four years on, the China Pizza Express accounted for the more than six issues; and taking Chinese firms overseas and angle has helped facilitate Cinven’s exit. Hony out of every 10 of the group’s 752 restaurants as bringing their foreign counterparts to China. Capital last week agreed to buy Pizza Express of June 2013. It also made up the bulk of GBP590 “Cross-border is the newest theme and also the for about GBP880 million ($1.5 billion) - valuing million in sales and GBP112.2 million in EBITDA. fastest-growing investment type,” Zhao adds.

Number 27 | Volume 27 | July 22 2014 | avcj.com 13 Customized Research Report Asian Private Equity Data Made Simple

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To understand how AVCJ Research can help you with your data needs, please call: 852-34114956 or email [email protected] avcj.com PROFILE Customized Research Report [email protected] The final frontier Asian Private Equity After more than a decade at CLSA Capital Partners, Josephine Price left to pursue an interest in sustainable Data Made Simple investment. It led her to Myanmar, the region’s last frontier market, and Anthem Asia “YOU HAVE TO BE SLIGHTLY MAD TO but an uncertainty as to how this might happen. offices. The team of four has since made four set something up,” observes Josephine Price, “We agreed it was going to be a really good investments in the services sector, two of them co-founder and managing director of Myanmar- market but people would make the same control deals. Check size ranges from $150,000 to focused PE firm Anthem Asia. “When we set up mistakes as in other frontier markets,” Price recalls just under $1 million, although more capital will the private equity platform at CSLA it was very of the party. “I felt it would be interesting to try likely be required as the companies expand. hard. We spent years building a team, banging on and do something different. I wanted a platform doors and trying to get deals done. You have to First steps AVCJ Research can provide really want it.” The first investment was in a wholly-owned your firm with timely and Price has a long-standing interest in corporate office center that is leased out to an array of governance, social enterprises and impact local businesses. It gives Anthem exposure accurate research support investing. She saw these issues converging in to the lawyers, accountants, suppliers and Myanmar, a country on the cusp of reform and contractors who form the fabric of the local to help you simplify and brimming with potential, but badly in need of business community, allowing the firm to build expedite your workflow. We development capital. relationships that can generate further deal flow. “Myanmar is the last frontier market in Convincing an entrepreneur to sell equity conduct in-depth research Asia, apart from North Korea,” she says. “While to a third-party investor is understandably Cambodia and Laos will eventually become challenging in a society that is trust-based and provide insightful peripheral to the big PE markets, Myanmar rather than rules-based and private equity is analysis in a bespoke report can become one of them. It is geographically little understood. Anthem made a breakthrough significant. It has ports, power and energy, and six months ago with Thahara, a tourism and that fully meets your data a big domestic population. If you look at where property platform. “These things don’t come to requirements. private equity has been successful in Asia, you you as deals,” Price says. “You have a conversation have big domestic populations.” and you think, ‘We could do it like this.’” Price’s journey to Myanmar started in Hong Anthem’s objective is to build up a series of Kong in the early 1980s. A lawyer specializing profitable businesses and strong relationships in corporate restructuring, she advised on the “Things don’t come to so that these conversations become easier. AVCJ’s industry standard data is used by the world’s leading firms in their takeovers of listed companies that characterized Private equity deal-sourcing prowess is driven by fundraising, investor relations communications and deal due diligence early PE activity in the region. In 1995, CLSA you as deals. You have brand, contacts and reputation, and in Myanmar recruited her to help develop CLSA Capital a conversation and you the latter is most important. “If you are small activities. AVCJ Customized Data Service includes: Partners. Over a decade later Price departed and company and a large foreign player comes in it worked on various projects in the region, “but think, ‘We could do it is a bit intimidating,” Price explains. “But if we are nothing for which I was directly responsible,” she able to show we can work with local partners ✔ Pan-Asian Industry Reviews/Regional Reports – timely updates explains. “When I left CLSA I had this idea that I like this’” then we can build up that social capital.” ✔ Specific industry and financing stage research wouldn’t do an awful lot: it didn’t last long.” It is still very early days. If and when Anthem to do responsible investment, working with graduates to a formal fund structure, the firm ✔ Comprehensive statistics on investments and funds Birth of an idea smaller companies and making money, but in will have to provide more clarity in areas such as Myanmar has flattered to deceive investors the right way.” investment size, length of holding period and ✔ Exits strategic analysis before. For a few years in the 1990s, it opened up A nine-month feasibility study offered further exit routes. There are also broader questions and a number of PE players found their way in, insights into the nature of the opportunity. for Myanmar regarding the development of an ✔ Market peers comparison but hopes were dashed when the government Myanmar has a few very large business groups economy overseen by an opaque administration, intervened and closed down activity. and then lots of smaller companies; the middle and the role of private equity in it. Price is familiar Anthem originated at a more positive time market is virtually non-existent. This is in part a with the rush-in, rush-out dynamics of frontier and with a different agenda. Price pinpoints function of necessity. The typical entrepreneur market cycles and preaches patience. the first serious conversation she had on the owns 5-6 businesses and has been careful not to “It is the fog-of-war as opposed to the three- matter to a party on New Year’s Eve 2011. Earlier allow any to grow too big due to historical fears year plan,” she says. “You land on the beach and that month, Hillary Clinton became the first US that the authorities will seize control of plum instead of waiting for a guy in headquarters to Secretary of State to visit Myanmar in 50 years, assets. Clearly there was scope to take some of tell you what to do according to a pre-set plan, To understand how AVCJ Research can help you a nod to the government’s tentative political these small but often well-managed firms and the fog clears for an instant, you see something, with your data needs, please call: 852-34114956 or and economic reforms. There was a sense that helping them achieve more meaningful scale. and you go for it. That is the strategy for frontier Myanmar was approaching a stage at which Anthem raised an evergreen pool of capital in markets. We have an idea as to where we are email [email protected] investment potential could start to be realized, 2012 from high net worth individuals and family going but it will take time to get there.” avcj.com Number 27 | Volume 27 | July 22 2014 | avcj.com 15 Book Now Early Bird Expires and Save BIG! on 10 October Register online at 27th Annual www.avcjforum.com or email AVCJ [email protected] PRIVATE EQUITY & VENTURE FORUM 2014 11-13 November 2014 Four Seasons Hotel, Hong Kong

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