Asia Private Equity Leaders' Outlook

Asia Private Equity Leaders’ Outlook

Industry Outlook for 2010 and beyond

Contact: Nicolas Pechet , Vice President, China, and Head of Private Equity practice, [email protected] Vishwanath Desai, Senior Consultant, [email protected] Web: www.globalintelligence.com Tel: Hong Kong (852) 2107 4299 Singapore (65) 6423 1681 New York (1) 212 946 2628 London (44) 207 203 8382

Outlook for Private Equity in Asia 4 Key Private Equity Strategies and Opportunities 7 Snapshot of APAC Private Equity Investment Flows 15 About GIA 26

Methodology: This industry briefing is based on a month long study involving over 20 in-depth interviews with business leaders within Asia‟s Private Equity industry, including senior executives from Apax Partners, Baring Private Equity Asia, CLSA, GE Capital, Morgan Stanley, as well as ongoing market monitoring and analysis of PE industry trends since 2008.

The report is provided as is, free of charge and without any warranty or guarantee. Global Intelligence Alliance accepts no responsibility for errors or omissions, or for any loss or consequential loss arising as a result of decisions taken based on its contents.

©2010 Global Intelligence Alliance. All rights reserved. This report is copyrighted, however individual pages or portions thereof may be copied referencing “Global Intelligence Alliance” as the source.

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 2 Abbreviations and acronyms

APAC Asia Pacific AUM Assets under management BFS Banking and finance bn Billion CAGR Compound annual growth rate FDI Foreign direct investment GPs General Partners IPO Initial public offering KPI Key performance indicator LPs Limited Partners mn Million PE Private equity Q-o-Q Quarter-on-quarter R&D Research & Development ROI Return on investment TMT Telecom, Media and Technology UNCTAD United Nations Conference on Trade and Development. Y-o-Y Year on Year

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 3 Outlook for Private Equity in Asia

www.globalintelligence.com Outlook for Private Equity in Asia

Outlook for PE sector in Asia is generally very positive, though much uncertainty remains in short to medium term

“The Private Equity industry in Asia will undoubtedly continue to grow. The fundamentals of the region are right and this presents great opportunities for Private Equity investors.” -- Managing Director, GE Equity

Private equity leaders in Asia remain generally very positive about growth of their industry in the region given strong economic fundamentals, particularly in several of the region‟s top markets (i.e. China and India). However their outlook on growth levels in the coming years varies substantially in light of economic uncertainty. Their expectations can be captured along three key scenarios - strong growth, moderate growth, moderate growth and saturation. Outlook for investment activities in Asia Scenario 1: Asian private equity aggregate fund Strong growth pool (2004-1H 2009, millions of USD) 262,317 254,037 Scenario 2: Moderate 207,381 growth Scenario 3: 166,139 Moderate growth and saturation 134,981 110,590

1H „09 2004 2005 2006 2007 2008 2009 2012 2015 Source: Global Intelligence Alliance, Research & Analysis, Center for Asia Private Equity Research

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 5 Outlook for Private Equity in Asia Outlook for growth of PE sector in Asia

Scenario 1: Strong growth • Asia continues to recover from the economic downturn relatively faster than the US and Europe. Companies in Asia continue to require capital to support expansion. Relatively low valuations caused by downturn attract PE funds to close more deals in near term. • Economic growth of 7 % to 10% in India and China remains on track in coming years, while demand for capital in these countries remains high in order to meet requirements for growth. • Strong economic growth absorbs PE investment and sustains further growth of PE industry. • High net worth individuals, sovereign funds and institutional asset managers continue to show strong interest in exposure to PE in Asia, making prospects for raising PE capital in Asia very bright.

Scenario 2: Moderate growth • Asia continues to attract capital for PE funds, however, the inflow of PE capital gradually outpaces economic growth and productive use for such capital, causing competition amongst private equity firms to intensify further. PE investment returns drop as the market matures. • Some capital is ultimately redirected to more attractive asset classes in which risk adjusted returns are higher.

Scenario 3: Moderate growth and saturation • Overinvestment in many core sectors such as chemical and manufacturing, and excessive competition amongst PE investors in the few remaining attractive sectors lead to weak PE investment returns. • Insufficient fund managers with skills to navigate PE funds through challenging cycles further limits growth. Only the best PE firms with top talent continue to thrive and attract capital. • A substantial reduction in capital allocated to PE funds occurs, eventually bringing the industry back to a more sustainable and balanced size.

“Lack of experienced and seasoned professionals and team who can manage capital and risk effectively through the various economic cycles could be a key barrier for growth of private equity industry in Asia.” -- Managing Director, Baring Private Equity Partners

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 6 Key Private Equity Strategies and Opportunities

www.globalintelligence.com Key Private Equity Strategies and Opportunities Key value creation areas by PE investors to portfolio companies in Asia 1 Bringing international exposure to portfolio company management • Access to senior management professionals and advisors with specific expertise. • Cross border collaboration with other portfolio companies. • Support for expansion in overseas markets through network and other portfolio companies.

2 Assistance in business development and growth planning • Steering organic growth via focused 100 day plans as well as long term business planning. • Rapid growth through M&A and partnerships in international markets. 3 Understanding and advice on capital structure • Assistance in capital need identification, capital allocation and management.

4 Assistance for IPO readiness • Setting up corporate governance and financial reporting systems as a precursor to IPO. • Promoting management reporting and transparency.

5 Operational best practices and optimization • Performance measurement and planning. • Sharing practices such as Six Sigma, inventory optimization and lean manufacturing.

“As the industry matures, simple Pre-IPO deals will become less attractive. To maintain high returns, PE firms will have to undertake deals where success depends more on improvement of the underlying business. Handling this operational risk requires a different skill set.” -- Former Investment Manager, Apax Partners

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 8 Key Private Equity Strategies and Opportunities Opportunities created by global financial downturn

“I haven‟t seen many deals at bargain valuations here in Asia. Companies that have focus on domestic markets have done well. ” -- Managing Director, Morgan Stanley Private Equity

Executives share that Private Equity firms in Asia were less impacted by the economic crisis as compared to many large US or European funds. However, many US/European funds investing in Asia have been constrained in terms of ability to exit deals, and have seen loss of some value during the recent cycle.

• Quality of deals improved During last 4 quarters, companies in all major sectors more or less saw the effect of economic slowdown. The deal flow surged till 2nd quarter of 2009. As a result PE firms received high quality leads and improved deal quality. • Acquisitions multiples have gone low. Thus there now are good companies available at cheaper prices. PE firms could assist portfolio companies better through strategic acquisitions/partnerships.

• Competition moderated and principles of PE business underscored • Competition from “me too” deal makers and hedge funds got moderated during recent time. • PE fund managers and firms could convince investors about their capabilities to manage the portfolio successfully through the downturn.

• Importance of portfolio management increased • Due to unattractive exit options, PE firms preferred to stay longer in the existing deals to improve the performance of portfolio companies. • Short term working capital management, customer focus, effective capital allocation and utilization by portfolio companies. • Smaller positions (investments of small size) are now getting better attention as PE funds focus more on portfolio management.

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 9 Research Idea Portfolio Screening / Due Exit generation Management Diligence Shifting industry sector focus and deal sources

Key sectors for PE investment in Asia

Consumer & Financial Technology / Manufacturing Healthcare Retail Services Media / Industrial

Infrastructure Renewable Business Agriculture Education /Real Estate Energy Services

Current actively invested sectors Future attractive sectors for investment Sector focused strategies

Key countries for PE investment in Asia Deal sources % range Individual referrals 5 – 20 Self researched & identified 10 – 50 S. Korea China Japan Approached by companies 5 – 30 Investment banks/brokers 30 – 60 India Hong Kong Others* 10 – 40 Vietnam * includes small boutique I-Banks, accounting firms, Singapore consulting firms, industry associations, etc.

• Deals sourced through individual referrals and Australia networks tend to have a higher success rate for a Geography focused funds focused Geography range of reasons (e.g. less competitive deal terms, Source: GIA Research & Analysis higher trust factor, etc.).

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 10 Research Idea Portfolio Screening / Due Exit generation Management Diligence

Growth capital screening process similar to US and EU, but more effort required to forecast market growth and regulatory dynamics in Asia

• Country‟s macro-economic growth, legal frameworks/ investor protection, geographical fit with fund mandate • Fundamentals of target industry/market, including industry size, Market structure and growth potential • Competitive landscape and intensity, new entrants and barriers to entry

Deal funnel • Regulatory environment, government control / intervention Screening • Strategic fit with firm‟s investment mandate and clear strategy for value creation during holding period • 360 degree assessment of target company, including due diligence on such factors as: • Business plan, business model, scalability, track record, Company financials, etc. • Comparative advantages (e.g. IP, technology, brand, license, etc.) • Management quality and compatibility

• Top and bottom line growth potential diligence Due • Legal, technology, operational, other risks • Capital requirements for expansion • Etc.

• Investment size • Entry price / valuation Deal structure • Holding period • Control

• Other investor / shareholder rights and conditions Deal structuring Deal • Exit options Source: Global Intelligence Alliance Research & Analysis

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 11 Research Idea Portfolio Screening / Due Exit generation Management Diligence Key post investment priorities typically used by APAC PE investors to lay foundations for long-term value creation 1 Working capital management to meet short term objectives • Re-negotiation of supplier contracts and centralizing procurement. • Supply chain improvement, reducing inventory, and optimization of working capital. • Cash-flow management and optimization.

2 Strengthening management of the company • Identification and prioritization of key issues for Board and management to address. • Incentive alignment of various stakeholders.

3 Financial and control system implementation • Assessment and improvement of financial reporting systems. • Implementation of policies to promote transparency. • Balance sheet management to manage risk while meeting long term needs.

4 Efficient capital allocation and capital usage • Identification of capital needs and alignment with growth objectives. • Prioritization of capital allocation and control on expenditure.

5 Implementation of operational level strategies • Identification of operational issues and implementation of improvement programs. • Implementation of operational improvement can be much more difficult in emerging Asian markets given gaps in knowledge, and thus requires more hands on involvement from PE firm. Source: Global Intelligence Alliance Research & Analysis

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 12 Research Idea Portfolio Screening / Due Exit generation Management Diligence Key value creation levers most commonly used by PE executives interviewed Profit and loss Very high impact High impact Moderate impact Balance sheet Sales optimization

Sales effectiveness Geographic/product Marketing Strategies External growth Marketing Strategies New market entry expansion Customer need Growth opportunities Distribution network New markets focus assessment identification and target •Customer need Customer portfolio Increasing core New product and service Screening acquisitions of assessment Pricing optimization competencies offering high potential targets •New product and service New products & services Post Merger Integration offeringR&D efficiency CoGS optimization Purchasing Inventory management Manufacturing Asset restructuring Total cost of ownership Inventory optimization Make-or-Buy Sale of new core assets (TCO) reduction Efficient warehousing Manufacturing footprint Company restructuring Make-or-Buy optimization Plant optimization Low-cost-country sourcing Benchmarking Production efficiency

SG&A optimization Sales focus optimization Supply chain G&A rationalization Working capital / Sales force efficiency and Supplier network strategy Overhead / support optimization organization Lead time reduction function efficiency Supplier payment terms Compensation scheme Shared services Account receivable Off- and near shoring Cash management IT performance

Source: Global Intelligence Alliance Research & Analysis GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 13 Research Idea Portfolio Screening / Due Exit generation Management Diligence Exit strategies heavily reliant on IPOs IPO remains the preferred exit strategy for most funds across various APAC markets, though strategic/ trade sales and overseas backdoor listings are prevalent for smaller markets in South East Asia.

Number of exits in 2008 Exit strategies by key geographies

N = 176 exits • IPOs will continue to be the key exit strategy, particularly given the increasingly large demand for IPOs in China and India, and 5% - Others, including falling capital controls allowing capital to flow dividends and write-downs into those markets more freely. • China – Exit route is mainly via IPO, though backdoor listing in overseas markets are commonly used given long lead times to 31% complete IPOs domestically. Strategic/ • India – a mix of both IPO and trade sales Trade sales with majority of deals exiting via IPO. 64% - IPO • South East Asia – exits tend to be more via strategic/trade sales given limited domestic IPO markets. • Korea – exits tend to be primarily via through strategic/ trade sales, through domestic IPO markets are increasingly robust. • Australia & Japan – a mix of strategic/trade sales and IPOs.

Source: Global Intelligence Alliance Research & Analysis, Center for Asia Private Equity Research

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 14 Snapshot of APAC Private Equity Investment Flows

www.globalintelligence.com Snapshot of APAC Private Equity Investment Flows China & India to continue leading the economic recovery

9.84% GDP Growth Rate Forecast (2009, 2012) 7.63% 8.50% 6.55% 4.97% 4.33% 4.17% 5.36% 3.42% 4.61% 2.32% 0.73% 2012

- 0.99% China India Vietnam South Korea Hong Kong Singapore Australia Japan

-3.62% -3.33% 2009 -5.37%

• Asia is leading the recovery from the global downturn, with the region‟s GDP forecast to grow at 5.75% in 2010. The relatively strong recovery is attributed to following key drivers: • Effective fiscal and economical policies implemented by Governments in Asia, particularly in China. • China and India‟s effectiveness in compensating for loss of exports via highly responsive and aggressive fiscal stimulus and credit easing in 2009. • Trade normalization: in late 2009, Japan, newly industrialized and ASEAN 5 countries have seen uptake in demand. • China and India will remain key economic drivers for regional growth. China GDP is expected to grow at 9% in 2010 and further at 10% through 2012. • A key challenge for Asia to contend with in 2010 will be to implement policies which support recovery momentum while external demand is expected to remain weak in the medium term.

Source: Global Intelligence Alliance Research & Analysis, IMF Asia Regional Economic Outlook Oct 2009

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 16 Snapshot of APAC Private Equity Investment Flows FDI inflows expected to continue to rise through 2011

Inward Foreign Direct Investment Top 6 FDI destinations, by home region (USD millions) (UNCTAD Survey)

108,312 Home region Most favored destinations China 83,521 China, United Kingdom, The Russian Federation, North America Germany, Brazil, United States 63,003 Hong Kong 54,365 United States, China, India, Brazil, The Russian Europe Federation, United Kingdom 46,774 Australia 44,330 China, India, United States, Brazil, Vietnam, Japan Germany 41,554 India China, United States, Indonesia, Australia, India, 25,127 Developing Asia Vietnam

24,426 Japan 22,549 • Investment activities in East and South Asia set to grow in next 3 years;

22,725 largest percentage of respondent companies reported in UNCTAD‟s Singapore 31,550 survey that they planned to increase their FDI in this region. • China and India featured in the UNCTAD‟s top 5 list of destinations for 8,050 investment through 2011; both countries showed highest growth in FDI Vietnam 6,739 inflows in 2008. 2008 • Large market size and growth, presence of an integrated supply chain, 7,603 South Korea 2007 skilled labor and talent are the primary reasons for investment growth 2,628 in Asian markets.

Source: Survey by United Nations Conference on Trade and Development (UNCTAD)

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 17 Snapshot of APAC Private Equity Investment Flows PE investments in Asia bottomed out in Q4 2008

Asia: Q-o-Q PE investment Asia: Number of PE deals 1H 2009 (USD billion) Total deals studied: 190 27.7 Others Vietnam 8% 3% 20.6 19.7

15.4 44% China 11.4 12.1 India 26% 10.3 7.4

9% 4% 6% Australia South Japan 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 Korea

• Private Equity investment activities in the region has shown a „V‟ • East Asia remained a major recipient of Private Equity shaped recovery in first two quarters of 2009 after bottoming in 4Q investment in 1H 2009; China and South Korea saw the 2008. largest size deals followed by Australia, India and • Investment in 1H 2009 amounted for USD 22.4bn, 36% less than Singapore. similar period in 2008. • China recorded highest investment activity with 84 deals in • However, a record low since 2005, only USD 9.8bn of fresh 1H 2009. capital flowed into funds in of 1H 2009. • Hopu Investment Management and Temasek • As markets are stabilizing and new funds are being setup, total Holdings‟ investment of USD 4.5bn to acquire a 3.6% AUM in Asian private equity is expected to grow significantly stake in China Construction Bank was the most during the second half of 2009 and early 2010. significant deal in China.

Source: Global Intelligence Alliance Research & Analysis, Asia Venture Capital Journal, KPMG

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 18 Snapshot of APAC Private Equity Investment Flows TMT was the largest sector for PE investment in 2008 in Asia, followed by manufacturing and industrial sectors Asia: Private Equity investment by industry (2008) • Telecom, Media and Technology (TMT) remains the largest (USD billion) sector for PE investment in 2008 in Asia, followed by Telecom, Media, manufacturing and industrial. Technology Others • Consumer & retail sector enjoyed relatively consistent growth 20% 27% despite the global economic downturn in all major countries in Asia, and proved to be another important sector for attracting PE investment. Asia: Private Equity fund types (2008) 11% Manufacturing & Industrial Construction 3% Fund type # of funds Total Amount 4% Transportation (USD billion) 4% 9% 4% Consumer Chemicals & 4% 9% & Retail Buyouts 17 20.07 Materials 5% Financial Business services services Alternative energy Growth 86 18.16 Agriculture, Forestry VC 60 5.26 • Buyouts are the leading type of private equipment investment, representing 41.5% of the total. • The average buyout fund size in 2008 was ~USD 1.18bn. Infrastructure 11 3.34 • In India and South East Asia, non-buyouts were the dominant transaction type. Mezzanine 3 0.96 • While developed economies see substantial amounts of buyout transactions, emerging economies such as India and China have Secondary 1 0.48 yet to see significant volumes of buyouts. As industries in those countries consolidate and mature in the coming decades, buyout volumes are expected to increase. Source: Thomson Reuters

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 19 Snapshot of APAC Private Equity Investment Flows China led the regional fund pool for 2008, with 49% of all assets under management in Asia going to China Asia: Private Equity AUM by country (2008) Asia: Private Equity investment by sector (2008) (USD billion) (USD billion) South SE Asia, Korea, 0.22 0.66 Japan, 2.6 Australia, Banking & 4.5 Finance 11.4

Others India, 7.8 21.94

China, 15 8.4 Industrial & Mfg. Goods

4.6

IT & Telecom • China led the fund pool for 2008 with 49% of all investments • Banking and Finance (BFS) were most preferred in Asia going to China. across Asia, attracting 25% of invested private equity • India, with a fund pool of US$7.8bn, was 2nd to China. capital. • The allure of China and India‟s market potential is clearly • Though IT & Telcom attracted the 3rd largest amount of shown in this distribution of funds. private equity investment, it managed the highest • Developed economies such as Japan and South Korea have number of transactions in 2008, totaling to 144. a relatively small fund pool, with Australia being the only • The remaining private equity investments are exception in the developed segment. This is however slightly diversified across a broad range of sectors, ranging misleading as much Australia‟s AUM are directed towards from consumer and retail, to education and agriculture. other APAC countries. Source: Global Intelligence Alliance Research & Analysis

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 20 Snapshot of APAC Private Equity Investment Flows Average private equity deal size in Asia increased by ~15% in 2008 given fewer deals

• US$46.3 billion in private equity deals was • The average deal size has increased to completed in 2008, virtually unchanged US$66.4 million in 2008, an increase of from 2007 levels. ~15% over 2007. • 789 private equity investment transactions • The number of billion dollar deals in Asia in were known to have been completed in 2008 increased to 7, against only 4 in 2007. 2008, a 13.0% decline from 907 deals in 2007, indicating a higher average deal value in 2008.

Source: Global Intelligence Alliance Research & Analysis, Asia PE Review 2008

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 21 Snapshot of APAC Private Equity Investment Flows The financial services sector received most private equity investment in H1 2009 in China and India

India-PE Investments by Industry in H1 2009 (mn USD) China-PE Investments by Industry in H1 2009 (mn USD)

Financial services 5311 Financial services 818 Retail/Wholesale 523 Telecom/Media/Technology 518 Transportation/Distribution 437 Infrastructure 138 Telecom/Media/Technology 249 Utilities 103 Manufacturing-heavy 227 Medical 86 Textiles and clothing 141 Consumer products & services 47 Electronics 110 Ecology 43 Non-financial services 69 Transportation / Distribution 42 Mining and metals 69 Manufacturing-heavy 34 Leisure/Entertainment 20 Retail/Wholesale 31 Construction 10

Source: AVCJ Asian Private Equity Barometer, Q1 and Q2 2009 report

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 22 Snapshot of APAC Private Equity Investment Flows

Japan saw huge PE investments in the leisure/ entertainment industry in H1 2009, while Australia’s investments were heavily focused on financial services

Australia-PE Investments by Industry in H1 2009 (mn USD) Japan-PE Investments by Industry in H1 2009 (mn USD)

5070 Financial services Leisure/Entertainment 1682 569 Utilities Financial services 160 397 Environmental Management Manufacturing-heavy 119 272 Consumer products & services Non-financial services 113 96 Telecom/Media/Technology Telecom/Media/Technology 93 84 Mining and metals Manufacturing-light 89 33 Medical Travel/Hospitality 84 32 Electronics Transportation/Distribution 37 9 Manufacturing-Heavy Construction 33 2 Textile & clothing Electronics 3

Source: Global Intelligence Alliance Research & Analysis

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 23 Snapshot of APAC Private Equity Investment Flows Private equity firms are very upbeat about investment opportunities in China in 2010

2009 2010 and beyond

• Although interest plummeted in the aftermath of • Consumer driven sectors will continue be the the global financial crisis, the latest annual survey hottest growth sectors for investment. of industry participants by Deloitte, suggests that • Pharma & biotech have been growing rapidly in confidence has rebounded. China in recent years and will attract more PE • More than 95% of respondents said that they investment. expected investment activity in China's private • With a large population, energy saving and equity market to increase in 2010, driven by an environmental protection remain a big challenge to improving economic environment and an the Chinese government. The “Green” industry, upturn in local stock markets. new energy and clean technology sectors are hot • Honson To, Partner and Regional Head of Private areas for PE investors in China. Equity across Asia Pacific at KPMG said: • Private equity from local government or central “We have seen an increased willingness to do government will witness rapid growth, e.g. China deals compared to several months ago, both on Social Security Fund, Chinese Government Funds, the part of private equity firms and companies CIC,•The etc. average deal size has increased to raising capital. This may be driven by the • DestinationsUS$66.4 million for PE ininvestment 2008, compared are going toto be the realization that there are many business segments moreUS$57.6 diversified million as tier-two and tier-three cities in China that remain promising, despite the global are•The attracting number more of billiondevelopment dollar opportunities. deals in 2008 economic turmoil, while valuations may be were 7, against 4 in 2007 reaching levels that are enticing to both buyer and seller”.

Source: Chinaventure.com

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 24 Snapshot of APAC Private Equity Investment Flows Infrastructure will be the most popular sector for PE investors in India in 2010 2009 2010 and beyond

• Private equity deals slowed significantly over • Retail and consumer products, as well as pharma & biotech will Q1, Q2 and Q3 of 2009 and at an accelerated remain popular sectors given growth in disposable income and rate. increasing spending power. • PE investment in the first 3 quarters of 2009 • Although poor infrastructure will hold back the rate of growth of PE totaled USD2.3 bn, a 75% plunge compared investment, the infrastructure sector should emerge as a major PE to USD 9.2 bn in the same period of 2008. destination in India. • This was primarily caused by two key factors: • The education sector, cleantech and renewable energy will also be • The global economic downturn hit the very attractive in 2010 and beyond. demand and confidence of consumers as • A survey by Deloitte Corporate Finance completed in February 2009 well as enterprises. shows the following industries are expected to be most popular for • Mismatch on valuation expectations PE investors in India. between investors and sellers. • Financial services, TMT and infrastructure sectors were most favored by private equity investors. • All the top international PE players today have a presence in India and are making investments in various sectors. They include the Blackstone Group, Kohlberg Kravis Roberts (KKR), W.L. Ross & Co, Warburg Pincus, Providence Equity Partners, Carlyle Group, Actis Capital, 3i Group, Deutsche Bank and Temasek Holdings of Singapore.

Source: Deloitte Corporate Finance Services India Private Limited

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com 25 About GIA

www.globalintelligence.com GIA is a strategic market Intelligence and advisory group

Global Intelligence Alliance (GIA) was formed in 1995 when a team of market intelligence specialists, management consultants, industry analysts and technology experts came together to build a powerful suite of customized solutions ranging from outsourced market monitoring services and software, to strategic analysis and advisory. Today, we are the preferred partner for organizations seeking to understand, compete and grow in international markets. Our industry expertise and coverage of over 100 countries enables our customers to make better informed decisions worldwide.

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com Access local knowledge in over 100 countries

GIA Group has 12 offices on 4 continents. Together with affiliated GIA Member companies, certified GIA Research Partners and consultants, GIA provides access to local knowledge in over 100 countries.

All GIA Network companies adhere to GIA‟s Research and Analysis Quality System as well as the SCIP Code of Ethics.

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com We bring value to private equity investment decisions

rd . Independent 3 party opinion on opportunity. Fact based . Interviews with local industry players along the value- . In-country industry expert network at critical stage decisions chain (suppliers, competitors, distributors, retailers, of transaction and development. customers, regulatory and industry experts. . We understand the PE investor mindset, . Cross-referencing and validation of critical data / investment lifecycle and mode of cooperation. assumptions. Value . Leverage local industry experience. No Creation . Conclusions based on end-to-end research, from suppliers to customers . „learning curve‟ at your expense. Rapid Integrated . Global coverage, and local expertise in . Answers in days, not weeks. diagnosis due diligence 16 countries in APAC.

     Idea generation Screening Research/ Portfolio Exit due diligence management

Sector topography Investment 360 target evaluation Identify, monitor and Identify and evaluate and opportunity identification quantify new threats & potential exit partners studies and screening Evaluation of investment developments theses and assumptions Development of Forecasting and impact Monitor industry exits/ company screening models Assess viability of target analysis of sectoral M&A activity growth strategy and trends ability to compete

Benchmark products/ System dynamics and services and forecast game theory modeling GIA‟s suite of services to market success Access network of industry insiders / domain support investment decisions expertise to address hard to solve issues

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com Over the last decade, the private equity industry has experienced dramatic growth in scale and ambition

Recent difficulties in fund raising coupled with defaults by portfolio companies mean challenging times for investors.

Intense rivalry between PE houses, and a scarcity of proprietary investment opportunities are leading to an increasing focus on generating attractive proprietary deal flow, making superior investment decisions and on adding value to portfolio companies.

Recognizing this we have developed a proprietary network of industry and technical consultants throughout the world as the cornerstone of our approach to addressing our client‟s commercial due diligence needs.

We can help you to address these challenges and more. Contact us to find out how: [email protected]

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com Strategic market intelligence & advisory

GIA is a strategic market intelligence and advisory group that is consistently commended for its reliable client-oriented and expertise- based solutions. According to our latest customer survey, a full 100% of our retainer clients say they would recommend GIA as a business partner to their peers.

www.globalintelligence.com

GIA Industry White Paper 1 / 2010: Asia Private Equity Leaders‟ Outlook www.globalintelligence.com