Asia’s Private Equity News Source avcj.com February 18 2014 Volume 27 Number 06

EDITOR’S VIEWPOINT Why ’s tangled tech entrepreneur landscape is good for start-ups Page 3

NEWS Boyu, CIC, CITIC Capital, CPPIB, GE Capital, Hony, IMM, INCJ, JAIC, Pacific Equity Partners, Quadrant, RRJ, Sequoia, Tiantu, Tiger Global Page 4 DEAL OF THE WEEK Adveq looks to harvest Australia’s almonds Page 12 TutorGroup to scale up with bumper Series B Page 12 QUESTION & ANSWER Partners Group’s Andreas Beyond reproach? Baumann on direct investment in Asia PE firms embrace responsible investment, but it’s not an even field Page 7 Page 15

FOCUS DEAL OF THE WEEK

Singapore certainty Vote of confidence Regulations drive demand for fund admin Page 10 VCs commit $100m to struggling Vancl Page 13 11th Annual Private Equity & Venture Forum Australia & New Zealand 2014 5-7 March, Four Seasons Hotel, Sydney

GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjausnz.com

Over 150 companies and 70 limited partners have already registered to attend the AVCJ Australia & New Zealand Forum.

Confirmed limited partners include: Hesta aeris CAPITAL AG Pomona Capital Nomura Private Equity Capital Sunsuper Pty Ltd. Telstra Super AMP Capital Investors MLC Private Equity International Finance Corporation Bessemer Trust HarbourVest Partners (IFC) University of Rochester RF Capital Wholesale Investor GE Asset Management University of Sydney AustSafe Super GESB Aberdeen Asset Management Khazanah Nasional Berhad QIC DuPont Capital Management The Clean Energy Finance OPTrust Private Markets Group Future Fund Corporation FLAG Squadron Asia Limited ATP PEP Leyland Private Asset First State Super Hermes GPE Management StepStone CPP Investment Board Private Portfolio Managers Wilshire Australia The Myer BlackRock Private Equity Partners AXA Private Equity Group Asia Tyndall Asset Management Qantas Superannuation Cogent Partners Top Tier Capital Partners Milltrust International Group MLC Investment Management Macquarie Investment Northgate Capital Quentin Ayers Management Private Markets Texas Permanent School Fund Funds SA Commonwealth Superannuation Abu Dhabi Investment Authority Canada Pension Plan Investment Corporation (CSC) Board (CPPIB) Media Super … and many others! Australia Post Superannuation Pathway Capital Management Scheme AlpInvest Partners

View the speaker line up and programme at avcjausnz.com

The event starts in only 2 weeks! Join us now! Email us at [email protected] or register online at avcjausnz.com

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avcjausnz.com 11th Annual Private Equity & Venture Forum Australia & EDITOR’S VIEWPOINT New Zealand 2014 [email protected] 5-7 March, Four Seasons Hotel, Sydney Managing Editor Tim Burroughs (852) 3411 4909 Staff Writers Andrew Woodman (852) 3411 4852 Mirzaan Jamwal (852) 3411 4821 Of the same mind Winnie Liu (852) 3411 4907 Creative Director Dicky Tang Designers Catherine Chau, Edith Leung, Mansfield Hor, Tony Chow

Senior Research Manager SO NOW WE KNOW, OR AT LEAST WE ARE equity-backed IPOs by Chinese companies Helen Lee in a position to make an informed guess: Alibaba on NASDAQ since 2000. By this measure, the Research Manager Alfred Lam Group is worth $127.6 billion. Others would entrepreneur community – at least in terms of Research Associates GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjausnz.com puts its value at north of $150 billion, but that’s those plugged into foreign VC networks – is Herbert Yum, Isas Chu, not the point. More interesting is the process relatively small. It should come as no surprise that Jason Chong, Kaho Mak that led to this estimate and what it says about everyone knows everyone else and, to a certain Circulation Manager Over and have already the tangled nature of China’s tech entrepreneur extent, is investing in everyone else. Sally Yip 150 companies 70 limited partners Circulation Administrator registered to attend the AVCJ Australia & New Zealand Forum. landscape. Indeed, a lot of threads can be traced back to Prudence Lau Tiger Global has agreed to buy a minority stake one man: Lei Jun. Two transactions in the past Subscription Sales Executive Jade Chan in Alibaba from Giant Interactive, a Chinese week speak volumes for his influence. First, Lei Confirmed limited partners include: online game developer, for $199.1 million. Giant led a $100 million round of funding for online Manager, Delegate Sales Pauline Chen Hesta aeris CAPITAL AG Pomona Capital originally invested $50 million in the company clothing retailer Vancl. The founder and CEO of via limited partnerships managed by Yunfeng the company, Chen Nian, previously co-founded Director, Business Development Darryl Mag Nomura Private Equity Capital Sunsuper Pty Ltd. Telstra Super Capital, a PE firm set up by , founder of online books and music retailer Joyo with Lei. Manager, Business Development AMP Capital Investors MLC Private Equity International Finance Corporation Alibaba, and David Yu, founder of Target Media. Second, Ventures, a VC unit of the mobile Anil Nathani, Samuel Lau The investment was announced in September phone company Lei founded, invested in a Bessemer Trust HarbourVest Partners (IFC) Sales Coordinator 2011, the same month Yunfeng and several gaming subsidiary of Kingsoft Corporation, which Debbie Koo University of Rochester RF Capital Wholesale Investor other investors paid $1.6 billion for a 5% stake Lei co-founded and where he now serves as non- Conference Managers GE Asset Management University of Sydney AustSafe Super in Alibaba, valuing the company at $32 billion. executive director and chairman. Jonathon Cohen, Sarah Doyle, Assuming the size of Giant’s shareholding has not Whenever we write about nurturing Zachary Reff GESB Aberdeen Asset Management Khazanah Nasional Berhad Conference Administrator changed, the exit valuation suggests Alibaba is start-ups in Asia, contrasts with Silicon Valley QIC DuPont Capital Management The Clean Energy Finance Amelie Poon worth $127.6 billion. lurch into view. Fewer mentors are available Conference Coordinator OPTrust Private Markets Group Future Fund Corporation One month prior to last week’s divestment, – entrepreneurs who have been through the Fiona Keung, Jovial Chung Giant issued a clarification regarding the several start-ups – to guide newcomers; and the Publishing Director FLAG Squadron Asia Limited ATP PEP Leyland Private Asset Allen Lee involvement of its chairman, Yuzhu Shi, and an entire supporting infrastructure – experienced First State Super Hermes GPE Management independent director, Jason Jiang, in Yunfeng. early-stage financiers and service providers, Managing Director Jonathon Whiteley StepStone CPP Investment Board Private Portfolio Managers This was in response to accusations of fraud not to mention the plethora of like-minded Wilshire Australia The Myer Family Office BlackRock Private Equity Partners made by an independent research firm, which individuals looking to share ideas – is lacking. AXA Private Equity Group Asia Tyndall Asset Management Qantas Superannuation said that Shi and Jiang failed to disclose a The single biggest reason why the VC markets conflict of interest. Giant stressed that, while in China and India are by some distance the Cogent Partners Top Tier Capital Partners Milltrust International Group Incisive Media Shi and Jiang were among the 20 well-known region’s leaders is scale – not only for the capacity Unit 1401 Devon House, Taikoo Place MLC Investment Management Macquarie Investment Northgate Capital Chinese entrepreneurs who put up the capital to identify business models that can be rolled 979 King’s Road, Quarry Bay, Quentin Ayers Management Private Markets Texas Permanent School Fund for Yunfeng’s debut fund, they are both passive out nationwide, but also in terms of the robust T. (852) 3411-4900 investors. entrepreneur communities that have emerged. F. (852) 3411-4999 Funds SA Commonwealth Superannuation Abu Dhabi Investment Authority E. [email protected] It is unclear whether the two events are And just like their Silicon Valley counterparts, URL. avcj.com linked. Shi and a PE-backed consortium are in those who have created successful start-ups are Canada Pension Plan Investment Corporation (CSC) Representative Office the process of trying to privatize Giant and it contributing capital and expertise to the next No.1-2-(2)-B-A554, 1st Building, Board (CPPIB) Media Super … and many others! No.66 Nanshatan, has been reported that the divestment will help generation. Chaoyang District, Beijing, Australia Post Superannuation Pathway Capital Management deleverage the company’s , While Yunfeng’s investments in Alibaba People’s Republic of China T. (86) 10 5869 6203 Scheme AlpInvest Partners making the banks more comfortable. Equally, have received a lot of attention, the PE firm has F. (86) 10 5869 6205 Giant might have decided it didn’t need the participated in 17 other transactions by AVCJ E. [email protected] View the speaker line up and programme at avcjausnz.com hassle while under the spotlight and exited for a Research’s count – and this almost certainly tidy profit. doesn’t reflect the full extent of its activity in a The efficacies of the investment in Yunfeng sometimes opaque small-cap space. Ten of these The Publisher reserves all rights herein. Reproduction in whole or The event starts in only 2 weeks! Join us now! Email us at [email protected] or in part is permitted only with the written consent of register online at avcjausnz.com are for another time, although it was board were Series A or B rounds. AVCJ Group Limited. approved. Shi and Jiang’s involvement in the ISSN 1817-1648 Copyright © 2014 private equity firm was hardly a secret and Lead Sponsors Asia Series Sponsor Co-Sponsors Exhibitor the notion of leading Chinese entrepreneurs clubbing together to make investments isn’t Tim Burroughs necessarily bad for the tech sector. Managing Editor AVCJ Research has records of 62 private Asian Venture Capital Journal avcjausnz.com Number 06 | Volume 27 | February 18 2014 | avcj.com 3 NEWS

GLOBAL Tiger Global picks up existing dairy farming and related businesses into Alibaba stake for $199m the joint venture. Partners Group raises $2b Tiger Global has agreed to acquire a minority Sequoia leads round for stake in from Chinese online for PE direct investment game developer Giant Interactive Group for second-hand car platform Partners Group has raised EUR1.5 billion ($2 approximately $199.1 million. Giant originally Sequoia Capital has led a $50 million round of billion) for its largest-ever private equity direct invested $50 million in 2011 via limited funding for Cheyipai, a Chinese second-hand car investment program, adding impetus to a partnerships managed by Yunfeng Capital set up trading platform. Existing backers Morningside strategy that has so far seen the firm take specifically to hold stakes in Alibaba. Technologies, Matrix Partners and CITIC Capital the sole lead in two deals in Asia. Like its two Giant will sell its entire interest in Yunfeng also participated. predecessors, Partners Group Direct Investments E-Commerce Fund A and Yunfeng E-Commerce 2012 will focus on mid-market . Fund B to Tiger Global. The move comes about Travel site 17u raises $82m one month after the US-listed company issued from Tencent, Boyu, Oriza AUSTRALASIA Chinese online travel agency 17u.cn has received a RMB500 million ($82 million) from Tencent Quadrant exits home Holdings, Boyu Capital and Oriza Holdings. The company will use the proceeds to expand equity release assets domestic and outbound travel packages, as well Quadrant Private Equity has agreed to sell as for developing mobile services. Seniors Money International’s (SMI) New Zealand and Australian home equity release mortgage CITIC leads $41m China businesses to New Zealand’s Heartland Bank for NZ$87 million ($72.8 million). SMI has operations tech fund launch in Ireland as well as Australia and New Zealand, A group of investors, including CITIC Capital helping people over the age of 60 release value and the Shenzhen municipal government, have thy have built up in their homes without having a clarification regarding the involvement of launched a RMB250 million ($41 million) venture to move from it or make regular payments. its chairman, Yuzhu Shi, and an independent fund to invest in technology companies. Other director, Jason Jiang, in Yunfeng Capital. investors include listed chip maker Nationz Ex-PEP executive to lead Giant was one of approximately 11 LPs in the Technologies, Infotech Pacific Ventures and Yunfeng E-Commerce Funds, accounting for 10% Shenzhen State Microelectronics Investments. Social Ventures Australia of the total investments across the two vehicles. Rob Koczkar, formerly a managing director at The investment was disclosed in September Mingxin China backs liquid Pacific Equity Partners (PEP), has been appointed 2011, the same month Yunfeng and other CEO of Social Ventures Australia, a non-profit investors acquired a 5% stake in Alibaba for $1.6 fuel cell specialist organization that makes investments designed billion, valuing the company at$32 billion. Oorja Protonics, a California-based liquid fuel to generate education and employment Based on this and Giant’s exit valuation - and cell technology firm, has raised a Series E round opportunities for disadvantaged Australians. He assuming the Yunfeng E-Commerce Funds’ stake of funding from Mingxin China Growth Fund, will assume his new position in October. in Alibaba has not changed in size since the alongside existing investor DAG Ventures. Oorja original investment - Alibaba is now worth in the will use the proceeds to expand into the telecom GREATER CHINA region of $127.6 billion. industry and enlarge its distribution network. Accelerated Venture Xiaomi invests in Kingsoft public in the US in 2012, has agreed to buy a 75% stake in cosmetics and fashion products Partners opens in HK gaming unit Westhouse site Lefeng.com for $132.5 million. The seller is Accelerated Venture Partners (AVP), a Silicon Xiaomi Ventures, a VC unit of Chinese mobile Ovation Entertainment, the Valley-based PE firm, has opened an office in phone maker Xiaomi, has invested $20 million for Lefeng. It has previously received investment Hong Kong to provide Asian companies with for a 4.7% stake in Westhouse Group, a game from Sequoia, China International Capital Corp. financing and help them go public in the US. developer controlled by Kingsoft Corporation. and China Broadband Capital. Kingsoft Entertainment, the Hong Kong-listed CIC confirms appointment company’s entertainment software division and RRJ to invest $250m in majority owner of Westhouse, put in $5 million. of new president Bright Dairy JV China Investment Corp.(CIC) has confirmed that Vipshop buys into RRJ Capital plans to invest RMB1.5 billion ($250 Executive Vice President Li Keping will succeed million) for a 45% stake a dairy farming joint Gao Xiqing as vice chairman and president. VC-backed cosmetics site venture with Shanghai-listed Bright Dairy & Food, Gao is leaving after reaching China’s mandatory Online retailer Vipshop Holdings, a DCM and a subsidiary of Chinese conglomerate Bright retirement age of 60. Li, 57, joined the sovereign Sequoia Capital portfolio company that went Food Group. Bright Dairy will restructure all its wealth fund in 2011 and was previously CIO.

4 avcj.com | February 18 2014 | Volume 27 | Number 06 NEWS

GE, SAC exit Taiwan’s IMM set to buy HMM’s LNG and engineers medicines to treat inflammatory eye conditions, sold 5.75 million shares at $10 Cosmos Bank business apiece, well below the proposed range of $13-15. GE Capital and SAC Capital will exit Taiwan’s IMM Private Equity has been selected as the Cosmos Bank to domestic preferred bidder for Hyundai Merchant Marine’s conglomerate China Development Financial (HMM) liquefied natural gas (LNG) business in SOUTH ASIA Holding Corp for NT$23.1 billion ($762.4 million). a deal worth KRW1.1 trillion ($1 billion). The SAC owns 57.09% of the business while GE holds announcement comes a few weeks after fellow Piramal, CPPIB form 22.52%. They invested a combined $900 million Korean GP Hahn & Co. agreed to buy certain bulk in Cosmos in 2007, taking an 82% stake. and LNG assets from Hanjin Shipping. $500m realty finance fund All four of Korea’s leading dry bulk carriers India’s Piramal Enterprises is to form a $500 China’s Sungy Mobile buys are in distress as the global shipping industry million realty debt fund with CPPIB Credit remains mired in troubles that emerged during Investments,, a subsidiary of the Canada Pension VC-backed app store Getjar Plan Investment Board (CPPIB). The strategic Sungy Mobile, a VC-backed Chinese app alliance will see CPPIB and Piramal each put $250 developer that went public on NASDAQ last million into the fund. year, has acquired GetJar, a US-based mobile ad network. GetJar previously received funding from India impact investments Accel Partners and Tiger Global. total $390m in 2013 Hony in talks to join Giant Private equity impact investments in India totaled $390 million across 80 deals last year Interactive take-private – comprising 23% of all PE transactions in Hony Capital is said to be in advanced talks to the country – says Bangalore-based financial join a consortium led by Baring Private Equity advisor Unitus Capital. The firm said the impact Asia that is supporting the $2.8 billion take- investment sector is relatively nascent, with private deal for Chinese online game developer the global financial crisis. While Hanjin and around two-thirds of impact investments Giant Interactive. The Chinese GP may cover a HMM are raising capital through asset sales and involving early-stage businesses. portion of an equity tranche worth as much as restructurings, STX Pan Ocean and Korea Line $500 million that has been made available. have already filed for bankruptcy. HMM said the JLL in final close on maiden potential divestment is part of a rescue plan India property fund Tiantu Capital commits drawn up in December. The sale is expected to be completed within six months. Segregated Funds Group (SFG), the private equity $8m to Qinghai dairy firm HMM launched Korea’s first LNG vessel in 1994 unit of Jones Lang LaSalle (JLL), has reached China’s Tiantu Capital has committed RMB50 and is now the largest operator in the space, with a INR1.6 billion ($27 million) final close on its million ($8 million) to Qinghai Xiaoxiniu Biological eight vessels that between them transported 7.5 maiden Indian real estate fund - short of its Dairy Industry. The company filed for an IPO in million tons of LNG in 2011 - approximately 22% original INR3 billion target. Shenzhen in March 2012 but was rejected by the of total domestic imports. regulator for financial reporting issues. AmEx VC unit backs

Series D round of funding in Tokyo-based biotech Capillary Technologies NORTH ASIA firm Regimmune Corporation. Several other new American Express Ventures (AEV), the corporate and existing investors also participated. venture arm of credit card company American Digital Garage leads $10m Express, has made its first India investment, INCJ picks up stake in backing Bangalore-based cloud software round for Betaworks solutions provider Capillary Technologies. The Japanese incubator Digital Garage (DG) has robotic hand maker round is reportedly worth $4 million. invested $10 million in Betaworks, a New York- State-backed Innovation Network Corporation of based early-stage tech investor. DG contributed (INCJ) has acquired a 20% stake in Squse $7.5 million to the round with the balance - a Kyoto-based company that makes robotic SOUTHEAST ASIA coming from a group of angel investors. Similar hands - for JPY500 million ($4.9 million). INCJ to Digital Garage, Betaworks makes seed-stage joins existing investors Amazon and Google. Corporates, VCs back investments in internet companies and also Indonesia e-commerce site builds and launches internet products. Jafco-backed Eleven Bio raises $50m in NASDAQ IPO 500 Startups and existing investors Gree JAIC, Nippon Venture lead Ventures have together invested in Bukalapak, Eleven Biotherapeutics, a US biopharma an Indonesian e-commerce marketplace, Series D for Regimmune company firm backed by Japan’s Jafco Ventures, alongside two Japanese strategic investors – Japan Asian Investment Corporation (JAIC) and has raised $50 million through its NASDAQ IPO. price comparison site Aucfan.com and digital Nippon Venture Capital have led a $9.2 million The Massachusetts-based firm, which designs marketing firm IREP.

Number 06 | Volume 27 | February 18 2014 | avcj.com 5 3rd Annual Private Equity & Venture Forum Indonesia 2014 20 March, InterContinental Jakarta Midplaza Sustaining Momentum when the Buzz Cools avcjindonesia.com The Opportunity Landscape of Indonesia’s PE & VC market

Total PE investment made in Indonesia in the past 5 years Rank #5 In terms of competitiveness in Southeast Asia

Top 3 PE investments made in Indonesia in 2013

693% Increase in PE-backed exits between 2012 and 2013

Investment realisation in Indonesia in 2013 TOP 10 PE INVESTMENT IN 2013 FROM US$25m UP TO US$300m

Source: AVCJ Research, BKPM and WEF

Contact us Registration: Pauline Chen T: +852 3411 4936 E: [email protected] Sponsorship: Darryl Mag T: +852 3411 4919 E: [email protected]

Asia Series Sponsor Co-Sponsors

avcjindonesia.com 3rd Annual Private Equity & Venture Forum COVER STORY Indonesia 2014 [email protected] 20 March, InterContinental Jakarta Midplaza Sustaining Momentum when the Buzz Cools avcjindonesia.com The Opportunity Landscape of Indonesia’s PE & VC market Nice guys finish last? Responsible investment has is now a priority for many institutional LPs. GPs might recognize the importance Total PE investment made in Indonesia of environmental, social and governance principles in this context, but acting on them can be challenging in the past 5 years

Rank #5 WHEN KKR AND AFFINITY EQUITY previous years this had largely been limited Furthermore, LPs have established and Partners sold Oriental Brewery to Anheuser- to development finance institutions (DFIs) strengthened their own protocols with regards In terms of competitiveness Busch InBev for $5.8 billion last month in Asia’s that invest in jurisdictions or sectors typically responsible investing. in Southeast Asia largest-ever trade sale, the exit not only proved considered to have a high level of ESG risk. The California Public Employees’ Retirement lucrative – generating a more than 5x money Today, governance issues are becoming System (CalPERS), for example, pledged to multiple – but it also boosted the investors’ green mainstream. A greater number and variety of LPs integrate ESG across all it investments as early credentials. are introducing ESG remits and looking to GPs as 2011 and has a global governance team to KKR claims that during the three-and-a- for action. oversee this area. The pension system uses ESG Top 3 PE investments made in half-year holding period the business saved One of the key developments driving a questionnaire across all its investments. It is also $17.7 million in energy costs, reduced water greater demand for ESG disclosure has been the pushing for more standardized information from Indonesia in 2013 consumption by 19 million cubic meters – saving another $3.7 million – and avoided 85,000 metric tons of greenhouse gas emissions. GP ESG disclosure to investors The South Korean brewery was part of 100% KKR’s Green Portfolio – a cache of companies intended to showcase the PE firm’s commitment 80% to environmental, social and governance (ESG) principles. That KKR is now touting the success of 60% investments in terms metrics other than return 693% on equity demonstrates how far ESG has climbed 40% up the private equity agenda. Increase in PE-backed exits This is in part a response to pressure from LPs 20% between 2012 and 2013 who increasingly require managers to behave as responsible investors. At the same time, many 0 potential buyers of PE-backed assets, notably Global average South America North America Europe Asia Paci c Investment realisation in Indonesia multinational corporations, recognize the value Currently discloses ESG activity Expects to disclose in the next two years in 2013 in – and are therefore willing to pay a premium Plans to use ESG disclosure framework for – businesses with a good ESG record. Source: PricewaterhouseCoopers TOP 10 PE INVESTMENT IN 2013 Accordingly, more GPs are looking to establish responsible investment programs, or at the very least review how they how they manage UN Principles for Responsible Investment (UNPRI), GPs in areas such as climate risk exposure and portfolio companies in terms of ESG. Being a voluntary set of standards supported by United has formed the Global Peer ESG Exchange to FROM US$25m aware of the importance of ESG is one thing; Nations. benchmark sustainable investment efforts. establishing a successful framework through The principles – which to date have attracted The private equity community has responded UP TO which initiatives can be executed is quite around 1,200 signatories, including many with varying degrees of enthusiasm. According US$300m another, placing demands on time and resources. European and North American LPs – focus on to a report on attitudes to ESG in private equity “From a fundraising perspective we are six broad pledges, covering: the incorporation put out by PricewaterhouseCoopers (PwC) last seeing a lot more LPs asking about ESG and of ESG principles into investing, decision making year, 57% of GPs surveyed have a formalized they are asking in a much more formal way,” says and ownership; disclosure on ESG issues; and public commitment on ESG management and Source: AVCJ Research, BKPM and WEF Michael Henningsen, managing g director with promotion of ESG. around 55% actually having relevant policies in placement agent Park Hill Group in Hong Kong. These form the basis for the global ESG place. “There are now more ESG-related questions Disclosure Framework published last year in Looking at Asia Pacific in isolation, it is Contact us Registration: Pauline Chen T: +852 3411 4936 E: [email protected] within an LP’s diligence questionnaire about cooperation with 40 LPs, 10 GPs and 20 private perhaps unsurprising that the region trails its Sponsorship: Darryl Mag T: +852 3411 4919 E: [email protected] what sort of processes the GP will put in place equity associations. The framework, which covers global peers. Just 15% of GPs currently disclosing and how they are going to articulate their disclosures during fundraising and during the ESG activities in their portfolio to investors, Asia Series Sponsor Co-Sponsors approach.” life of the fund – is intended to clarify and define compared to 61% in Europe, 100% in North what information is needed by LPs to assess how America and 43% in South America. The global Priority alert a GP approaches ESG. In addition, it provides a average is 56%. Demands for better ESG reporting are by guidance for potential questions an LP can ask “The PE landscape in Asia has a large of no means new to private equity, but in of the GP. number of small funds that have traditionally avcjindonesia.com Number 06 | Volume 27 | February 18 2014 | avcj.com 7 COVER STORY [email protected]

focused on maximizing returns and therefore to China Mengniu Dairy last June for HK$3 Zealand. Better production processes were also have limited focus on sustainability and, billion ($387 million), as an example of how ESG introduced alongside a strong compliance accordingly, limited focus on ESG issues,” says improvements can lead to value-add. framework that suited the company and industry Monica Hira, risk assurance partner at PwC When the private equity firm bought a 17.3% well. . “You do see larger PE houses with stake in the company for $95.2 million in 2009, “Those that talk about ESG as risk an established approach to ESG assessment of China’s dairy industry was still reeling from the management are reacting to pressure rather than target companies but the smaller houses are still a tainted milk scandal that saw infant formula trying to get out in front and recognizing that behind.” ESG is not only the right thing but that it can also Big and bold a competitive advantage,” The large global firms, by says Siewert. virtue of their networks, ESG: Disclosure guidelines This view is echoed resources and LP bases, The global ESG Disclosure Framework was published last year with the cooperation of 40 by Steve Okun, director have not only been LPs, 10 GPs and 20 private equity associations under the umbrella of the UN Principle of of public affairs with the earliest adopters of Responsible Investment. KKR, who reflects that it ESG policies, but have is not only possible for also helped drive a DISCLOSURES DURING FUND-RAISING ESG to play a role in the standardized approach to A GP should disclose information sufficient to enable an LP to: value-add process but ESG reporting. • Assess if the GP is aligned with the LP’s ESG-related policy and investment beliefs essential if investments , for • Assess the GP’s policies, processes, and systems for identifying ESG-related value drivers are to be sustainable. “If example, established its and managing material ESG-related risks; and to identify possible areas for future you change the way a own set of responsible development company operates and it investment guidelines in • Understand if and how the GP influences and supports its portfolio companies’ is profitable, that change 2010, using UNPRI and management of ESG related risks and pursuit of ESG-related opportunities is going to last,” he says. “If UN Global Compact – a • Assess how the GP will help the LP to monitor and, where necessary, ensure that the GP is you do something that is policy initiative aimed acting consistent with the agreed-upon ESG-related policies and practices as set forth at ‘nice to do’ but does not at getting businesses to fund formation add to the bottom line, align operations with • Assess the GP’s approach to managing and disclosing material incidents at the GP and the minute the operating broad human rights, portfolio companies environment changes, labor, environmental such as during a financial and anti-corruption DISCLOSURES DURING THE LIFE OF A FUND crisis, you are likely to principles –as a starting A GP should seek to disclose information sufficient to enable an LP to: drop it.” point. These in turn • Establish if a GP is acting in a manner consistent with the GP’s investment policies, KKR also invested in helped form the basis of processes, and agreed-upon fund terms regarding ESG management China’s dairy sector in the responsible investment • Understand positive and negative ESG-related developments that may impact portfolio wake of the melamine guidelines adopted by companies in the fund crisis. Acting in tandem the Private Equity Growth • Determine if responses to GP and portfolio company incidents and incident reporting with CDH Investments, Capital Council (PEGCC) are consistent with relevant investment terms, the fund’s policies, and the LP-stated it backed China Modern under the umbrella of objectives regarding incident disclosure Dairy and helped the UNPRI. company establish While many GPs are itself as a high-end milk aware of what is required, producer. The PE firms the issue is how to demonstrate to LPs that contaminated with the chemical melamine, made a partial exit last year, also to Mengniu. they are making the necessary change to their resulting in the death of six infants, while portfolios. Several sets of sweeping guidelines hundreds more were hospitalized. Tight resources have been published but there is no one-size- “Sometimes it takes a bad situation to give At the other end of the spectrum, small players fits-all model that can easily be applied across a people the conviction that ESG is both a risk and often struggle to satisfy LPs’ ESG requirements portfolio. A fund can have a core set of principles, an opportunity,” say Patrick Siewert, managing because they lack the financial and human but approaches differ from business to business. director with Carlyle in Hong Kong. “In this resources of their larger counterparts. Indeed, From a GP perspective, ESG is addressed particular case the management had a strong many managers that are scaling up for Fund in two ways, depending on the stage of the conviction around quality and doing the right II or III and want to deepen their LP bases investment cycle being targeted. There is ESG thing.” with the addition of European and North risk management during due diligence and The private equity firm’s first move was to American institutional investors, find themselves then ESG in the context of post-investment bring in Robert Brackett, former director of the US unprepared. value-add. Typically, GPs and LPs have focused Food and Drug administration’s Center for Food “Over the last couple of years there are mid- on the former. However, private equity firms are Safety and Applied Nutrition, to head Yashili’s market GPs that have started to receive requests increasingly looking at how ESG can contribute food safety and quality assurance committee from pension funds and other new LPs on their to the development of portfolio companies. (FQSAC). In addition, the firm was forced to think ESG programs, and in many cases it takes them Carlyle cites its investment in Yashili, a more strategically about quality while reorienting by surprise,” says Javad Movsoumov, executive Chinese infant formula manufacturer exited its supply chains to source raw milk from New director in the private funds group at UBS. “They

8 avcj.com | February 18 2014 | Volume 27 | Number 06 COVER STORY [email protected]

operate with ESG principles in mind but very because DFIs such as International Finance greenhouse gas emissions. often that part of the investment process is not Corporation and CDC Group feature prominently “When you do a minority investment, you well documented. In many cases there will not in the first of these funds and because Indonesia have to aim for a partnership approach, and it be a separate ESG part of the process simply is perceived to have higher levels of ESG risk. can be a little bit different in terms of convincing because no one has asked for it before.” people to make changes,” says KKR’s Okun.” One Not only do these GPs have little experience Less is more? of the key things for us is that the portfolio with ESG mandate-wielding LPs, but those As such, some are skeptical as to whether a lack companies need to agree to do it and they need operating in Asia’s emerging economies are often of resources is sufficient reason for a GP not to to want to do it, because if they don’t it is not making growth, not , investments. have a proper ESG policy in place. “There is no going to be effective.” With limited influence at board level, they reason why proper ESG due diligence cannot In either case – whether you are a mid-market might struggle to country fund or global implement ESG policies buyout shop – the even if they had them. “If you want to change the way a company issue is remains how And their typical mode to record and measure of exit is an IPO – the operates and it is profitable, that change is going ESG improvements founder and majority to last” – Steve Okun in a meaningful way. shareholder wants to While some initiatives, maintain control of such as saving the company – so these GPs are not necessarily happen,” says James Pearson, CEO of Pacific Risk water and reducing greenhouse emissions, can incentivized to improve ESG credentials to meet Advisors.”If a GP starts saying ‘we cannot afford it, be quantified, other elements like social and the requirements of acquisitive multinationals. we will go bust if we do this’ then they really do governance impact are harder to quantify. However, UBS’s Movsoumov notes that while not understand what it is all about.” “The Holy Grail is to truly quantify how much few GPs raising funds with less than $1 billion in Similarly, taking minority stakes does not of an IRR comes from the ESG element,” says Mark commitments are likely to have a dedicated in- preclude a private equity firm from generating Goldsmith, head of responsible investment as house ESG team, there are exceptions. successful ESG outcomes from an investment. Actis. “Improvement on the governance side, Indonesia-based GP Saratoga Capital, for KKR took a minority interest in India’s Dalmia which is often the biggest driver of value, is hard example, has its own ESG director to oversee Bharat Cement in 2010, added the company to separate out from what you would have done investments, despite raising about $750 million to its Green Portfolio two years later, and so far anyway as part of being a good private equity across its two institutional funds. This is chiefly claims to have saved 141,000 metric tons in investor versus it being part of your ESG.”

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avcj.com FOCUS [email protected] Shifting sands Fund administrators are seeing increased demand from GPs for back office services in Singapore. Hong Kong isn’t the definitive loser, but the territory’s lack of tax and regulatory certainty for PE is a factor

COVERAGE OF THE BATTLE BETWEEN Hong Kong’s concerns about the asset class. The administration and at least S$200,000 ($151,000) Hong Kong and Singapore to become Asia’s territory is said to fall short of its regional rival in in local business spending each year. The system preeminent private equity hub makes liberal use three interrelated areas: regulation, tax and ability isn’t perfect but it offers substance and certainty. of subordinating conjunctions and modal verbs. to domicile. There is also the option domiciling a private “Unless” Hong Kong introduces an acceptable In terms of regulation, while a number of equity fund in Singapore as opposed to just regulatory framework for the asset class then it Hong Kong-based managers have chosen to putting in place a local manager. The FSDC “might” end up losing business to Singapore. register with the Securities & Futures Commission proposals for Hong Kong currently extend no Similarly, there is anecdotal evidence of CFOs (SFC), the agency’s response has until recently further than allowing open-ended investment being told by managing partners that relocation been that PE funds domiciled in the Cayman companies (OEICs) to domicile locally. “should” be considered “if” they are unable to Islands with only an advisory presence locally “We looked at Hong Kong and we spent a lot achieve clarity on tax treatment. are not its concern. They only become the of time traveling to the region from the UK. We chose Singapore primarily because it is a fund domicile whereas Hong Kong is not really,” says “LPs look at Singapore as having a regulatory Alexander Traub, managing director for Asia at Augentius. structure in place for the private equity industry The independent administrator opened and that gives them a lot of comfort about in Singapore two years ago. In addition to the domiciling issue, it felt that the Singapore investing in locally-managed funds” – Julian Carey administration market was less penetrated than Hong Kong. Augentius now has approximately 15 live clients in the region, all of whom use Are we now witnessing the thin end of the concern of the SFC or other regulators if they are locally-registered fund management companies. wedge burrowing its way into the argument? marketing to local investors or offering financial Most use a Cayman domiciled feeder with a According to third-party administrators, products in other asset classes. Singapore master fund sitting underneath. Singapore has become one of the fastest- As for tax, private equity firms with managers The domiciling preferences of Augentius’ growing markets in Asia for their services. onshore and funds domiciled offshore risk clients reflect those of the wider market. “We have seen a huge increase in the number triggering permanent establishment and However, Tata Capital is among those that opted of managers knocking on our door in Singapore, becoming liable for local tax. Complex structures for Singapore as a base for its funds as well as its including international managers,” says Julian are set up to avoid this potential fate, but at fund management operations. Carey, managing director at Tricor IAG. “LPs look the same time, the absence of local substance The jurisdiction is said to be gaining ground at Singapore as having a regulatory structure theoretically makes it harder for funds to take on Mauritius, a traditional favorite of India- in place for the private equity industry and that advantage of Hong Kong’s double tax treaty focused managers, due to the introduction of gives them a lot of comfort about investing in (DTT) network. anti-avoidance measures under the country’s locally-managed funds.” To be fair, there has been progress. The impending new direct tax code that would Dan McNicholas, head of sector sales for government has promised to introduce an require proof of local substance in order to alternatives in Asia at State Street, sees a similar attractive regulatory framework for private qualify for DTT benefits. Establishing a sufficient trend, noting that the tax incentives offered by equity and the Financial Services Development local presence is far easier in Singapore than the jurisdiction are a big draw for GPs, especially Council (FSDC) has since released specific Mauritius. those looking to raise capital locally. The proposals. These included extending the profits For Tata Capital, however, Singapore was regulatory requirement that Singapore-registered tax exemption for offshore funds to include selected as a headquarters in 2008, before managers must have an administrator within the SFC-licensed private equity funds, which would uncertainty about the India-Mauritius DTT came jurisdiction is also a boon for service providers. address the permanent establishment concern. to the fore. “It’s not the only reason we maintain a However, progress is measured in baby steps “We wanted to build a long-term business in staff there but it is a convenience to have that and it will take time for the territory to match private equity and we thought Singapore was a capability, particularly as we deal with global Singapore’s robustness. good destination from the perspective of being managers and managers emerging from China Exemptions on most forms of income tax able to attract global talent and resources, as well who may prefer a Singapore structure,” he adds. and capital gains are granted automatically to as the well-regulated market and strong financial funds that, depending on the nature of their infrastructure,” says Bobby Pauly, a partner at Tata Areas of imbalance investor base, register with or are licensed by Opportunities Fund. The Tata Group’s ties with The possibility of losing mainland Chinese private the Monetary Authority of Singapore. Other Singapore, which go back more than 40 years, equity firms to Singapore goes to the heart of requirements include local management and were also a consideration.

10 avcj.com | February 18 2014 | Volume 27 | Number 06 FOCUS [email protected]

The administrative burden placed on party administrators – it suggests a commitment while respecting the efficiency of the Singapore Singapore-registered managers to have work to transparency and compliance, and then the regulatory system, he doesn’t believe Hong Kong carried out locally is taken seriously. Dean Collins, service providers employed might be familiar to needs to replicate it in full in order to remain the a partner and member of the fund formation the LPs. jurisdiction of choice for most PE managers. team at O’Melveny & Myers, recalls acting for a Tata Capital has a dedicated back office First, there is simple geographic perception: client that used an Ireland-based administrator team but also outsources certain functions. “It GPs with a primary focus on North Asia, and with an office in Hong Kong. The administrator gives a degree of independence and we use particularly China, have traditionally established had to give an undertaking to the MAS that very reputable third parties because it gives platforms in Hong Kong; those looking at it would carry out accounting functions in our investors comfort that the accounting and Southeast Asia veer towards Singapore. Old Singapore or the client faced losing the tax administration is up to standard,” Pauly explains. habits die hard. incentives. Second, does Hong Kong need to make The MAS also requires that, on top of the Rapid response tax incentives conditional on a high degree of standard practice of using third-party custodians Speaking to AVCJ last year, John Levack, localization? The exemption proposed by the and auditors, PE firms ensure independent managing director of Electra Partners, said that FSDC would be extended to properly licensed valuation and customer reporting by using a the Hong Kong Venture Capital & Private Equity entities, which could be advisors rather than third-party service provider or setting up an Association – where he is chair of the technical fund management operations. There are many in-house function that is segregated from the committee – had commissioned a study to look who want the exemption apply to unlicensed investment management function. at the indirect jobs created by private equity managers as well. Similarly, requirements for “You have to demonstrate to the MAS that activity. These are the kinds of white-collar minimum local business expenditure and you have a segregation of front and back office. ancillary services positions that third-party administration might also be skipped. That means you have to put in Chinese Walls and administrators are so readily filling in Singapore. “From a tax perspective, Singapore has an have separate reporting between the execution The question for Hong Kong – where financial advantage over Hong Kong and because of and deal sourcing sides and your back office,” says services accounts for 6% of the workforce and that we have seen managers set up platforms Tricor IAG’s Carey. 16% of GDP – is how quickly and decisively it can in Singapore. If Hong Kong does nothing then While there is no obligation to use a fund respond. it is a real threat to us,” says Bowdern. “But I don’t administrator, the costs attached to building Darren Bowdern, a tax partner at KPMG China, see the need to stipulate that you should have a fully independent back office can make is confident that the tax exemption for private administrators in Hong Kong in order to qualify outsourcing the logical choice. Another factor equity funds, and the SPVs they control, will be for the tax exemption. As far as I am aware, this is is that many LPs like to see managers use third- in place by the middle of this year. However, not being contemplated.”

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To subscribe, call Sally Yip at +(852) 3411 4921 or email [email protected] avcj.com DEAL OF THE WEEK [email protected] Adveq buys into Australia’s king of crops

THE TERM “REAL ASSETS” DOESN’T The orchards, located in Victoria and term inflation hedge, and sustainable returns,” generally conjure up images of almonds. And operated by Olam Australia, a subsidiary of Olam Arnaboldi adds. these assets aren’t widely available. California, International, provide the required nurturing Of the 18,000 hectare plot, 12,000 hectares Spain and Australia account for around 80% of a environment – cold winters and hot summers are currently planted with 3 million trees. The global almond market set to be worth $5 billion with little rain during the harvest period asset will be rented back to Olam Australia for an in 2013. While market leader California has seen between February and April. They account for 18-year period. Olam International claims to be its share fall in recent years, Australia is on the approximately 50% of Australian almond output the world’s second-largest almond grower. way up, with young plantations due to reach and 3.5% of the global total. “The orchard investment maturity in the next four years. The investment was led is the first transaction on our It is four years since Adveq identified by the Adveq Real Assets real asset platform. This is one almonds a priority for its real assets portfolio. Harvested Resources Fund, of 10 agriculture deals in the Last week, the Swiss fund-of-funds completed which is currently in the market pipeline – some will be orchards, the purchase of 18,000 hectares of orchards in and seeking to raise up to $300 others feed producers,” says Australia for A$211 million ($200 million) from million. Other participants Berry Polmann, also an executive Olam International, a commodities conglomerate include Municipal Employees’ director at Adveq Real Assets. backed by Singapore’s Temasek Holdings. Retirement System (MERS) of Almonds: Big in Australia “There is an increasing demand “Demand for almonds is increasing Michigan and Denmark’s Danica for meat, so we want to have consistently, partly because a lot of countries, Pension from Denmark. these types of investment as well.” especially in Asia, now regard them as healthy The Laguna Bay Pastoral Company, an About one third of the fund will be deployed snacks,” says Gaia Arnaboldi, executive director at Australian fund manager that specializes in in the Asia Pacific region. Adveq Real Assets. “At the same time, the supply agriculture, will manage the local holding Adveq has moved into real assets space in the of arable land suitable for orchards is limited. A structure, Adveq Almond Trust. last five years and currently manages two other unique combination of terrain, soil, water access “This investment ticks every box we are funds in the space, covering oil and gas and and temperature is needed.” looking at in terms of diversification, long power generation, respectively. Jack Ma returns to school

JACK MA WAS AN ENGLISH TEACHER AT educated in different countries, and understands Qiming first invested in TutorGroup in April the Dianzi University before he went the nuances of some of the largest education 2012, committing $15 million. CyberAgent on to found Alibaba Group. Now he has returned systems work.” Ventures invested a few months later. Qiming has to the education sector to support the next While Alibaba and Qiming will support advised the company on sales and marketing, generation. Alibaba committed nearly a half the company’s expansion in China, Temasek is and last month recruited Yao Ming, the former online English tuition provider TutorGroup’s $100 expected to help scale the business in Southeast NBA basketball player, as the face of the brand. million Series B round of funding. The rest came Asia and Japan. The firm is also looking to beyond Within two years of the initial investment, Wall from Temasek Holdings and existing backer English tuition, having recently launched Tutor Street English pulled out of Taiwan, solidifying Qiming Venture Partners. Ming, aimed at foreign students TutorGroup’s position. At the same time, it was Through this investment learning Mandarin Chinese. seeing rapid expansion in the mainland. Alibaba has stolen a march on its Brothers Eric Yang and Ming The company offers tuition services to adults domestic internet rivals, Tencent Yang started the company in through its TutorABC and VIPABC platforms, as Holdings and Baidu, into the Taiwan 10 years ago, initially well as a separate service for school-age students. education sector. Eric Yang, co- providing English tutorials in It expects the adult English language-learning founder and CEO of TutorGroup, classrooms in competition market will grow at 25% per year through 2016, notes that the partnership is with Wall Street English and EF when it will be worth more than $21 billion. regarded as strategic and there English tuition: Growth market Education First. The firm soon Supported by an R&D team in Silicon Valley, have already been discussions on launched an online platform with TutorGroup provides real-time language learning potential collaboration. a view to entering the mainland market. through online class sessions in 40 countries “Alibaba has a breadth of products, while “I knew this company from classifieds in a with 2,000 tutors to date. “People may think that TutorGroup has more than a decade of domain Chinese newspaper and then made a cold-call online teaching is easy to run through Facetime know-how in online education. This may present to its founders,” says J.P. Gan, managing partner or Skype, but it’s not,” says Gan. “Successful service both parties with unique opportunities,” he adds. at Qiming. “The company had already recorded a providers should have a full-set of teaching “Our executive team is multinational, has been profit in Taiwan at that time.” content, IT system and teaching experience.”

12 avcj.com | February 18 2014 | Volume 27 | Number 06 DEAL OF THE WEEK [email protected] Superangel swoops in to support Vancl

CHINESE SMART PHONE MAKER XIAOMI which boasts at least 300 threads per inch, is his platforms, JD.com, Vipshop and LightInThebox is a smash hit, valued at $10 billion in its most favorite item of clothing. aggressively buying market share. The company recent round of funding. Lei Jun, the company’s “Vancl invested hugely in growing its brands has struggled to position itself, at one point founder, is riding high. In contrast, Chen Nian, and products over the last few years, and it has seeking to expand into a variety of categories, who set up online clothing retailer Vancl six undoubtedly become a leading player in the including consumer electronics. years ago, is reportedly in trouble, his company online clothing category. We are still convinced Last year, Vancl shifted its focus back to shedding staff and truggling to pay suppliers. that it has a high business value,” says J.P. Gan, clothing and cooperated with third-party brands, Lei and Chen are old friends, having founded managing partner at Qiming, following the acquisition of rival multimedia retailer Joyo.com together in the which led Vancl’s Series C round Beijing Crucco Technology. It 1990s and then sold the business to Amazon in 2008 and has also invested in also restructured into three core in 2000. Lei provided seed funding for Vancl in Xiaomi. “Now Lei is on the board businesses – its own brand V+, 2007 and last week he bet on the company once he can bring his experience to special discounted sales and again, committing $20 million to a $100 million help grow the business.” third-party brands. However, round. Existing investors Temasek Holdings, Vancl, which started out critics are skeptical whether this Ceyuan Ventures, IDG Capital, Qiming Venture selling low-price menswear, was model is sustainable as it far from Partners, SAIF Partners, Hotung International and once a VC darling. According to Chen Nian: Vancl founder the original goal of establishing a CITIC Private Equity also participated. AVCJ Research, it has received proprietary online brand. Chen intends to adopt the Xiaomi model in arund $449 million across five rounds of funding. “Vancl will return to selling its own branded trying to turnaround Vancl, with clear market Tiger Global Management, Trust Bridge Partners clothes by targeting young and fashionable positioning, high quality products at reasonable and Kerry Properties are also among the customer groups,” says Gan. He envisions the prices, and killer online marketing strategies. The investors. An attempt at an IPO was aborted in company following a similar online development two entrepreneurs have already created a buzz 2012 due to market volatility. path to Japan’s Uniqlo – and once it gets back on for Vancl’s latest offering on microblogging site Stiff competition appears to have shaken track and back on scale, an IPO will again be in Sina Weibo. Lei wrote that the high-quality shirt, Vancl, with Alibaba Group’s Taobao and TMall the offing.

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avcjchina.com ANDREAS BAUMANN | INDUSTRY Q&A [email protected] The direct approach Partners Group has raised $2 billion for its latest PE direct investment program, up to 40% of which can be deployed outside of the US and Europe. Andreas Baumann, head of the firm’s Singapore office, highlights the opportunities in Asia

Q: How important is direct you have equal representation and the environment offers of a strategy that leverages investment becoming to on the board. Partners Group good opportunities that are your primaries business? Partners Group globally? Direct Investments 2012 will skewed towards the control A: It’s more a coincidence. We are A: We have always been a direct only do deals where we are the investor. We’ve had a fair bit of not in the business of buying investor and there has always lead or joint lead. Trimco and success finding interesting and companies out of other PE been a mix of lead transactions CSS fall squarely within the lead actionable opportunities in India. portfolios, but we may do so and joint investments. The first category and we are working on You have secondary buyouts occasionally. In private markets, Partners Group-led buyout a couple of others in Asia that and buyouts from entrepreneurs as the name implies, information transaction in Europe was in are at advanced stages. A couple willing to sell majority stakes comes at a premium and if we 1999, so these types of deals go more would fall into the joint who in the past would not have better information than back quite some time. In terms lead category. other potential investors we will of weighting in what we do use that to our benefit. year-on-year, they have become Q: Is control a prerequisite? more prominent. What is new is A: We don’t necessarily have a Q: Are there likely to be the scale, which is a result of the restriction only to do buyouts, situations in which you are build-out of our footprint around but this is our strong preference. competing for direct deals the world and the addition of We believe in active ownership against portfolio GPs? senior investment professionals to make companies bigger and A: Ideally, we wouldn’t need to with direct investment better and that is best achieved compete with anyone and I like backgrounds. through majority stakes. In the to think our targets are slightly US, Europe and other developed different, but sometimes there Q: What resources do you have in markets, a deal can be more than is overlap. The angles we look this area in Asia? $1 billion in and for tend to be around situations A: We have separate teams looking still be mid-cap. In emerging where we can help companies at primaries, secondaries and become more regional or directs. On the direct private global – and that is the case equity investment side, there are “We believe in active ownership to with both Trimco and CSS. This is about 15 dedicated professionals something we can do as a global in Asia. In addition to that, make companies bigger and better firm and we feel it gives us a leg we have an industry value and that is best achieved through up compared to a local GP that creation team of around 20 only does deals in China or India people globally that provides majority stakes” or Southeast Asia. operational support. Q: Global presence aside, what Q: So Trimco International and Asia it typically goes from $100 have been. In China, you have advantages does Partners CSS Corp. are the first Partners million in enterprise value at entrepreneurs who founded Group have over Asian GPs? Group-led deals in Asia? the lowest end all the way up to businesses in the late 1970s and A: Markets are maturing, offering A: We have three categories of $1 billion, but the sweet spot is 1980s and might not have an opportunities like succession deal. There are joint investments, $250-500 million. ideal successor. Many of these planning, consolidation and where we have a rather passive industries are fragmented and secondary buyouts where you role, and then at the other end Q: Where in Asia do you see the the entrepreneurs also recognize can buy majority stakes. But there of the spectrum there are lead best opportunities? that consolidation might make is a mismatch in the market terms transactions, where we take a A: On a relative scale, many sense. We do, however, like of skills to take advantage of controlling stake in a company sub-regions and countries situations where the original these openings. Fundamentally, on our own. In between those look attractive from a pricing founders are still involved in the the business of active ownership two we may do deals not as a perspective compared to 5-6 business and continue to hold a is different from the growth co-investor but as a joint lead years ago. There are certainly significant stake. investing model, which often investor, where we underwrite challenges in the region that we tends to be more passive. And the deal with a partner, conduct factor in and partially explain Q: Both Trimco and CSS were the universe of private equity due diligence together and share the pricing. But overall we secondary buyouts from other firms in Asia is skewed more the costs, and post-transaction find it is a good time to invest GPs. Is this coincidence or part towards the growth model.

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