December 2020/January 2021 • privateequityinternational.com EXTRA The Emerging Markets Guide

Going it alone How to start your own firm The Debevoise Group continues to “Dominant global private for decades. With consistently high rankings from PEI, Chambers equity practice & Partners, and The Legal 500 with experience recognized leader for more than 40 years. advising a 3 comprehensive range of clients” Chambers Global www.debevoise.com Contents

How to contact us

Senior Editor, Private Equity, Americas Isobel Markham [email protected], +1 646 380 6194 Senior Editor, Private Equity, EMEA Adam Le ISSN 1474–8800 • ISSUE 191 • DECEMBER 2020/JANUARY 2021 [email protected], +44 20 7566 5437 Senior Special Projects Editor Graeme Kerr [email protected], +44 20 3862 7491 Special Projects Editor Louise Fordham Insight Cover story [email protected], +44 20 7566 5440 Senior Reporters Carmela Mendoza 18 [email protected], +44 203 640 7512 2 Rod James Diversity Emerging managers will How to spin out [email protected], +44 20 7566 5453 bear the brunt of flight to familiarity Senior Reporter – Asia The pandemic has left many Alex Lynn Climate change Will the US wondering whether they could [email protected], +852 3704 4638 take the lead? 4 garner better economics by setting Contributors up their own funds. We spoke Bruno Alves, Amy Carroll, Claire Coe Smith, Ben Jackson, Karl Shmavonian, Rebecca Szkutak LP Watch AP7 preps for alts boost 4 to 21 market sources involved in successful spin-outs about leaving Managing Editor, Production: Mike Simlett China Merchants Capital The largest Production Editors: Daniel Blackburn, an established franchise and starting Adam Koppeser PE firm you’ve never heard of 6 anew Copy Editors: Eric Fish, Nicholas Manderson Retail investors Partners Group and Art Director: Mike Scorer UBS Wealth’s tie-up 10 EMERGING MARKETS GUIDE Head of Design: Miriam Vysna Senior Designer: Lee Southey Fundraising Capital concentrates 12 Designers: Denise Berjak, Pio Blanco Covid-19 What PE pros learned 14 Head of Marketing Solutions, 27 Private Equity Group: Continuation funds Get ‘em while Alistair Robinson How to get a deal done during [email protected], +44 20 7566 5454 they’re hot 15 Subscriptions and reprints a downturn 28 [email protected] EDITOR’S LETTER 16 Customer Service Due diligence in Africa 30 [email protected] Editorial Director, US: Rich Melville LatAm HNWIs are waiting for the Editorial Director: Philip Borel Analysis recovery 31 Director, Product: Amanda Janis Director of Research and Analytics: Dan Gunner DFIs: Picking up the pieces 32 Managing Director, Americas: Colm Gilmore 44 Managing Director, Asia: Chris Petersen Gulf Capital: Building global Chief Commercial Officer: Paul McLean leaders across growth markets 34 Chief Executive: Tim McLoughlin VC to benefit from Middle East diplomacy changes 37

Baltic GPs bet on regional play 38

Myanmar’s PE firms hope to win local hearts and minds 39

Germany roundtable Mittelstand Covid-19 calms Vietnam’s feeding deals, venture and corporate carve- For subscription information visit frenzy 40 privateequityinternational.com outs are all poised to accelerate, but sourcing remains challenging in a China’s boost for secondaries 42 covid-19 environment Q&A: EMPEA 43 And finally Life in quarantine 52

December 2020/January 2021 • Private Equity International 1 iversity has been Diversity and fundraising a recurring topic in the private Emerging managers will bear the equity industry, and the pandemic brunt of a flight to familiarity and racial justice Dmovement in the US this year have added urgency to the issue, writes of industry affairs of the Institutional LPs would seek safer options to Carmela Mendoza. Limited Partners Association, told an present to their internal investment Against this backdrop, Private investment summit in September committees and boards. Equity International fundraising data that this flight to familiarity – LPs Paradoxically, blue-chip GPs show capital is being concentrated focusing on re-ups with managers upping their game on diversity in the hands of ever fewer managers. they had relationships with before could make it even harder for Of the $369.2 billion of private the crisis – was the latest risk investors diverse managers to attract new equity, real estate and infrastructure would face and that opportunities relationships. Carlyle Group has set a commitments that closed in the first could be overlooked. goal of achieving 30 percent board half of the year, less than 3 percent At PEI’s Women in Private Equity diversity in its companies by 2023. was committed to firms raising their Forum in November, panellists In June, KKR co-chief executive first- or second-time funds. Only noted that a pandemic-altered Henry Kravis said 80 percent of its 16 percent of the 486 investment environment had made it harder companies had at least two board vehicles that held final closes in H1 for diverse managers to attract new directors with diverse backgrounds, are managed by new firms. investors. Anamica Broetz, head a goal it had set several years ago. Jennifer Choi, managing director of investor relations at DWS, said An LP that needs to meet its

New managers only accounted for 16% of PE funds raised in H1

Total number of funds raised in H1 2020 Percentage of funds raised by new managers 0 50 100 150 200 250 0 10 20 30 40 50

Private equity Private equity

Real estate Real estate

Infrastructure Infrastructure

Source: PEI

2 Private Equity International • December 2020/January 2021 the road. this could be a costly decision down and diverse managers at a time like they know well. But ignoring new LPs to double down on managers vintage years studied. benchmarks in 78.6 percent of the performed better than industry 1994 and 2018 were shown to have Grosvenor study, thediversePEfundsthat owned managers pays off. In a 2019 that investingindiverseorwomen- managers. Research has shown troubling state of affairs for diverse All this leads to a potentially Better returns return.” easiest the not return, investor to make the best possible our clients and the onus is on the paid to choose the best funds for be taking the easy route. We are consultancy. “As an LP you shouldn’t private equity, at an investment my spine,” Europe, saysthehead of appear the saferfinancialchoice. teams. The latter option can often leadership, deal teams and operating focusing on creating diverse established manager that is already Alternatively, it could choose an team ithas yettomeetin-person. to perform diligence and whose backgrounds – on which it has yet one led by people from diverse could go with a fledgling GP – albeit diversity targets will have a choice. It investor to make the easiest return return easiest return, not the best possible consultancy EuropeHead private of equity, investment “ The pandemic is clearly forcing “That thought sends shivers down The onus is on the

had tracked between ”

GCM

has been an issue for a that when it comes Investment Forum: managing director markets managers taxation of carried Democrat or GOP sister title Europe delegates interest is unlikely decade or longer through by either reporting carbon tells Responsible to assessing and Kelly DePonte, Kelly footprint, private that a hike to the downs “Private markets Stephen Barrie, Stephen public markets” deputy director are around five administration under a Biden and has never , Fund, Pension at the Church been pushed Partners, tells engagement years behind of ethics and with Probitas “Taxation of are lagging lawmakers” of England Ups

&

a

December2020/January 2021•Private EquityInternational Size that Brookfield Asset Management’s new series of impact funds could grow tobeovertime, executive according BruceFlatt tochief a fund without a meeting with the subscription credit facilities EQT expects to admit third-party billion –foritsinfrastructure unit LPs who can virtually underwrite capital in SoftBank’s Vision $100bn Percentage of North American Fund II as of 9 November. November. 9 of as II Fund It is 100 percent financed now has, thelatest –upto $10.3bn Raised by Goldman Sachs Asset Management for Vintage VIII, VIII, Vintage for Management Asset Sachs Goldman by Raised by SoftBank Group but Amount of committed $10bn 77% GP (Capstone Partners) Number of ESG-linked investors infuture The big numbers big The the fifth-largest secondariesfundeverraised 2 around theprivate equityuniverse Facts andfigures from € 5 invested capital with 12.5 percent carried interest, versus the option to pay 1 percent on committed equity fund that opted to pay a 1 percent on Management Board’s private equity returns, fees, gross of from 4.4percent at 30 June capital with10percent carry Hamilton Lane’s latest direct 67% across three funds closed Percentage of investors in as of 30 September – up six institutional investors $22.8bn in October, with at least Raised by Thoma Bravo Massachusetts Pension 16.8% Reserves Investment backing allthree

3 Insight

Climate change no substitute for an actual climate LP Watch AP7 change mitigation policy. Will the US take Take Biden’s plan for a $2 trillion preps for major green stimulus over the next four the lead? years to help the US economy alts boost bounce back from covid. An analysis by Vivid Economics shows green spending would increase 14-fold P7, Sweden’s largest Comment if Biden’s plans were implemented public pension, has been in full. To get a sense of how net A exploring how it could positive that would be for the increase its exposure to private Expert analysis by Bruno Alves environment, the US would overtake equity and begin investing in other the EU as the biggest low-carbon alternative asset classes. spender – the current US stimulus The SKr655 billion ($73.9 billion; ell, that took a while. After plan is net negative. €63.3 billion) institution is awaiting four nail-biting days, Of course, the chances of Biden a government review that could WDemocrat Joe Biden being able to fully implement his allow the pension to increase its emerged as president-elect of the green stimulus are a bit like this unlisted assets target to 40 percent United States. election’s red mirage: come January from 4 percent, Per Olofsson, Now, we focus on what the new and a Republican Senate, they AP7’s head of alternative US president has in store for private might fade fast. As Keefe says: “If investments, tells Private Equity equity; specifically, the Biden the Republican Senate leadership International. administration’s stance on climate reverts to its strategy during the “Today we only have private change, considering it is pretty Obama years – of an outright equity but we are exploring ways much diametrically opposed to its refusal to work across the aisle on to diversify the portfolio into predecessor’s. President Trump’s any legislative proposals – then infrastructure, real estate, private views on climate change were fluid, an overwhelming majority of this debt,” Olofsson says. from branding it an “expensive agenda is likely to be compromised.” “Even if we don’t get the green hoax” to acknowledging it as “very A cynic might ask what the point light on this [from the government], important”. His signature climate is of a $2 trillion green stimulus plan from what we’ve learned so far, policy – withdrawing the US from the – or an executive order to re-join we may expand into other 2015 Paris Agreement – speaks for the Paris Agreement – in the face strategies.” itself, though. of the cold, harsh truth. An optimist might reply that if four years of Waiting for a target A thriving sector “indifference” and “opposition” still The Swedish government said in Still, as Joe Keefe, president of managed to produce green growth, 2017 it would allow its “buffer” Impax Asset Management, notes: four compromised years of climate- pension funds – AP1, AP2, AP3 and “The clean energy sector has positive policies should be able to AP4 – to allocate up to 40 percent managed to thrive despite four generate a whole lot more of it. to unlisted assets, up from the years of indifference at best and With the Federal Reserve listing current 5 percent limit. opposition at worse from the Trump climate change as a risk for the For AP7, reaching the 40 percent administration. Technology cost first time in its biannual financial target exposure would take many reductions, supportive state-level stability report – calling for increased years. The pension is waiting policy and strong demand from disclosure and warning of significant for further guidance from the corporate consumers responding to impacts on asset values – the more government review on a revised customer pressure have all helped important question is: what are return target, which would be renewables grow significantly with the cynics and the obstructionists around 7-8 percent in absolute extremely limited federal support.” actually holding out for? terms. In other words, society at large If given the green light, the first disagreed with the president and [email protected] step will be to commission an asset

carried on decarbonising the Bruno Alves is Senior Editor, and liability management study, economy. That’s encouraging, but Infrastructure at PEI Media Olofsson says.

4 Private Equity International • December 2020/January 2021 Private equity investing has its cycles. Work with a secondary manager who’s experienced them all.

As leaders of the secondary market, the Lexington Partners team draws on more than 400 years of private equity experience. Through all types of business cycles, we have completed over 500 secondary transactions, acquiring more than 3,000 interests managed by over 750 sponsors with a total value in excess of $53 billion. Our team has excelled at providing customized alternative investment solutions to banks, financial institutions, pension funds, sovereign wealth funds, endowments, family offices, and other fiduciaries seeking to reposition their private investment portfolios. If you have an interest in the secondary market, our experience is second to none. To make an inquiry, please send an email to [email protected] or call us at one of our offices.

Innovative Directions in Alternative Investing

New York • Boston • Menlo Park • London • Hong Kong • Santiago • Luxembourg

www.lexingtonpartners.com

Includes information regarding six funds managed by Lexington’s predecessor formed during the period 1990 to 1995. This information is provided for informational purposes only and is not an offer to sell or solicitation of offers to purchase any security. Insight

f one were asked to name the China Merchants Capital The largest world’s largest private equity firms, a handful of US blue- PE firm you’ve never heard of chips would no doubt spring to mind. China Merchants Capital, CMC would have been the 11th largest firm in the world had it been included in this year’s a Shenzhen-based private PEI 300 ranking equity firm, also deserves to be in Capital raised since 2015 ($bn) I 0 20 40 60 80 100 the conversation, writes Alex Lynn. Blackstone CMC is – by any standards – enormous, overseeing 277.4 billion Carlyle Group

yuan ($41.8 billion; €35.3 billion) KKR of across private equity, real estate TPG Capital and infrastructure, of which about Warburg Pincus 80 percent is allocated to PE. It has Neuberger Berman raised $27.9 billion of private equity capital since 2015, more than Bain CVC Capital Partners Capital, Cinven and Apollo Global EQT Management, according to this Advent International year’s PEI 300 ranking. Originally the investment arm of Vista Equity Partners China Merchants Group – a state- China Merchants Capital owned conglomerate spanning Leonard Green & Partners finance, transportation and property – CMC launched as a fully-fledged Cinven

private equity manager in 2012. China Merchants Bank, also partly Apollo Global Management owned by CMG, was ranked the 189th largest company in the world Source: PEI in the latest Fortune Global 500, above Tencent, Goldman Sachs and Shenzhen and Hong Kong, two-thirds LPs,” chief executive Rizhong Zhang Morgan Stanley. of which are investment professionals told Private Equity International in CMG sold a 50 percent stake in in seven sectors: transportation, an emailed statement. “We may CMC to Singaporean investment infrastructure and logistics; real also launch more mezz funds, manager GLP last year. estate; finance and fintech; TMT; infrastructure funds and real estate For a GP to be so large and yet advanced manufacturing; green tech; funds in the future.” comparatively unknown overseas and healthcare. CMC’s largest vehicle is the 60 is not unusual for China. Previous “We intend to launch more PE billion yuan Yinhe Equity Investment estimates put the number of firms funds that will receive commitments Fund, according to its website. The in the country anywhere between from current LPs and prospective 2016-vintage commits several hundred to the tens of to the firm’s own vehicles within the thousands, according to the Cheung high-end manufacturing and medical Kong Graduate School of Business. “ We believe that health sectors, among others. Data from Schroder Adveq and It also manages the 30 billion yuan advisory firm Zero2IPO put China’s the long-term GuoXie Phase I Equity Investment yuan fundraising at the equivalent Fund, a 2016-vintage targeting of $163 billion last year, compared political outlook will state-owned enterprise reform in with just $22 billion for USD- be benevolent to areas such as logistics and urban denominated China funds. infrastructure, and the 25 billion- CMC manages 37 private equity investors like us ” yuan CCT China Merchants funds, according to the firm. It Fund, a 2017-vintage focusing on Rizhong Zhang, China Merchants Capital employs around 260 staff in Beijing, M&A, restructuring and pre-IPO

6 Private Equity International • December 2020/January 2021

This announcement appears as a matter of record only.

November 2020

$1,300,000,000

Nexus Special Situations III, L.P.

Flexible private equity mandate investing across the

Credit Suisse Securities (USA) LLC acted as the exclusive advisor and placement agent.

Nexus Capital.PEI.indd 1 11/16/20 1:35 PM Insight

opportunities across several sectors. our jurisdiction.’ … And that’s usually our international clients than for our “The biotech/health sector what’s special about the Chinese domestic clients.” is looking strong this year, due fundraising community, because we Chinese GPs watched the US to covid and increased health help each other.” election with interest. Deteriorating awareness,” Zhang noted. “We CMC also manages five USD relations between the US and China are also excited about cutting- funds, including the $585 million have prompted concerns in Asia edge technology sectors such Sino-BLR Industrial Investment Fund, that US public pensions will face as advanced manufacture, a 2017-vintage, and the $794 million government and public pressure to information technology, and any China Merchants Direct Investment reduce their exposure or allocations other tech sector that can drive Fund, a Hong Kong-listed private to Chinese private equity funds. the global economy and industrial equity trust launched in 1993. Its “Although there are short-term development forward.” USD investors include Mizuho frictions in geopolitics, we believe The firm declined to disclose Securities and SoftBank Group. that the long-term political outlook performance data for its funds. The firm is understood to have will be benevolent to investors Some of CMC’s capital was ambitions to reach one trillion yuan like us, who are looking for good provided by government entities, of AUM over an unknown timeframe; companies to invest in and growing as well as privately run businesses a target that would put it in the same these companies,” Zhang said. seeking industrial consolidation league as the likes of CVC Capital and financial institutions such as Partners, which had $160 billion of Terms of endearment the Agricultural Bank of China, funds committed as of June. Part of Chinese private equity funds Kane Mauri Zhu, a Shenzhen-based this expansion would be through can differ from their Western analyst at CMC, tells PEI. new relationships with international counterparts in several ways, “Local governments and central LPs. CMC is working with external including larger GP commitments governments really do have a lot of consultants to that end. and shorter fund lives, Lorna Chen, money for us,” he adds. “The fund products we intend Asia regional managing partner “Part of that contribution came to serve our domestic clients and and head of Greater China at law with a deal, and that deal is that, ‘If international clients should be the firm Shearman & Sterling, told PEI in you take our money, you have to same in principle,” Zhang added. September. invest like a specific percentage “With that being said, we will roll CMC’s typically include a seven- of that money to privately owned, out more real estate, infrastructure, year fund term, comprising a three privately run businesses that are in mezzanine debt fund products for to four-year investment period, two to three years for divestiture and an optional one-year add-on, Zhu says.

The firm’s five largest PE funds have raised 148bn yuan between them The firm’s management fees range Fund size (bn yuan) between 0.8 percent and 2 percent, 0 10 20 30 40 50 60 depending on the fund and LP, and carried interest is no lower than Shenzhen China Merchants Yinhe Equity Investment 20 percent. Unusually for China, (2016) its funds operate with a whole-of- fund waterfall, rather than the more Shenzhen GuoXie Equity common deal-by-deal structure. Investment Fund I (2016) “We’re also working with outside institutions to find out how we can CCT China Merchants Buyout Fund (2017) activate and sort of capitalise on the deal-by-deal basis to better-motivate some of our top employees,” China Merchants Union (BVI) Limited - PE (2017) Zhu notes. “We understand that going deal-by-deal will sometimes Shenzhen China Merchants pose more hazard, but even Capital Fund of Funds though it does, the huge returns (2017) and successful timeframes really Source: CMC motivate people.”

8 Private Equity International • December 2020/January 2021 Private Funds Group

PRIVATE EQUITY PRIVATE DEBT REAL ASSETS INFRASTRUCTURE

Select Virtual Fundraises

November 2020 July 2020 June 2020

Symphony Technology Vitruvian Investment Tenzing Private Group VI Partnership IV Equity II Technology Buyout European Growth Buyout UK LMM Buyout $2.0bn Closed €4.0bn Closed £400m Closed $1.5bn Target €3.75bn Target £350m Target 4 months in market 3 months in market 2 months in market

Additional Recently Closed Private Equity Fundraises July 2020 April 2020 March 2020 March 2020

Pacific Equity Partners Parcom Capital Insight Partners Lee Equity Partners Fund VI Fund VI Fund XI Fund III Australasia Buyout Dutch LMM Buyout Global Software Growth North America Buyout A$2.5bn Closed €775m Closed $9.5bn Closed $800m Closed A$2.5bn Target €650m Target $7.25bn Target $700m Target

February 2020 January 2020 January 2020

BVIP X Kinderhook Industries Alvarez & Marsal Business and Fund VI Capital Europe IT Services Buyout North America Buyout European Buyout $1.1bn Closed $1.1bn Closed €650m Closed $1.0bn Target $1.0bn Target €400m Target

15 STANHOPE GATE 55 EAST 52ND STREET THREE EMBARCADERO CENTER TWO EXCHANGE SQUARE LONDON, W1K 1LN , NY 10055 SAN FRANCISCO, CA 94111 CENTRAL, HONG KONG TEL: +44 (0) 207 290 3290 TEL: +1 (646) 264 2374 TEL: +1 (415) 229 8096 TEL: +852 3983 2604

[email protected] Insight

Retail investors Three things to infrastructure, complemented with select private debt investments,” know about Partners Group and Wicklein says.

UBS Wealth’s tie-up Investors can tap PE buyouts at a lower threshold artners Group has teamed portfolio where the firm is sharing UBS clients will be able to invest up with UBS to offer private co-investments with UBS. a minimum of €20,000 in the Pmarkets investments to the The joint initiative has an annual ELTIF, per Elmhirst. A typical UBS Swiss bank’s wealthy clients, as investment capacity of between $1 aggregating vehicle would require interest in illiquid private markets billion and $3 billion, and the co- at least €100,000 from each investor. continues to increase, writes investment sub-portfolio is expected Elmhirst says the lower minimum Carmela Mendoza. to make up roughly 20 percent of size makes it much more accessible, Jake Elmhirst, head of private the whole. Partners Group also has a democratising access to private markets content at UBS Wealth second initiative: its private markets markets for the bank’s client base. Management, tells Private Equity European Long-Term Investment “What we have seen at UBS, International the move illustrated the Fund, which is a 10-year vehicle with particularly in the last three years, benefits of adding private markets the possibility to extend by two years. is tremendous growth in interest to a client portfolio, both in terms This is a type of collective investment in private markets from our wealth of returns but also when it comes framework that allows investors management clients,” he says. to reducing volatility and increasing to put money into companies and “When you are in a low interest rate diversification. projects that need long-term capital. environment – and particularly more Firms that have drawn in retail “What we are providing here is recently in very volatile markets – the capital include Blackstone, KKR, a multi-asset one-stop solution to asset class provides a great way for Altamar Capital Partners, Pantheon Partners Group’s direct investments clients to diversify their portfolios and Tikehau Capital. Meanwhile, platform, which will invest across and generate attractive absolute and nearly half of European private private equity, real estate [and] risk-adjusted returns.” banks surveyed by Cerulli Associates Wicklein adds the private markets in May expect to increase their ELTIF has only one , so strategic allocation to private equity it is a fully paid-in structure, which over the next 12 months, while makes it more palatable for private 38 percent plan to increase their individuals. exposure to private debt. Here are three things to know Not just about liquidity about the Partners Group-UBS “Liquidity – at least in the client alliance. perception – always plays a certain role,” says Wicklein. “But I think it’s It will focus on directs more than that. It also comes down In a statement, the firms said the to how easy it is to access solutions, initiative would give UBS Wealth how difficult the administration is, Management clients in Europe and as well as the hand-holding on the Asia exposure to Partners Group’s operational side.” direct PE investments. Partners Group has been offering According to Christian Wicklein, products with liquidity elements to head of distribution partners and “ What we are institutional investors for at least two liquid private markets at Partners providing here is a decades, and Wicklein says the firm Group, it focuses predominantly has almost two decades’ experience on direct investments via two multi-asset one-stop of managing open-end or semi- structures: a joint initiative in which liquid products, having launched its a sub-portfolio of Partners Group’s solution ” first institutional PE portfolio in 2001. direct equity investments is offered The firm has built up more than $24 Christian Wicklein to UBS clients; and a smaller sub- Partners Group billion in AUM in that strategy.

10 Private Equity International • December 2020/January 2021 AsanteWE Capital WOULD Group LIKE is TOpleased WISH to YOU announce SEASON’S the closing GREETINGS of AND ALL THE BEST FOR WHAT WILL HOPEFULLY BE A MORE BENIGN 2021

Abingworth Global Alternatives LLR Equity Partners Potentia Capital Bioventures 8 L.P. Return Fund I VI, L.P. Fund I $450,000,000 $150,000,000 $1,800,000,000 A$350,000,000 2020 2020 2020 2020 A fund focused on North American lower middle market sciences and healthcare. assets across single cases and portfolios. growth investments in the technology and healthcare market businesses headquartered in Australia and New sectors. Zealand with corridors of growth into Asia. Insight

Fundraising Capital concentrates in fewer hands

undraising in the first Fundraising in the first nine months of 2020 held up when compared with previous years, though significantly fewer vehicles closed nine months of the year Capital raised ($bn) Q1-Q3 Q4 Number of funds closed matched levels seen 700 1,400 during quarters one to three in both 2018 and 600 1,200 2016, as the pandemic pushed investors to focus on re-ups F 500 1,000 and established managers, writes Carmela Mendoza. Total fundraising in the year 400 800 through the end of September reached $348.5 billion, a 10 percent 300 600 decrease on the $388.3 billion raised during the same period last 200 400 year, according to Private Equity International data. 100 200 A notable difference between

2020 and 2019 has been the 0 0 collapse in the number of funds 2015 2016 2017 2018 2019 2020 closing. Just 583 vehicles held final closes in the first nine months of The 10 largest funds raised $103bn between them as of September 30 ($bn) this year, a drop from the 1,135 0 5 10 15 20 25 30 recorded throughout 2019 and CVC Capital Partners VIII* even further down on the 1,226 recorded in 2016. The amount of capital raised and Ardian Secondary Fund VIII (ASF VIII)** the number of funds closed also dropped quarter-on-quarter, by 41 Lexington Capital percent and 27 percent, respectively. Partners IX Four European-headquartered

managers raised the largest funds Insight Venture Partners in the third quarter, gathering about XI $40 billion between them, according

to PEI data. Francisco Partners VI CVC Capital Partners raised the largest fund in Q3, as well as the largest so far this year, gathering €22 Nordic Capital X*** billion for its latest flagship in July. In late September, Nordic Capital Clearlake Capital Partners collected €6.1 billion for Nordic VI Capital X, surpassing its hard-cap of €5.75 billion. Fundraising was Baring Asia Private Equity completed in less than six months Fund VII and conducted without face-to-face meetings. MBK Partners V *CVC Capital Partners VIII raised €22bn **ASF VIII gathered $14bn and a further In July, UK firm Vitruvian Partners $5bn for co-investments gathered €4 billion for its fourth ***Nordic Capital X raised €6.1bn buyout fund, Vitruvian Investment HgCapital 9 ^HgCapital9 raised €4.4bn (Hg Genesis 9)^ Partnership IV, less than three Source: PEI

12 Private Equity International • December 2020/January 2021 Insight

Top 10 most active investors based on known PE fund commitments made in 2020 YTD

Institution Regional HQ Number of 2020 Regional appetite commitments

European Investment Fund Western Europe 24 Central/Eastern Europe, Western Europe

Cathay Life Asia-Pacific 19 APAC, North America, Western Europe

State of Wisconsin Investment Board North America 19 All regions considered

San Francisco Employees' Retirement System North America 18 All regions considered

California State Teachers' Retirement System North America 17 All regions considered

New York State Common Retirement Fund North America 17 All regions considered

Texas County and District Retirement System North America 17 All regions considered

New York State Teachers' Retirement System North America 13 All regions considered

Los Angeles Fire & Police Pension System North America 12 All regions considered

Maryland State Retirement and Pension System North America 12 All regions considered

Percentage of institutions increasing, maintaining or decreasing private equity allocations from commitments by private equity Q3 2019 to Q3 2020 (%) LPs in the three months to end- Increased Maintained Decreased 0 20 40 60 80 100 September, 13 were to multi- regional funds. Foundation / Endowment The most active investors in PE were also agnostic when it came Public pension fund to regional appetite. Combined, the top 10 most active investors, Insurance company including the European Investment Fund, have made a total of 168 fund Private pension fund commitments to 2020-vintage funds so far this year. Private equity is bracing itself for All investors an active end of the year, with funds Source: PEI in market targeting $774 billion as of 1 October. Nearly half, or $356 months after launching the vehicle. through prior crises will continue billion, of the total capital-raising Ardian raised €2 billion for its latest to commit to private assets and target is focused on North America, expansion fund, Ardian Expansion re-ups, especially to large and $107.9 billion on Asia-Pacific and Fund V, in September. established managers,” Lambert $77.1 billion on Europe. tells PEI. Funds expected to hold final Growing appetite “Where you will likely see closes before the year-end include LPs’ appetite for mega-funds amid challenges are in niche and newer Silver Lake Partners VI, which has the coronavirus uncertainty is likely teams that have just spun off, given collected more than $18.27 billion to continue, according to Raelan LPs’ inability to conduct onsite due as of August and has yet to hold a Lambert, global head of alternatives diligence due to covid-19.” final close; and Clayton, Dubilier & for global wealth at consultancy LPs’ greatest interest lay with Rice XI, which had raised $12 billion Mercer. funds with a multi-regional as of September against a $13 “Limited partners that have been focus. Of the top 20 largest fund billion target.

December 2020/January 2021 • Private Equity International 13 Insight

Covid-19 What PE pros learned SIDE• LETTER

in a pandemic Juice squeezed from our daily subscribers-only email

Comment GP stakes: The G Unit Credit ace Bennett Goodman (known for being the ‘G’ in GSO Expert analysis by Toby Mitchenall Capital Partners) has launched a firm, Hunter Point Capital, to buy minority interests in mid-market alternative hat have we learned from pandemic has also given would-be asset managers. Avi Kalichstein the global pandemic? It investors another DD reference (Easterly, JC Flowers & Co, Goldman Wwas a question posed at point when assessing a target. Sachs) will be chief executive our Responsible Investment Forum: One recurring talking point was and Goodman will be executive Europe in November. previously how a company had chairman. Michael Arpey, former One significant learning process fared financially through the GFC. global head of investor relations at involved the emergency funding To this can now be added how it , joins as president. that governments mobilised to keep responded to the covid crisis, said Other members of the HPC team businesses afloat during lockdowns. Ondrula, both financially and in include: Rex Chung, the former head These state programmes – most “bigger picture” non-financial ways, of the client and partner group in notably the US Paycheck Protection such as its treatment of employees. Asia at KKR; Debra Bricker, ex-CFO Program – were a point of debate Elsewhere, a more prosaic at Harvest Partners; and Mariska internally and externally. lesson has been learned about Richards, currently a partner at law “Some saw it as free money,” said air miles. James Arnell, partner at firm Kirkland & Ellis. Insight Partners’ deputy general Charterhouse Capital Partners, noted Based in New York, HPC will target counsel and chief compliance “some surprise” at just how much managers in private equity, private officer Andrew Prodromos at the cost was coming out of businesses credit, real estate and infrastructure Forum, who explained that his as a result of not being able to travel. across North America, Europe and firm saw it as a programme for Asia. It will offer strategic advice, LP “mom and pop” businesses: the Stay at home capital formation and other services type hardest hit by stay-at-home News of a potentially effective to these managers. measures. “We took the perspective vaccine against covid-19 has shown The group of financial investors early on that this money was not us all light at the end of the tunnel. fishing in the pond for mid- for us and encouraged portfolio It is tempting to jump ahead in our market GP interests is growing. companies to not take the money. thinking to the post-covid era, when Investcorp, Volunteer Park Capital, We viewed this as a significant in fact the world is many months Stonyrock Partners, Leucadia regulatory risk and reputational risk.” away from that. There will be just as Asset Management, Rosemont Jordan Company partner Lisa much uncertainty heading out of the Investment Group and Bonaccord Ondrula said her firm took the same pandemic as there was going into it, Capital Partners (a unit of Aberdeen line: “We were getting questions noted Prodromos. Standard Investments) are all [from portfolio companies] The final lesson is that firms cannot either active in the space or moving constantly, because individually they take their eyes off the ball when it into it. thought they met the criteria. There comes to effective communication Blackstone has decided to were interesting and sometimes and consideration of employee rebrand GSO Capital Partners as difficult conversations.” wellbeing as we emerge from the Blackstone Credit. It can hardly be Other pandemic lessons relate to crisis. argued that this doesn’t make sense, due diligence. Business resilience as all three co-founders (“G” for and continuity were always parts of [email protected] Goodman, “S” for Tripp Smith and

the DD checklist, but they are now Toby Mitchenall is head of newsletters “O” for Doug Ostrover) have now left priority items, said Prodromos. The at PEI Media the business.

14 Private Equity International • December 2020/January 2021 Insight

SECONDARIES• PICKS Continuation funds Get ’em

Top stories from across while they’re hot secondariesinvestor.com

Comment Secondaries smashes records Fundraising for dedicated secondaries vehicles by end of Q3 Expert analysis by Rod James had broken all records: funds that held final closes during the first three quarters raised $59.7 billion, he secondaries market is are other willing suitors. “Sponsors exceeding all full-year tallies on more seller-friendly than ever, are saying, ‘Trust us, we know the record. The average fund to close Tallowing sponsors to push assets, we’re aligned economically was $1.7 billion in size, the first time terms that surprise even seasoned so you’re getting comfort,’” says the this figure has exceeded $1 billion. pros. This is unlikely to last. law firm partner. “This isn’t sustainable; we deserve Sponsors are also starting to take a holiday,” says a London-based some cash off the table. “Gone are Greenhill’s GP-leds rebuild secondaries advisor, half in jest. Since the days when buyers would say, Speaking on the investment bank’s the shutdown ended in August, the ‘100 percent has to be rolled into Q3 earnings call, Greenhill chief market has exploded with GP-led the continuation fund,’” says Sunaina executive Scott Bok said the firm’s deals. Most are highly concentrated Sinha, managing partner of advisor secondaries advisory unit is to move or based around a single asset: Cebile Capital, adding that 50-70 away from the market where it made intermediaries betting it is easier to percent is now the new normal. its name, and will do more complex market a targeted set of companies For sponsors, there has never “restructuring-type transactions” than to convince buyers to take on been a better time to consider a and fewer portfolio sales. The firm, diversified market exposure. process. Limited partners are also which lost seven managing directors They have been proved right. In benefiting, as competition allows in a month, will rebuild a smaller the words of one New York-based sponsors and advisors to drive top team with more junior members. law firm partner, “there’s money dollar for exiting LPs. According to stacked up like planes landing one fund investor from a multi-asset at Newark” to back these deals. manager, as long as LPs get a fair Blackstone nabs Morandi Buyers who were frozen out during price on exit and the opportunity to Blackstone’s secondaries unit lockdown feel the urge, or the reinvest on the same terms as new Strategic Partners has hired Nik pressure, to deploy. In September, investors, they are generally happy. Morandi, formerly of Canada sister title Buyouts noted that the This window is unlikely to be Pension Plan Investment Board’s process to move Clearlake Capital open long. Stabilising valuations will secondaries team, to help lead its portfolio company Ivanti into a speed the return of the LP portfolio European business. Morandi will be continuation vehicle was probably market. Some secondary fund LPs based in London. the “fastest ever”, taking 45 days to are also beginning to push back, per complete. a London-based advisor, believing the buyers are straying from their Who owns what? Seller advantage goal of providing diversification Secondaries Investor looked at Inevitably, documents are now more or that they are trampling on the the ownership structure behind seller-friendly with few reps and toes of co-investment and direct the firms that make up this year’s warranties, limiting the buyer’s ability investment platforms. GPs should SI 30 ranking, a list of the biggest to seek redress if the asset proves at seize the day while they still can. fundraisers in the five years to odds with the packaging. June 2020. Check out the results Buyers are also being discouraged [email protected] at www.secondariesinvestor.com/ from doing too much due diligence, Rod James is a senior reporter at secondaries-firms-who-owns-what/. while being firmly reminded there PEI Media

December 2020/Janurary 2021 • Private Equity International 15 Insight

Editor’s letter

New York It’s not a bad time 130 West 42nd Street Suite 450 New York NY 10036 to step out T: +1 212 633 1919 London 100 Wood Street London EC2V 7AN Isobel Markham T: +44 20 7566 5444 Hong Kong [email protected] 19F On Hing Building 1 On Hing Terrace Central Hong Kong T: +852 2153 3240

Private Equity International espite positive overall numbers, it’s tough out there on the fundraising Published 10 times a year by PEI Media. To find out more about PEI Media visit thisisPEI.com D © PEI Media 2020 However, if you’ve always had a hankering to start your own shop, there are No statement in this magazine is to be construed as a recommendation to buy or sell securities. Neither interest you were hanging around for, or at least you’ll have to wait a good while this publication nor any part of it may be reproduced or transmitted in any form or by any means, Also, those feelings you’ve been “ A rockier electronic or mechanical, including photocopying, recording, or by any information storage or longer aligning with your investment investment climate retrieval system, without the prior ambitions and passions? Not permission of the publisher. might reveal pockets Whilst every effort has been made to ensure its accuracy, the of opportunities ” publisher and contributors accept no responsibility for the accuracy of the content in this magazine. Readers should also be aware that external contributors may represent firms that may have an interest in companies and/or their securities mentioned in their contributions herein. Cancellation policy You can cancel your subscription at any time during the first three months of subscribing and you will receive a refund of 70 percent of the total annual subscription fee. Thereafter, no refund is Enjoy the issue, available. Any cancellation request needs to be sent in writing to the subscriptions departments (subscriptionenquiries@peimedia. com) in either our London or New York offices.

Printed by Stephens & George Ltd stephensandgeorge.co.uk

Isobel Markham

16 Private Equity International • December 2020/January 2021 Announcing the All-New Holt-MM&K-Buyouts North American Private Equity & Compensation 1/3

Report 2/5

Recruit, retain, and motivate top private equity and venture capital talent in 2021 (with stress-free budget planning) using the benchmarking data found in the new 1/2 2020-2021 North American PE/VC compensation report. Now shipping!

Part 1 describes firm-wide compensation Part 2 includes - Salary, bonus, carry 3/5 practices such as: distribution and carry point in 47 different job titles • Annual bonus plans • Carried interest plans Sample groups include: 2/3 • Co-investment plans • LBO/growth equity firms (small, mid-sized and large) • Employee benefits, i.e. healthcare insurance, retirement plans, etc. • Venture capital firms (small, mid-sized and large) • Payroll costs as percent of revenue • Mezzanine firms • Year-over-year salary, bonus and staffing changes • Funds of Funds

The report also features break-outs for Canadian and • Institutional private equity firms (owned by a Asian firms. company or investment bank) 5/6

Exclusive offer: Take 10% off the report using discount code CR20BO online at PEHub.com/shop during checkout. Cover story

How to spin out

This year’s pandemic has left many investment professionals wondering whether they could garner better economics by setting up their own funds. We spoke to 21 market sources involved in successful spin-outs about leaving an established franchise and starting anew. By Carmela Mendoza

lie Moore Haynes, former man an investor meeting she wouldn’t sharing gets pushed further into the I it was a ‘no’, she tells Private Equity International was going to be too small for a do downs of the overall fundraising market The pair didn’t think about it for too opportunity to build our own business,

18 Private Equity International • December 2020/January 2021 Cover story

December 2020/January 2021 • privateequityinternational.com EXTRA The Emerging Markets Guide

Going it alone How to start your own firm

Cover story

December 2020/January 2021 • Private Equity International 19 Cover story

and we have an existing revenue stream “You have to think port of our existing investor base, and about what your bait what we think is the best team in the is, and your bait is way for LPs to get regional strategy being pursued by his to know you. Your highest and best use of your time is to get a deal done and bring it were in the meeting, but notes the re to them” for another year, while transitioning

SENIOR ADVISOR US-based fund of funds Haynes made a proposal to her for was going to wasn’t where my inter mer employers about how her depar PEI Leaving well obligations in the employment agree terest of both the parent manager and

20 Private Equity International • December 2020/January 2021 Cover story

Hi! My name is… lyle itself and the investment giant’s engagement upon departure from the and that “doing the right thing worked Track record attribution top of the departing manager’s list of

terly valuations with the former shop’s “It is almost always in the best interest of both the parent manager transferred to Melior and employ the and the spin-out to managers PEI spoke with for this story negotiate a separation agreement with clear proved format and provided whatever ground rules” This is by no means the only way to SARAH SANDSTROM Campbell Lutyens

December 2020/January 2021 • Private Equity International 21 Cover story

The average number of debut funds to close on capital each year since 2003 is 70, with around $15bn raised annually Capital raised ($bn) Number of funds 35 140

30 120

25 100

20 80

15 60

10 40

5 20

0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*

*As of 30 June 2020 Source PitchBook

Almost 90% of investors say they will back a debut PE or VC fund (%) Yes No 0 20 40 60 80 100

Almost a third of LPs have a formal emerging managers programme in place (%) Yes No 0 20 40 60 80 100

“You’ve got to keep Investment strategy and team composition are the most important factors for LPs when evaluating an emerging manager fund (%) it simple. We had an Extremely important Very important Important Somewhat important Not important 0 20 40 60 80 100 email, cell phones. Investment strategy Good to go. I put up a Composition of team website. I said we were Track record

Deal sourcing process say we had money, but we didn’t have any Operations/compliance money” Fund terms and conditions

HOLLIE MOORE HAYNES Co-investment opportunities Luminate Capital Partners

Source: Emerging Manager Survey by Buyouts and Gen II Fund Services

22 Private Equity International • December 2020/January 2021 Cover story

about what your bait is, and your bait is of your time is to get a deal done and the team that’s spinning out have only the team that exited Herkules Capital Movsoumov notes that one of the we knew it would be worth it in the Deal number one ital, shares that managers unable to raise their fund will often have a rebate say we had money, but we didn’t have managers shouldn’t underestimate how the team on board, getting regulated if “That’s a hard thing to do as an ad make a dollar on this deal until we sell Haynes, living without a salary at that time, had already spent almost

December 2020/January 2021 • Private Equity International 23 Cover story

Wafra: Improve ‘Return on Time’ to reduce flight to familiar

Wafra Europe managing director Tom Rotherham-Winqvist offers some advice to new managers looking to establish themselves on the private equity scene.

debut and growth stage managers has a team of operational experts, a small may outweigh the promise of a high better to delay the formation of fund Rotherham-Winqvist: help LPs with both sides of the ledger Be patient but persistent advantages for emerging managers over more established Find the right partner and ability to support new and growing managers, both Be the change LPs want to see trusted peers to form the Constellation platform: a global meetings have made it harder to build and expand new growing a new business has never been easy, and Focus creatively on the deals

24 Private Equity International • December 2020/January 2021 Cover story

Capital raising roughly on a par with the same peri “As an advisor, we raised dropped sharply, suggesting will take a risk-based approach, but also accept that we are investing in the long- term relationship” of our business: you don’t need that SAM KAY Travers Smith than its original target, a little over two to PEI new managers in today’s environment ated attributes and the ability to have PEI The class of 2021 have turned to established relation

December 2020/January 2021 • Private Equity International 25 1/3

2/5

1/2

3/5

Advancing the 2/3 role of the finance executive Built on the back of in-depth conversations with private equity CFOs, a 20-year heritage of our CFO community and the annual conference

5/6

For more information, visit privateequityinternational.com/cfo-all-access EMERGING MARKETS A 17-page special report

How to get an emerging markets deal done during a downturn Page 28 Due diligence in Africa Page 30 LatAm HNWIs are waiting for the recovery Page 31 DFIs: Picking up the pieces Page 32 Building global leaders across growth markets Page 34 VC to benefit from Middle East diplomacy changes Page 37 Baltic GPs bet on regional play Page 38 Myanmar’s PE firms hope to win local hearts and minds Page 39 Covid-19 calms Vietnam’s feeding frenzy Page 40 China’s boost for secondaries Page 42 Q&A: EMPEA goes deeper in Asia Page 43 Emerging Markets

How to get an emerging markets deal done during a downturn

The covid-19 pandemic has dealt severe challenges to the emerging markets growth model, and fund managers on the ground are adapting and making the best of it. Carmela Mendoza reports

began to in of the virus during the early months of in China and W Due diligence gets tougher in a slightly longer timeframe for due in emerging markets? bility to visit sites and interview people institutional risk aversion were among bit of a gap or surprise between what they would have done originally, but investors believe they’ve underwritten Private Equity International’s own is as important as what you hear and talk about organisation around how “Countries everywhere are having business, or how you might apply digi tal to your environment, and it’s some for business owners themselves, it’s

28 Private Equity International • December 2020/January 2021 Emerging Markets

Despite market uncertainty and travel GPs invested $3.8bn in South-East Asia in H1 across 159 deals restrictions caused by covid-19, capital raising increased slightly annually as of Q3 Capital invested ($bn) PE and VC deal count Capital raised ($bn) 20 200 Q3 2019 Q3 2020

0510 15 20 25 30 35 40 15 150

Asia-Pacific 10 100

5 50 Middle East, Africa and Latin America 0 0 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018 H1 2019 H2 2019 H1 2020 Source: PEI Source: EMPEA

governments, what you see is what you it will be harder to understand how Threefold shift has an existing relationship with the investing in emerging markets more management team, but they are una down, debt levels are up and there are He adds that the level of detail re He adds that Northstar is providing tends to give rise to buyout opportu the management team, as well as mar nities where owners and families are has emerged: understanding the inter means that opportunities for alterna Clode says he has seen a real im On the ground is key agement team, and has been owned by powder and want to put it to work in is working on its last deal of the year: a PEI

December 2020/January 2021 • Private Equity International 29 Emerging Markets

Due diligence in Africa: Finding a new normal?

Ben Jackson to restrictions on risk management activity in Africa

A has nevertheless brought severe disrup is a risky strategy in large parts of the ly turning to partnerships, both with retrieved on site in the majority of Af tors surveyed said they had already used “Covid-19 is interrupting new Private Equity In- fundraising in ternational instances where the ‘on-the-ground’ due a lot on the people who we have on diligence has not been able to take place” RUNA ALAM Development Partners International

30 Private Equity International • December 2020/January 2021 Emerging Markets

LatAm HNWIs are waiting for the recovery

The pandemic has upended high-net-worth investors’ near- to medium-term appetite for alternatives, writes Carmela Mendoza

Latin American investors’ assets ($bn) Investors 2018 2025* CAGR (%, 2018-25*) C Retail 2,845 4,804 7.8 HNWIs 1,674 3,414 10.7 Mass affluent 1,558 2,921 9.4 Pension funds 955 2,445 14.4 Insurance companies 436 1,082 13.9 Private Equity International. that the investor base is looking at an Private equity assets under management ($bn) intermediate way to generate returns 200

That intermediate way is invest 150 mains the most popular, with assets ex 100 50 This has been driven by low inter

0 2012 2014 2016 2018 2025* *Projected Source: PwC Global AWM Research Centre er parts of the world, both in human terested to look at more international not thinking about anything long term Seeking an alternative Alternative assets are in strong demand funds’ need to diversify and expansion

December 2020/January 2021 • Private Equity International 31 Emerging Markets

DFIs: Picking up the pieces

Foreign direct investment into emerging markets is forecast to drop by up to $700bn Rod James

merging markets invest ment often follows a pre investors, who enter the E amount raised by emerging markets Infrastructure Investor invests in power generation and distri as governments spend to mitigate the remain weak against the dollar, limiting PEI understands, What are DFIs doing? mix to ‘stop the bleeding’ and avoid a provide any of it? The largest, most es tablished emerging markets managers been around a long time, that are used Pri- vate Equity International interviewed for Emerging market fundraising was

32 Private Equity International • December 2020/January 2021 Emerging Markets

Investors are stepping back from emerging markets but only in the short term (%) Decrease No change planned Increase happened to be out in the market when 0 20 40 60 80 100 Over the next 1-2 years

Over the next 3-5 years Of those planning to increase their EM commitments, pensions are leading the long-term push (%) Over the next 1-2 years Over the next 3-5 years 80 60 40 20

0 Pensions Endowments Funds of funds/ Family offices secondaries funds Source: EMPEA vestors see the broad potential in ven now, they intend to return, per EM ernments about regulation that’s sup Fundamentals still stand tough for most emerging markets, the grow and the transformative power of

December 2020/January 2021 • Private Equity International 33 Analysis

KEYNOTE INTERVIEW

Building global leaders across growth markets

The pandemic has hit oil prices and economic growth hard, but the Gulf states continue to provide rich pickings for investors looking to invest in fast-growing companies and to turn them into global leaders, says Dr Karim El Solh, co-founder and CEO of Gulf Capital

How has the pandemic SPONSOR impacted mid-market Q GULF CAPITAL companies, and private equity activity, in the Gulf region through 2020? How is the covid-19 Q pandemic impacting your portfolio companies and investment opportunities in the GCC? However, in the summer, there was

34 Private Equity International • December 2020/January 2021 Analysis

behaviour are here to stay, so it is im portant to be able to adapt to the New an investment partner and an operating man with global industry expertise, so How does private equity Q activity currently vary across the Gulf countries, and What opportunities which countries do you expect Q does Gulf Capital see for to see the most PE deals in capturing value in emerging 2021? markets, and particularly for be able to operate and survive until the building global leaders from the GCC? tor, most of our investments start in that we only had to support one of our expand rapidly, they grow faster, they for ambitious growth and playing of Egypt remains a favourite investment destination for both Middle Eastern with the ultimate goal of selling our payment gateway where we enabled in Metito, the largest privately held Another example is Chef Middle “March and April Mitsubishi Corporation and Mitsubishi were all about stabilizing and protecting our portfolio companies, then we That is now a growing business that we started planning for aggressive growth over the summer” ing to survive and prosper in this new

December 2020/January 2021 • Private Equity International 35 Analysis

amed, the largest radiology and di “We see very little private equity the largest radiology platform in the competition in the region at the moment, What particular trends with the market just Q are you observing around not as crowded as digital adoption in the region, and how is that impacting your it is in the US and ful exit showed that good businesses in portfolio companies? Europe” a trend for more and more orders to relation to acquisitions, exits and fundraising? are looking at exits, and we have two in and then hope to sell them to global when new investments were put on pause, so we got busy in the interim Where do you expect to Q see the most activity for funds in the region in 2021, in

36 Private Equity International • December 2020/January 2021 Emerging Markets

VC to benefit from Middle East diplomacy changes

The Abraham Accords normalised relations between the UAE and Israel, and investors in the Middle East are optimistic about the opportunities, writes Rebecca Szkutak

nvestors in the Middle East are opti I business relations between the nations, had a long history of entrepreneurship but a relatively short history of venture The fundraising environment will Medved: wants to build a strong base in UAE the world are based in the region and interested in what he had to say about li as a venture partner and head of the nies and investors while also helping Medved thinks investments into nix Capital, the business development just within the Middle East region, but million to a partnership to invest in global investors and the global venture A strong partnership

December 2020/January 2021 • Private Equity International 37 Emerging Markets

Baltic GPs bet on regional play

making up a bigger share of capital commitments, writes Carmela Mendoza

hat do instant messaging W started out as business angels and fam Sales jump Exit volume has been another devel opment, with divestments jumping ures for the region are on an upward head of northern Europe for lower Baltic investment deal value (€m)

100 playing to their strengths and are using 80 makes them more visible to interna 60 essential when originating deals, es 40 20 0 2015 2016 2017 2018 2019 Source: Deloitte’s Baltic Private Equity and Venture Capital Market Overview

38 Private Equity International • December 2020/January 2021 Emerging Markets

Myanmar’s PE firms hope to win local hearts and minds

country that is traditionally sceptical of outside investment. Alex Lynn reports

However, this interest does not al M “The awareness is growing but, um on gatherings of more than six peo investment meant all these business es survived and grew without outside down with people there’s little under standing of investment and our lengthy opposed to some of the neighbouring Private Equity International reported in Myanmar’s PE deal count has soared in recent years, though deal values have tended to remain small PEI Deal value ($m) Deal count 350 35 300 30 250 25 200 20 view, does not appeal to many Myan 150 15 100 10 50 5 ing and so is the understanding of what 0 0 2016 2017 2018 2019 2020 Source: S&P Global Market Intelligence

December 2020/January 2021 • Private Equity International 39 Emerging Markets

Covid-19 calms Vietnam’s feeding frenzy

a period of intense spending by regional and global players. Alex Lynn reports

regional funds and one of the key things ed some respite from a limiting the number of investors that V been looking at in the past, that they founder was asking for a high valuation it’s not booming in a way the numbers they have more angles to play around Besides deals that were already Singapore, Vietnam and Indonesia have been the primary beneficiaries of increased PE and VC dealmaking in South-East Asia (number of deals) Singapore Indonesia Vietnam Malaysia Thailand Philippines Myanmar Cambodia 600 ese real estate developer Vinhomes for 400 200 million into digital payments business 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* Source: S&P Global Market Intelligence *As of October

40 Private Equity International • December 2020/January 2021 Emerging Markets

Priced to sell trepreneurs are unsure about growth in its founders well, but “the valuations they also don’t think they would get the valuation they want for their business at Trade war tailwinds Vietnam’s appeal is driven in part by PEI re prompted numerous internation those are the same entrepreneurs who that now’s an opportunity to take share “Vietnam has been a popular des valuation that they would have gotten Vietnamese deal value and deal count have both soared in recent years, though 2020’s total has been distorted by KKR’s $650m investment into Vinhomes Deal value ($bn) Deal count opportunities within Vietnam’s already 0.9 90 0.8 80 0.7 70 in turn have the potential to generate 0.6 60 0.5 50

0.4 40 0.3 30 0.2 20

0.1 10 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: S&P Global Market Intelligence

December 2020/January 2021 • Private Equity International 41 Emerging Markets

China’s boost for secondaries

Yuan-denominated funds have raised magnitudes more than dollar equivalents, though a lack of buyers hinders growth of a secondaries market, writes Rod James

above: “A majority of sales at the mo T ly held businesses valued at more than GP-led opportunity turings, a trend that has gathered mo siderable majority of value remaining international investors with seeded, there is no shortage of net asset value for an investor than making a blindpool prevented the entry of foreign buyers, sister title Secondaries Investor eign programme China’s yuan-denominated fundraising enables foreign managers to invest now dwarfs the USD market ($bn) Yuan-denominated fundraising USD-denominated fundraising 250 200 150 100 50 aries market is at a very early stage in 0 2015 2016 2017 2018 2019 NB: Includes Chinese government guidance funds he adds, with very little trading at par or Source: Schroder Adveq; Zero2IPO

42 Private Equity International • December 2020/January 2021 Emerging Markets Q&A As Asia continues to attract increasing private equity investment, EMPEA is looking to get deeper into the region, say its chief executive Cate Ambrose, and Julie Ruvolo, managing director of venture capital

Asia is leading all other emerging mar How is EMPEA making Q headway in the region? Cate Ambrose: A How does Asia’s tech scene Qdiffer from the West? JR: A share how and why the industry body What are you focused on Q in Asia? Julie Ruvolo: A two things in this vast world of “We want to be at the table and as close to players in those markets... promoting is to provide rigorous detailed examples engagement” CATE AMBROSE

December 2020/January 2021 • Private Equity International 43 Analysis

ROUNDTABLE

SPONSORS CAPVIS • DEBEVOISE & PLIMPTON • HAMILTON LANE

German private equity rebounds defiantly

Mittelstand deals, venture and corporate carve-outs are all poised to accelerate, but sourcing remains challenging in a covid-19 environment, write Adam Le and Amy Carroll

positioning, strong growth and strong management, we are seeing no negative €32bn Investments in Germany completed in 2019, up 80 percent year-on-year (EY) fund investment team at Hamilton $4.6bn Capital raised by Germany- Unlocking the Mittelstand headquartered PE funds in Q1-Q3 2020 (PEI) at Capvis, explains at Private Equity In- ternational

44 Private Equity International • December 2020/January 2021 Analysis

Frank Amberg

Head of private equity and infrastructure, MEAG

Frank wwwww is responsible for the private equity and infrastructure investment activities at MEAG, the proprietary asset manager of Munich RE. Prior to joining MEAG, Amberg spent eight years in the banking sector. He has also worked in private equity fundraising. Earlier in his career, he was responsible for M&A transactions with a German industrial company.

André Perwas

Partner, Capvis

Patricia Volhard Capvis hired André Perwas as its 10th partner in October 2019. Perwas is responsible for the Partner, Debevoise & Plimpton advanced services and software sector and is based in the firm’s Frankfurt office. He has more Patricia Volhard is a partner in Debevoise & Plimpton’s Frankfurt than 13 years of private equity experience, having and London offices and is a member of the firm’s private equity previously worked at 3i and Accenture. He serves and funds groups. She focuses on advising private funds on a on the board of BSI Software. range of European regulatory issues and on structuring funds for EU insurance companies and pension funds. Volhard has also been heavily involved with both Invest Europe and BVK.

Richard Hope

Managing director and head of EMEA, Hamilton Lane

Richard Hope leads Hamilton Lane’s London office, focusing on equity, credit and secondaries investment. He is also a member of its investment committee. Prior to joining the firm in 2011, Hope worked as a director with Alliance Trust Equity Partners, where he helped establish a private equity fund investment business, as well as completing a number of direct deals.

December 2020/January2021 • Private Equity International 45 Analysis

German VC in the ascendancy

Berlin’s tech hub is causing a stir. Limited partners are showing increasing interest in the city’s early-stage and managers, according to MEAG’s Frank Amberg, and valuations of tech businesses are climbing.

“Venture is one of the big winners at the moment, riding on a wave of repayments and tax bills as they fall software TeamViewer has opened the industry’s eyes to the potential of the should also start to emerge as state ness units, sitting within larger organ to prioritise what’s most important environment where travel is largely the day before our roundtable was held, Meanwhile, valuing businesses is as As a result, there have been more “A lot of people are wanting to sell

46 Private Equity International • December 2020/January 2021 Analysis

“Overall, I am optimistic. I see more opportunities than challenges. The capital is there. The debt markets are continuing to work. It is just a question of forging the right partnerships”

FRANK AMBERG MEAG

Build back better to take new areas of sustainability into undoubtedly be opportunities emerg isting businesses and employees as they grapple with the fallout from the virus, and safety issues into the spotlight and deals that were already in the pipeline ropean limited partners and that will,

December 2020/January 2021 • Private Equity International 47 Analysis

“We have seen a steady increase in more positive public opinion in recent years. Those negative connotations are fading away and more it should absolutely be viewed as a pos emphasis is being placed on how value is being created” ANDRÉ PERWAS Capvis fading away and more emphasis is being to emphasise that their underlying in

48 Private Equity International • December 2020/January 2021 Analysis

More opportunities than challenges? “The biggest challenge facing German private equity right now, has to be the pandemic and its subsequent economic effects,” says Frank Amberg of MEAG. “You have to ensure Politics and private equity your portfolio is bulletproof.” ily straightforward in a world where the headlines, it is not the only situa

“A lot of people are wanting to sell on future earnings and multiples. Where there is volatility, that takes a brave investor”

RICHARD HOPE Hamilton Lane

December 2020/January 2021 • Private Equity International 49 Analysis

the EEA and to demonstrate genuine and talent in order to have useful sub these days, it is even more helpful than Meanwhile, new regulation, in thorised management or investment national law next year, is intended to “That is something we wouldn’t “We do see GPs creating “The idea that banks would move up their presence... If you want to do deals in Germany these days, it is even more helpful than Amberg, however, is sanguine, as in pre-covid days to have boots on the ground” “After Brexit, the world will have to PATRICIA VOLHARD stands on the global stage, but here on Debevoise & Plimpton

50 Private Equity International • December 2020/January 2021 NEGOTIATE FAVORABLE T&CS WITH THE 2020-2021 PE/VC PARTNERSHIP AGREEMENTS STUDY Buyouts has compiled one of the largest studies ever of global private equity limited partnerships from surveys acquired from GPs and LPs. The resulting report is an indispensable tool for anyone involved with private equity and venture capital partnership terms and conditions.

Analysis of what’s market for terms Results are broken down for and conditions organized in five seven sample groups categories: • North American Venture • Fund formation and operation • North American Buyout • Fees and expenses • International Venture • Distributions and profit sharing • International Buyout • Performance and returns • Funds of Funds/Secondary Funds • Corporate governance • Mezzanine/Infrastructure • Private Equity Real Estate The study also provides: An analysis of co-investment deal terms and conditions, a look at limits placed on the use of capital call loans and a view into how quickly fund managers are adopting ILPA reporting templates and standards.

Receive 10% off the study online at pehub.com/shop. Enter promo code PASPTEN at checkout to redeem. And finally

Life in quarantine The first winter

ur first full winter syndromes have become with lockdown Use the power of reverse common: trigeminal Ois almost upon neuralgia, also known as us. For many of us the psychology to help get through intense facial pain; and chance to be stuck at shingles, which, for the home with long nights, the next few months afflicted individual, can grey days and kids feel alternately like a hot schooling remotely in our iron or numerous thumb living rooms is proving to be irresistible, like a four-month tacks being applied to the skin. Ingmar Bergman movie. But the important thing is to use However, once you’ve conquered these ills, you’ll feel psychological jiu jitsu to turn the unpleasant moments stronger than ever! back upon themselves. Many people dread being stuck indoors over the Sure, the lockdown that started in March had its bad winter. But use your power of paradoxical, positive moments and we’ve learned about the odd physical thinking to get around this: isn’t it actually worse to be manifestations. Dentists have been reporting a huge working, Zooming and getting yelled at by your boss upswing in fractured teeth – yes, you read that correctly. when it’s beautiful outside? At least in the winter when it’s The apparent cause is people grinding their molars freezing out and dark you won’t feel like you’re missing furiously as they deal with anxiety caused by the anything. It’s all to the good! And one distraction to coronavirus pandemic. There’s even a nifty word for help us that we didn’t have earlier: sport, the tried-and- this grinding of teeth: “bruxism” (which also sounds like true companion to drinking, smoking and bruxism. In people subtly and inexplicably turning Belgian). addition to wagering on, say, NFL games, you can place Other untoward outcomes of our recent spring and bets on when the league will cancel the season, given summer of home incarceration: heavy drinking and even recent postponements. an upswing in cigarette sales (yes, cigarettes – remember Using these psychological gymnastics, you will keep those?) as reported by Altria, formerly Philip Morris. And calm and carry on. Remember to grit, not grind, your a lack of exercise has led to weight gain, joint pain and teeth, look out for others and fight on through the general postural decline. Other stress-related physical upcoming winter of our discontent.

52 Private Equity International • December 2020/January 2021 Guide to Family Offices Fifth Edition

Access the world’s 1/3 leading family offices 2/5

Guide to Family Offices is an essential resource for in-depth and proprietary information about the world’s leading family offices that invest in alternative assets. Now shipping! 1/2

Family office profiles include: • Key personnel with contact information • Fund opportunities sought by strategy, 3/5 size, geography, requirements on • Description and investment objectives terms and conditions

2/3 • Assets under management • Direct and co-investment opportunities sought by strategy, size, industry

This guide is the key to locating new investors quick and easy! Included with the family office guide is an exclusive database of more than 2,600 family office and wealth manager executives (with 2,000+ hard-to-find e-mail addresses).

5/6

Buyouts subscribers receive 10% off the guide online at pehub.com/shop. Enter promo code GFO20BO at checkout to redeem. Leading European mid-market investor writing entrepreneurial success stories through quality, technology and innovation.

www.capvis.com