An Acuris company
Asia’s Private Equity News Source avcj.com September 05 2017 Volume 30 Number 33
EDITOR’S VIEWPOINT What regulation means for China outbound M&A Page 3
NEWS Accel, Blackstone, DSG, EDBI, GGV, Hillhouse, IDFC, IDG, J-Star, KKR, Matrix, Mercury, MSPEA, Norwest, Qingsong, Samara, SDIC, Sequoia, TPG, Yunfeng Page 4
DEAL OF THE WEEK Navis poultry play leads to China agri payout Page 12 Affinity backs Lock & Lock for regional growth push Page 13
INDUSTRY Q&A A founder’s friend? Barnaby Lyons of Bain Capital Credit Asian corporate culture means VCs are loath to replace founder-CEOs Page 7 Page 15
FOCUS DEAL OF THE WEEK
Alignment of forces Pedals to the metal Shifting GP-LP relations under the microscope Page 10 GoGoVan and 58 Suyun fuel up for expansion Page 12 rvr, e opruiis ad ot rsig challenges pressing most affecting and M&AinandoutofChina. opportunities, key drivers, latestthe makersdiscussfromacrossto globepolicy the and 270+ senior corporate investors, fund managers, M&A advisers The Early confirmedspeakers to attend include: 2016 Forumkeystatistics: GLOBAL PERSPECTIVE,LOCALOPPORTUNITY Wi-Fi Sponsor Co-Sponsors E: E: Anil Nathani +852 21589636 T: Registration Enquiries: [email protected] returns to Shanghai this October.this Shanghai ForumreturnstoJoin M&A China 270+ 19 October2017lFourSeasonsHotelPudong,Shanghai 中国企业并购论坛 China
Co-hosted by:
MORGAN STANLEY Acquisitions Asia Pacific Mergers& Executive Director, Clarence Kwok SANPOWER GROUP Senior Advisor Michael Weiss
Participants 2017年10月19日 M&A www.chinamergers.net l 上海浦东四季酒店 Executive Director and Chief Executive Officer Shuang Chen CHINA EVERBRIGHT LIMITED EVERBRIGHT CHINA Keynote Forum 100+ 2017 Exhibitors
Corporates
COOPERATION FUND ECONOMIC CHINA-EURASIAN Chief Investment Officer Honghui Sun LIMITED (CICC) CAPITAL CORPORATION CHINA INTERNATIONAL Executive Director Bagrin AngelovBagrin E: E: Mag Darryl +85221589639 T: Sponsorship Enquiries: E: Mag Darryl Sponsorship Enquiries: [email protected]
[email protected] 全球视野，本土机遇 T:
37 +852 34114919 Simultaneous translation isavailable Speakers
BLACKSTONE Private Equity Managing Director, JOHNSON CONTROLINC. APAC Development Officer, VP &Corporate Jay Cheng Brian Chi Brian SAVE US$ (THIS FRIDAY) 8 September and bookbefore 20 300 全球视野 全球视野 Countries Enquiry ,
本土机遇
China M&A Forum EDITOR’S VIEWPOINT 2017 [email protected] 19中国企业并购论坛 October 2017 l Four Seasons Hotel Pudong, Shanghai Both same font l 2017年10月19日 上海浦东四季酒店 GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY 全球视野 , 本土机遇 years The China M&A Forum returns to Shanghai this October. Join US$ Within the rules 270+ senior corporate investors, fund managers, M&A全球视野，本土机遇 advisers and book300 before Managing Editor
and policy makers from across the globe to discuss the latest SAVE Tim Burroughs (852) 2158 9661 Associate Editor drivers, key opportunities, and most pressing challenges 8 September A HYPOTHETICAL CHECKLIST FOR A be looked upon kindly if they offer exposure Winnie Liu (852) 2158 9663 affecting M&A in and out of China. (THIS FRIDAY) private equity firm working with a Chinese to foreign technology and manufacturing corporate on an outbound acquisition might expertise, help export Chinese production Staff Writer Holden Mann (852) 2158 9646 include some of the following: 1) Pick a partner capacity, contribute to the country’s resources Justin Niessner (852) 2158 9678 Keynote you know well; 2) Target an asset that is relevant and agricultural needs, or play a role in general to the partner’s core business; 3) Make sure that industry upgrades. Design partner has a presence and/or capital overseas Other investments are classified as restricted Edith Leung, Mansfield Hor Shuang Chen so the regulatory approvals process is easier; or prohibited. The former category includes Rana Tang Executive Director and Chief Executive Officer 4) If unable to fulfill the criteria in point three, sectors like real estate, hotels, cinemas, Events establish whether the partner has relationships entertainment, and sports – all of which have George Sengulovski, Jessie Chan, CHINA EVERBRIGHT LIMITED that can be leveraged; 5) Highlight a One Belt, received plentiful Chinese capital in recent years. Jonathon Cohen, Sarah Doyle, One Road (OBOR) angle in any submission that Furthermore, outbound investment funds will be Amelie Poon, Fiona Keung, needs to be made to Chinese regulators; 6) Have restricted if a specific industry project is not cited. Jovial Chung, Early confirmed speakers to attend include: a means of exit. It remains to be seen how widely the net will Marketing CITIC Private Equity has checked the first be cast in bringing supposedly “normal” sectors Agrina Sandri, Priscilla Chu, Michael Weiss Honghui Sun Jay Cheng three boxes with its acquisition of Canada-based under the restricted umbrella, how long the Research Senior Advisor Chief Investment Officer VP & Corporate Therapure Biopharma’s contract development approvals process will be, and what documentary SANPOWER GROUP CHINA-EURASIAN Development Officer, Helen Lee, Herbert Yum, and manufacturing (CDMO) business, which is evidence must be submitted. Kaho Mak, Tim Wong ECONOMIC APAC being executed in conjunction with 3SBio. The While deals involving New York hotels and COOPERATION FUND JOHNSON CONTROL INC. GP has been an investor in 3SBio since 2013. English Premier League football clubs are not off Sales The CDMO asset represents a logical addition to limits, strictly speaking, they will be subject to a Anil Nathani, Ashley Poon, Darryl Mag, Clarence Kwok Bagrin Angelov Brian Chi 3SBio’s business, which it is seeking to make more lot more scrutiny. On the other hand, a logistics Debbie Koo, Wendy Yu, Executive Director, Executive Director Managing Director, international. 3SBio is listed in Hong Kong so its transaction in Southeast Asia would likely Gavin Lam, Pauline Chen Asia Pacific Mergers & CHINA INTERNATIONAL Private Equity capital is not locked in the mainland. CITIC PE also encounter a smoother approvals process – which Acquisitions CAPITAL CORPORATION BLACKSTONE has a way out: the GP can sell its stake to 3SBio on is why some prospective buyers might try and Subscriptions MORGAN STANLEY LIMITED (CICC) pre-agreed terms after four years. play the OBOR card. Karina Ting, Sally Yip Points four and five are therefore less relevant For private equity firms partnering Chinese Publishing Director 2016 Forum key statistics: in this case, but they might be worth considering corporates on outbound deals, typically Allen Lee by other private equity firms backing outbound participating in a minority capacity and providing deals, particularly in the light of new guidance capital and expertise, selection will become a 270+ Participants 100+ Corporates 37 Speakers 20 Countries on overseas M&A released by Chinese regulators. lot more important. They must ask themselves Hong Kong Headquarter The guidance reinforces the existing government whether their partners have the domestic 16th Floor Registration Enquiries: SponsorshipSponsorship Enquiries: Enquiries: policy of cracking down on irrational transactions credibility, the ability to bring capital offshore, and Grand Millennium Plaza – where companies make lavish bets on the executional capabilities to get deals done. 181 Queen’s Road Anil Nathani T: +852 2158 9636 DarrylDarryl Mag Mag T: T:+852 +852 3411 2158 4919 9639 Central Hong Kong assets that have little in common with existing Plenty of transactions currently in the T. (852) 2158 9700 E: [email protected] E:E: [email protected] [email protected] Enquiry operations – as well as offering insights into pipeline may fall through, but at the same time F. (852) 2158 9701 which sectors might be favored. new opportunities will open up – working E. [email protected] URL. avcj.com Co-Sponsors Chinese corporates have committed with corporates on encouraged deals or going $82.5 billion to 226 outbound deals so far this solo elsewhere. A GP with an offshore fund is Beijing Representative Office year, compared to $204.1 billion across 282 not subject to the same restrictions as Chinese Room 77, Level 26, transactions for the whole of 2016, according to groups with renminbi-denominated assets, so it Fortune Financial Center No. 5, Dong San Huan Zhong Road Chaoyang District, Mergermarket. Capital controls remain in place may find there is less competition for deals than Beijing, 100020 China and banks have been warned about supporting before. And they still have scope to leverage T. (86) 10 5869 6203 deals launched by a handful of profligate relationships with Chinese corporates, potentially F. (86) 10 5869 6205 Wi-Fi Sponsor Exhibitors companies, but OBOR deal flow continues to positioning portfolio companies for future trade E. [email protected] increase even as broader M&A activity slows. sales, if and when the regulatory focus shifts. OBOR features prominently in the section The Publisher reserves all rights herein. Reproduction in whole or on “encouraged outbound investments” in the in part is permitted only with the written consent of AVCJ Group Limited. document published last month by the National ISSN 1817-1648 Copyright © 2017 Development & Reform Commission, Ministry of Tim Burroughs Co-hosted by: Commerce, People’s Bank of China, and Ministry Managing Editor of Foreign Affairs. Transactions will also likely Asian Venture Capital Journal Simultaneous translation is available www.chinamergers.net Number 33 | Volume 30 | September 05 2017 | avcj.com 3 NEWS
KKR to take control of Alvin Liu, an angel investor and co-founder of AUSTRALASIA Tencent Holdings, has closed its third renminbi- Laser Clinics Australia denominated fund at RMB850 million ($129 Mercury gets go-ahead for KKR has acquired a majority stake in cosmetic million). LPs include Shenzhen Guidance Fund, treatments business Laser Clinics Australia (LCA) SDIC Chuanghe National Venture Capital Fund, healthcare deal at a valuation of A$650 million ($515 million). The Qianhai FoF, Zhenjiang State-Owned Investment Australia-based middle market GP Mercury deal facilitates a partial exit for The Growth Fund. Holding Group, Redbud Capital, and Jingbei Capital has won regulatory approval to acquire Following The Growth Fund’s investment Investment. about 50% of Nirvana Health Group, New in 2014, LCA has accelerated its rollout and Zealand’s largest independent primary healthcare now has 80 clinics. The GP will retain a minority Ambow seeks return to US services provider. The company has 200,000 stake in the business as KKR drives further registered patients across 35 clinics, employs expansion of the company’s franchisee network, main board 1,000 staff including 300 doctors, and treats an PE-backed Chinese tutoring and training services average of 4,000 people every day. provider Ambow Education, which left the US main board in 2014 following allegations of Chinese investor backs financial impropriety and the appointment of provisional liquidators, has filed for an IPO. It has Australia incubator spent the last few years trading on the over-the- Suzhou High-Tech Venture Capital Group, a counter market. Baring Private Equity Asia holds a Chinese state-backed investment fund, has 8.44% stake in the company. committed A$80 million ($63 million) to a start- up incubator in Melbourne. The Jiangsu-Victoria TPG acquires Taiwan Innovation Centre will provide guidance to start- ups based in Melbourne, giving entrepreneurs healthcare player access to universities and research institutes and TPG Capital has acquired a controlling stake connecting them with accelerators in China. the introduction of new product and service in Taiwan’s OPC Holding, a contract research offerings, and the exploration of growth organization that offers clinical trial services. The opportunities overseas. company, which is active in mainland China, GREATER CHINA The deal size was first reported by Australian Taiwan, Korea and Japan, provides support media and has since been confirmed to AVCJ by services to both small molecule generic and MSPEA submits bid for auto sources familiar with the situation. KKR overcame novel drug developers, as well as biologics, competition from an assortment of private equity pharmaceutical and biotech companies. parts player and strategic players. Morgan Stanley Private Equity Asia (MSPEA) and LCA started in 2007 as a small business run by EDBI in $33m round for the chairman of China Automotive Systems Babak Moini and Alistair Champion. At the time, have submitted a take-private offer worth laser hair removal and cosmetic injectables were Taiwan AI player approximately $172 million for the NASDAQ- only offered at a high price point in low-traffic Singapore-based EDBI has joined a $33 million listed power steering components supplier. Most medical center locations. Moini and Champion Series C round for Taiwanese artificial intelligence of the company’s business comes from Chinese saw the potential of taking these procedures to (AI) company Appier. It brings the company’s automakers such as China FAW Group, Dongfeng the mass market at affordable prices. total funding to date to $82 million. SoftBank, Auto Group, and BYD Auto, but its single biggest Scale came through a 50-50 ownership split Naver, Line and Hong Kong-based AMTD customer is Chrysler Group. between the parent company and its clinic Group also participated. The capital will support operators, which continues today. By 2014, the marketing activities as well an expansion of the Yunfeng, Alibaba back business had grown to 25 clinics across New company’s AI services portfolio. cloud storage player South Wales and Queensland. The Growth Fund helped LCA build a nationwide footprint. Three SDIC leads $65m round for Qiniu Information Technology, a Shanghai cloud million treatments were performed last year by a storage and computer technology developer, has team of around 135 doctors and nurses. CF PharmTech completed a RMB1 billion ($152 million) funding SDIC Fund Management, a GP under China’s round led by Alibaba Group and Yunfeng Capital, State Development & Investment Corporation, a GP co-founded by Alibaba chairman Jack Ma. of funding for Arrail Dental, a Chinese dental has led a $65 million Series D round of funding The company plans to use the new capital to services provider. With the new investment, the for CF PharmTech, a Chinese manufacturer of strengthen its cloud computing, big data and company plans to build a network of more than inhalers and nasal sprays. artificial intelligence (AI) technology capabilities. 1,000 clinics over the next 5-8 years and also develop a healthcare platform. VCs back smart vending Goldman, Hillhouse invest machine operator Qingsong raises $129m $90m in Arrail Dental Citybox, a China-based smart vending machine Goldman Sachs and Hillhouse Capital have early-stage tech fund operator, has secured $15 million in Series A jointly invested $90 million in a Series D round Qingsong Fund, a Chinese VC firm formed by funding from GGV Capital, Yunqi Partners, Blue
4 avcj.com | September 05 2017 | Volume 30 | Number 33 NEWS
Lake Capital and ZhenFund. The company – IDFC exits remaining Green India’s Treebo Hotels raises which has a credit-checking partnership with Alibaba Group’s Sesame Credit and product Infra stake for $220m $34m supply arrangements with Shanghai City IDFC Alternatives has exited its remaining stake in Treebo, a VC-backed Indian budget hotel chain, Supermarket and Fruitday – expects to have Indian wind and solar power producer Sembcorp has raised $34 million in a Series C funding round 50,000 machines in operation next year. Green Infra (SGI) to Singapore-based Sembcorp led by Hong Kong-based investors Ward Ferry Utilities for INR14.1 billion ($220 million). Management and Karst Peak Capital. Existing RYB Education files for US The deal will be funded through a investors SAIF Partners, Matrix Partners India and combination of debt and Sembcorp’s internal Bertelsmann India Investments also participated. IPO capital, and will see Sembcorp take full RYB Education, a Chinese kindergarten operator ownership of SGI. The company bought a TPG invests in shoe in which Ascendent Capital holds a 46.4% 60% from IDFC in 2015 for INR10.6 billion. This stake, has filed for an IPO on the New York Stock facilitated an exit for UK development finance company QRG Exchange. Ascendent invested in the company in institution CDC and Piramal Group, which had TPG Growth - the middle market investment 2015, taking out several early-stage investors. invested in SGI through convertible debt. platform of TPG Capital - has joined QRG IDFC originally incubated SGI, then called Enterprises, the family office of India’s Havellis Green Infra, through IDFC Private Equity Fund Group in backing local shoe supplier Campus NORTH ASIA Activewear. The capital is expected to drive growth of the customer base through enhanced J-Star buys consumer brand distribution, diversified channels, and product Sun Smile expansion. J-Star has acquired Sun Smile, a Japanese Accel, IDG in $25m Series B manufacturer of consumer products aimed at young women. It plans to help Sun Smile for CureFit enhance its online sales efforts, add new Indian health and fitness start-up CureFit has products and enter overseas markets through raised a $25 million Series B round from a group improved marketing. of investors including Accel Partners and IDG Ventures. Kalaari Capital also participated in the Blackstone hires Japan round, as did RNT Associates, an investment firm II and IDFC Private Equity Fund III starting in backed by Tata Group chairman emeritus Ratan chairman 2008. The former vehicle made a full exit in the Tata and the University of California. All four are The Blackstone Group has appointed Katsuyuki 2015 sale, while the latter retained a 40% stake. existing backers of the company. Kuki, who previously spent nine years as an Speaking to VCCircle, Girish Nadkarni, a partner investment banker with J.P. Morgan, as its at IDFC Alternatives, said the firm received a total chairman and representative director for Japan. of INR25 billion through both transactions - its SOUTHEAST ASIA He will advise and support Blackstone’s investing largest exit to date - with an IRR of 19%. and capital raising efforts in the country as the SGI is one of India’s largest renewable energy Armstrong makes debut firm looks to develop its local presence. producers, with solar and wind power projects with total capacity of nearly 1,200 megawatts exit from Symbior DSG closes India, SE Asia operational and under construction across seven Armstrong Asset Management has secured a first states in India. exit from its Southeast Asia-focused cleantech fund at $50m fund, selling its entire stake in six solar projects DSG Partners Asia, which targets early-stage controlled by Thailand’s Symbior Solar Siam. A consumer opportunities in India and Southeast INR4.95 billion ($77 million). The bank received subsidiary of Thailand-listed Padaeng Industry, Asia, has closed its second fund at the hard several rounds of PE funding prior to its 2015 IPO. paid THB1.26 billion ($38 million) for Symbior cap of $50 million. DSG reached its target of Investors included Samara, Norwest, CDC Group, Elements, the holding company for Hong Kong- $40 million in April, with half the contributions Baer Capital Partners, Gaja Capital and Capvent. based Symbior Energy. Armstrong held a 60% coming from Fund I investors – primarily high Baer made a full exit in the IPO, while Gaja and stake in Symbior Elements. net worth individuals – and half from four Capvent made partial exits. institutional players. Toyota invests in Southeast Freshworks acquires Asia’s Grab SOUTH ASIA domestic marketing player Toyota Tsusho, a division of Japanese automotive Freshworks, an India and US-based cloud giant Toyota Group, has joined the latest Samara, Norwest in $77m business software developer with several VC funding round for Southeast Asian ride-hailing backers, has acquired Indian marketing software app operator Grab. The size of Toyota Tsusho’s exit from RBL start-up Zarget. The deal will provide an exit investment has not been disclosed. The round Samara Capital and Norwest Venture Partners for Zarget’s VC backers Accel Partners, Sequoia already includes $2 billion from SoftBank and Didi have made a partial exit from India’s RBL Bank for Capital and Matrix Partners India. Chuxing. It is expected to close at $2.5 billion.
Number 33 | Volume 30 | September 05 2017 | avcj.com 5 Customized Research Report Asian Private Equity Data Made Simple
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To understand how AVCJ Research can help you with your data needs, please call: +(852) 2158 9644 or email [email protected] avcj.com COVER STORY [email protected] Moving time From Uber to Flipkart, there are high-profile examples of founders being replaced as CEOs of their start-ups. It isn’t common practice in Asia, and for reasons of corporate culture, this isn’t likely to change
BENCHMARK CAPITAL’S MOVE TO FILE A The key facets of venture capital value-add that the founder-CEO was strong in product lawsuit against Uber founder Travis Kalanick early are well established, and human resources is one development but lacked the leadership skills to last month surprised many industry watchers. of them. Start-ups often need help in the early achieve scale. Over the course of several candid It’s not a norm for a well-regarded Silicon Valley stages to recruit individuals – such as CFOs, CTOs yet friendly conversations, the founder-CEO VC firm to sue a fellow board member and the and marketing specialists – who can fill out the recognized his weakness and supported the founder of one of its most valuable investments. executive team and pursue scale at speed. idea of hiring an experienced hand. He took Kalanick had resigned as Uber CEO in June However, the founder-CEO is usually the initiative in identifying the right person, following a series of controversies including untouchable, especially if a start-up is well-run. who then became a part of the founding team. allegations of sexual harassment by his Industry participants in China and India note Lightspeed invested and the company is now an employees and the use of software designed to that it is rare for these individuals to be asked industry leader. bypass regulators. Benchmark further alleged to stand aside in favor of a professional CEO – “Changing the CEO is very difficult and usually that Kalanick had committed fraud, breach of and it inevitably happens when a company is doesn’t work in China. In rare cases, it could work contract and breach of fiduciary duty while operationally flawed or falling behind its growth at an early stage. Early stage investors focus on trying to maintain control over the company. The trajectory. VCs have in the past decided to write the quality of the founding team, especially the GP wanted to remove him from the board and off an investment rather than damage their CEO. If they sense the founder-CEO would be eliminate the three additional voting directors he relationship with the founder by suggesting a better as CTO, they should also know whether sought to introduce last year. replacement. he would be open to an external hire. It’s not Uber’s boardroom brawl then became even “We don’t get into an investment with the easy, but if the original founder-CEO realizes messier as a group of Kalanick-supporting investors rallied against Benchmark and called on the firm to offload its shares. The mud-slinging “We don’t get into an investment wiht the has now abated with the appointment of former Expedia boss Dara Khoscrowshahi as CEO of Uber mindset of replacing the founder-CEO. We enter and a court ruling – in Kalanick’s favor – that the Benchmark suit be moved to arbitration, thereby with the expectation that the CEOs we back are avoiding a public battle. going to create businesses of size” – Richard Lim Pivot point The situation is unusual given the venture capital mindset of replacing the founder-CEOs at some and embraces that, it’s possible. You can’t force industry traditionally advocates constructive point. We enter with the expectation that the founder-CEOs to step down if they aren’t willing relations between founders and investors. But CEOs we back are going to create businesses to do so.” says Mi. CEO replacement does happen, albeit more of size,” says Richard Lim, a managing partner Venture capital investors are seldom activists. frequently in the US than in Asia. Kalanick’s grip at China-based GSR Ventures. “That’s the They take minority stakes in start-ups and on Uber notwithstanding, the cult of personality assumption we make – we are funding the many are unwilling to have any operational around founder-CEOs is stronger in China and person as much as we are funding the business.” involvement, citing the speed at which India than in Western markets, which means it The situation is somewhat different when technology businesses typically grow. There is a is harder to bring in a new leader. Furthermore, a venture capital firm incubates a start-up. The desire to preserve an alignment of interest with Asia’s technology talent pool is shallower than investor is building the business – sometimes the founder and they may raise issues with the that of the US, so a suitably qualified replacement seeding it with technology as well as capital – hope of steering events in a particular direction, CEO isn’t necessarily available. from the ground up and in due course hires a but in an ideal scenario the founder takes the “I think it is culturally less acceptable to ask professional CEO. But they do this from a position initiative on major decisions like introducing a a Chinese founder-CEO to resign and bring in a of strength: they typically have a lot of power at new CEO. replacement. The founder-CEO is typically the board level. For VC firms that invest in start-ups Chinese software outsourcing services face of a company, and the venture idea is about that have been independently founded, CEO provider HiSoft Technology International is a investors picking the right entrepreneurs to replacement is challenging, particularly after the well-known case in point. Founded in 1996 back especially in the early stages. So far, I have Series B round. If changes are to be made, they by Yuanming Li, the company grew fast and not seen or heard any GP complaining out loud must happen early. built up a large multinational client base. After about changing their founder-CEOs in China,” James Mi, a managing director at Lightspeed receiving Series A funding in 2004 from the likes says Jireh Li, chief representative for Asia at US- China Partners, recalls studying an early-stage of GGV Capital, Intel Capital and the International based fund-of-funds Commonfund Capital. online technology business and concluding Finance Corporation, Li expressed doubts to
Number 33 | Volume 30 | September 05 2017 | avcj.com 7 COVER STORY [email protected]
one of the investors about his ability to take “There was significant tension at the board in relatively immature markets; finding one who the company to the next level. He raised the level, and two parties were close to going to is able and willing to take over a troublesome possibility of hiring an external CEO. court. Eventually, things were amicably settled technology company is harder still. Many “He is the founder and he needed to know and the founding team left the business, but they executives with experience of taking a company what he wanted, because ultimately the still held 40% of the company,” says Prasanna. to IPO would prefer to launch their own start-up company is his baby. I asked him if he wanted to than be an employee at someone else’s, albeit see the baby to grow up. [Regarding an external Cultural differences one that is well paid. CEO] I told him, ‘If that’s the case, then we have Procrastination is generally more common than Asia and the US do not only differ in terms to decide. You may want to change not only the legal action. VC investors hold off raising the of the depth of their technology talent pools. crew but also the pilot,’” the investor recalls. “It prospect of CEO replacement because they have Historically, the US venture capital industry has took a long time to change the CEO. It was not developed close relationships with founders, been very hands-on: Josh Lerner, a professor and easy.” and once a decision is made it takes time to head of the entrepreneurial management unit The investor, who was also a board member, implement. at Harvard Business School, was once told by a helped recruit Tiak Koon Loh, formerly a One investor recalls a Chinese company US-based VC investor that he had invested in 20 corporate vice president at Hewlett-Packard, as struggling in its mid-stage rounds because companies and fired the CEOs at 19 of them. “Obviously, that’s a very dramatic example. Founders, CEOs of global unicorns But it accurately conveys the message that the CEOs who were good founders running Company Valuation (US$b) Founder/co-founder CEO a company in its first couple of years aren’t US Uber $68 Travis Kalanick Dara Khoscrowshahi necessarily the best CEOs later-on for the Airbnb $29.3 Brian Chesky Brian Chesky company,” Lerner says. “People like Bill Gates and SpaceX $21.2 Elon Musk Elon Musk Mark Zuckerberg have been very successful in Palantir Technologies $20 Alex Karp Alex Karp both founding companies and running them. WeWork $20 Adam Neumann Adam Neumann But most founders are not like that. I think China Didi Chuxing $50 Wei Cheng Wei Cheng founders in the US usually realize that finding a Xiaomi $46 Lei Jun Lei Jun replacement is part of the game.” Lufax $18.5 China Ping An Group Greg Gibb In contrast, Asian founders look at their Meituan-Dianping $18 Xing Wang Xing Wang start-ups more as personal affiliates – often 90% Toutiao $11 Yiming Zhang Yiming Zhang of their personal net wealth is linked to these businesses – and the prospect of no longer being India Flipkart $11.6 Binny Bansal, Sachin Bansal Kalyan Krishnamurthy the leader would equate to no longer having a Snapdeal $7 Kunal Bahl Kunal Bahl career. As such, a founder might try to make his One97 Communications $5.7 Vijay Shekhar Sharma Vijay Shekhar Sharma or her position essentially inviolable by retaining Ola $3.65 Bhavish Aggarwal Bhavish Aggarwal the right to appoint the majority of board Hike $1.4 Kavin Bharti Mittal Kavin Bharti Mittal members. Source: CB Insights Legal provisions are renegotiated with each funding round to ensure such power is retained. HiSoft’s new CEO in 2006. This was followed by the founder-CEO didn’t follow board When a company reaches Series B or C, it is several other senior appointments, including a recommendations about changing the business increasingly common for the founder-CEO to CFO and COO. The CFO reported directly to the strategy. The VC backers even went as far as to seek super voting rights in an effort to hold board, not the CEO. HiSoft listed in the US in 2010 promise the founder-CEO they would re-up on to control of the company’s voting shares and subsequently merged with industry peer in the next round and find new investors to because the round is so large that their equity is VanceInfo to form the company known today at participate if he would step aside. Eventually, he substantially diluted. Pactera. grew tired of the battle and agreed to transition “In the absence of a new financing event, “We have also seen some founders in India to a chairman role provided the investors could existing investors would typically resist amending recognising their limitations,” adds Anand find a suitable replacement as CEO. the existing governance agreements to provide Prasanna, a managing partner at India-focused “Investors usually don’t hold all the cards. It’s for such a change in voting control. However, if GP Iron Pillar Capital. “But, in many cases, it kind of a symbiotic relationship between the the new investors agree that the founder-CEO would take forever for them to really take action, founder and investors before the company goes will have super voting rights, the new investors like hiring an external CEO or other senior public. While VCs need a strong founder-CEO likely will want to ensure that existing investors management to run the company.” to build a successful company, the founder also do not end up with greater voting control per In the rare situations where venture capital needs the investors’ confidence and support to share than they have,” says Thomas Chou, a investors hold majority interests in companies, continue to attract capital. Once that relationship partner at Morrison & Foerster. “This means that they can execute their shareholder rights to breaks down, whatever change VCs want to the implementation of super-voting for the force out the founding team. This happened to make, it’s going to be traumatic for the company,” founder-CEO often ends up applying to all series one India-based technology company shortly says James Lu, a partner at law firm Cooley. of preferred shares, rather than against only the after its Series B round, when the VC backers When investors lose faith in the founder it is newest series of shares to be issued.” concluded that, although they liked the product, often seen as indication that the company isn’t In addition to board composition and voting the founder-CEO wasn’t the right fit to develop performing well. Finding a CEO who is able to shares, old and new stakeholders must also agree the business further. assume management responsibility is difficult on certain protective provisions. Often, these
8 avcj.com | September 05 2017 | Volume 30 | Number 33 COVER STORY [email protected]
provisions require that the appointment, removal messy situation and can lead to bad publicity. But that can lead to this – it could be a founder’s or any material changes in the compensation if you’ve billions of dollars stake in the company, personal decision, the company is in trouble, or of senior executives, such as the CFO and COO, you might be willing to do that,” observes there is a huge conflict within a founding team. must be approved by preferred shareholders Harvard’s Lerner. But most VC investors don’t want to force the or board directors. While these provisions give founders out,” says Ash Lilani, founding partner at minority investors a right to block the removal Dissenting voices India-focused Samma Capital. or appointment of an executive, they often do In some respects, this added complication is a Generally speaking, no venture capital firm not result in affirmative right of such investors to result of Uber wanting to stay private for longer, wants to be known for removing founders force through a removal of the executive, Chou raising substantial rounds of funding at ever because word spreads in the start-up explains. higher valuations. The company’s investor base community and it may struggle to secure the The Uber situation does involve a power is large and reflects a range of interests, which best investments. Given the less confrontational battle at board level. Benchmark – a significant means discord is more likely to occur. This has nature of Asian corporate culture, the cult of minority shareholder with a board seat – also proved to be the case at a number of Asian personality around founder-CEOs, and the opposed a decision last year to expand the unicorns, with conflicts of interest emerging due limited supply of experienced executives, the number of voting directors from eight to 11, to the presence of groups that have different risk reluctance to ship in replacement leadership at with Kalanick having the sole right to designate appetites and investment horizons. Chinese and Indian start-ups is understandable. those additional seats. Indeed, after resigning Another characteristic of certain start-ups that It may become more frequent as the industry as CEO, he could name himself to one of those have raised billions of dollars in private capital matures, but few market watchers flag it up as a seats. Benchmark argued that it wouldn’t is that investors assume positions of influence – meaningful future trend. have supported this due to Kalanick’s “gross particularly if a company is losing direction – by “If you look the large tech companies in the mismanagement and other misconduct at Uber,” virtue of the amount of money they have at world – Amazon, Facebook and Alibaba Group, as which included pervasive gender discrimination stake. Flipkart, India’s largest online retailer, is a well as the last generation tech giants like Apple, and sexual harassment. good example. Tiger Global Management is the Microsoft, Dell and Intel – many of them are run The subsequent division of the board into two company’s largest backer, with an approximately by the founders for a long period of time,” says groups with different alliances – as exemplified 35% stake, and earlier this year one of its former GSR’s Lim. “The venture industry is about making by the Kalanick backers calling on Benchmark to managing directors took over as CEO from co- the most money from large companies. Since sell its shares – further complicated matters. “In founder Binny Bansal. most successful companies are operated by Uber’s case, there are some reputational costs “It’s very unusual in India to get the founder to founders, I don’t expect changing the founder- [for Benchmark] of being an unfriendly VC. It’s a be replaced. There are only certain circumstances CEO to become the norm.”
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avcj.com FOCUS [email protected] Dangerous liaisons A diverging supply-demand dynamic in private equity fundraising is threatening the GP-LP alignment of interest. Concessions on both sides are needed in the interests of long-term stability
IN EARLY MAY, CLSA CAPITAL PARTNERS 2013. Ominously, the only natural comparison allocation. GPs will always try to divide and (CLSA CP) became the seventh GP to close a for this level of activity is the pre-global financial conquer.” Japan mid-market fund in the space of three crisis period, when annual fundraising fluctuated While GP-LP talking points typically revolve months, hitting the hard cap of its Sunrise in a range of $540-690 billion. around management fees, co-investment and Capital III at $400 million – almost double the “We certainly feel this is an environment to other specific rights, a number of terms around size of its predecessor. Demand for exposure to be pulling back in, and we are pulling back, but alignment of interest are distinctly long-term in private equity in Japan, not least from a swath of unfortunately, we don’t see that when we look nature. For mid-market funds, these include key domestic LPs that had previously steered clear of out in the LP community,” says Steve Byrom, head person clauses, no-fault divorces, GP removal the asset class, had never been higher. of private equity at Australia’s Future Fund. “What clauses and the distribution of economics within But details of the fundraising bring more we’re seeing is allocations increasing and the the firm. Bigger players, meanwhile, may see fundamental – and consequential – themes chase for yield spreading to private equity. People more concern around issues like hurdle rates. to light. Like many of its fellow Japanese and are scrambling to get more money into the asset This came to the fore in 2016 when Advent Asian funds this year, Sunrise III was comfortably class, and therefore more capital is being raised, International removed the hurdle from its most oversubscribed. This translated into an approximately eight-fold increase in CLSA CP’s LP base and an apparent hesitancy among the “At this part of the cycle, our antennae are up eager new backers to exert too much pressure around contract terms. more than usual to misalignment of interest, “We had 30-plus LPs saying all kinds of things at the same time, so managing that process was so we are definitely walking away from groups quite challenging,” says Shota Kuwaki, a director where we aren’t getting the alignment with the private equity firm. “Although they did have some specific requests in the side letters, mechanisms we’re looking for” – Steve Byrom most of the terms were quite consistent with the market standard.” However, Sunrise demonstrates that the more dry powder is sitting on the sidelines and recent fund. CVC Capital Partners subsequently skewing of GP-LP negotiating leverage implied high transaction multiples are being paid.” lowered its hurdle from 8% to 6%. by such scenarios is not necessarily a fait For many LPs, the primary concern is that as As a universal case in point, GP commitments accompli. Indeed, CLSA CP proactively pursued higher demand for PE exposure hardens GPs’ offer an interesting look at the difficulty of a number of alignment of interest initiatives as negotiating leverage, alignment of interest will agreeing mutually satisfactory terms on long- part of the fundraising process independent of break down, potentially undermining returns. term issues. For firms such as CLSA CP, this area any particular LP demands. Notably, this included The classic gripe with global PE firms is that their of negotiation – alongside the engagement of a a redrafting of the key person clause used in asset bases grow so large that accumulating placement agent – represents perhaps the best previous funds to cover a larger number of senior management fees becomes more important opportunity to improve the geographic scope of executives. than carried interest. Further down the spectrum, its backers. alignment issues tend to revolve around team “One of the things that contributed to the Times of plenty stability and governance. success of the fundraise was the fact that a lot These efforts highlight a relatively faint but The optimization of long-term alignment of of LPs really do focus on alignment of interest growing awareness that the supply-demand interest is seen as a key method for defusing this between GP and LP, so they were reassured by imbalance that characterizes some – but by no risk of consistently lower returns since it would the employee side-car commitment,” says CLSA means all – fundraising processes in Asia will not in theory support a more robust and sustainable CP’s Kuwaki. “I think that stood out when LPs last forever. Longer-range thinking, both on the private equity franchises. However, a logical were assessing other GPs across the board.” part of both fund managers and their backers, is tendency among GPs to exploit a cyclic windfall According to Megumi Kiyozuka, a managing necessary to ensure the private equity industry and competition among LPs under pressure to director at CLSA CP, the GP commitments across has the operational sturdiness to survive the kind deploy larger sums have stymied best intentions. Sunrise II and III have represented the maximum of economic shocks that often bring investment “The only chance for pushing for terms is amount the Sunrise team members were able to booms to an abrupt end. when you have a group of very like-minded LPs put in, amounting to 5% in both funds only by In its latest global PE report, Bain & Company who are willing to work together,” says Edmond coincidence. As a result, CLSA CP employees not called the fundraising environment of the past Ng, a managing partner at fund-of-funds Axiom on the Sunrise team who would have otherwise few years “as good as it gets,” noting that the Asia. “But the relationship among LPs is very contributed were cut back. industry has raised $550-600 billion a year since interesting because everyone is fighting for Meanwhile, much of the new thinking
10 avcj.com | September 05 2017 | Volume 30 | Number 33 FOCUS [email protected]
on GP commitments revolves around the during the fundraising process based on long- this part of the cycle, our antennae are up more notion that percentage-based standards are term goals around alignment of interest, even than usual to misalignment of interest, so we are a less reliable way to calculate alignment when engaging LPs that were not participating definitely walking away from groups where we compared to establishing what proportion but could be brought into future vehicles. aren’t getting the alignment mechanisms we’re of the GP’s net worth is being invested. This Transparency and education were considered looking for.” can lead to complex discussions involving essential since about half of the new backers LPs’ underwhelming reaction to growing non-cash components – which are usually not were entering Chinese healthcare for the first concerns around alignment of interest is at recommended – and controversial attempts time. least partially explained by the issues related to delve into personal finances. As a result, one “You should always put yourself in the LP’s to increased deployment expectations and of private equity’s key alignment of interest shoes just like you should also put yourself in a staffing shortages. These pressures can in turn talking points tends to boil down to a substantial portfolio company CEO’s shoes,” Zhao says. “The be problematic to the due diligence process of amount of guesswork. hard part is to align the GP, LP and CEO’s interests picking a GP partner. “If you’re backing someone who has been – that is really based on being very proactive The trend of LPs paring back their GP a successful professional, no matter how much about communication.” relationships is sometimes seen as a motivator money they have, I feel that $5-10 million of short-term thinking around alignment of more than the cumulative fee that the GP will Walking away interest. Although less diversity in partnerships be receiving over the fund life has got to be The reciprocal style of this approach offers a suggests an ability to establish more intimate something that hurts,” says Axiom’s Ng, referring reminder about the need for action on both sides and communicative GP-LP relations, the larger to funds around $500 million in size or less. “That of the GP-LP divide. Although terms are generally commitments involved often revert the talking would almost always be a meaningful amount.” expected to become more LP-friendly from one points back to the most immediately pressing Lyfe Capital is another GP that has closed fund to the next, a lack of capital rationing from points of friction. a new fund at double the size of its previous LPs is said to have resulted in the opposite effect “You hear a lot about LPs being dissatisfied vehicle but maintained the same percentage GP among more established buyout shops. To some with specific terms on specific funds where the commitment. The firm closed its second China- extent, this puts an onus on LPs to react by taking GP is being particularly egregious,” says Wen Tan, focused healthcare fund this year at $420 million a firmer stand. co-head of private equity Asia Pacific at Aberdeen by increasing its LP base from around 15 to at “You don’t see the LP community focusing Standard Investments. “But the acid test on that least 20 backers. on improving alignment of interest – or even is how often you hear about LPs walking away James Zhao, a founding partner at Lyfe, making sure alignment is as good as it was last from those scenarios – we don’t hear about it emphasizes a strong focus on setting terms time around,” says Future Fund’s Byrom. “But at that much.”
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avcj.com DEAL OF THE WEEK [email protected] GoGoVan, 58 Suyun seek logistics dominance
THE MORE 58 SUYUN AND GOGOVAN Seeing an opportunity in the logistics Choy, head of M&A at China Renaissance, which eyed each other, the more each company dysfunction, Lam and his co-founders hit on the advised both companies on the deal. “So there looked like the missing piece of the other’s idea of an app that could connect van drivers was also a strategic decision at Daojia’s level that puzzle. While both operated in the same broad directly to business customers without the both companies probably shouldn’t be under the market – booking delivery vans online through need of a call center. The start-up has attracted same roof.” a model similar to Uber – there was little overlap several rounds of investment The merger plays to both since they targeted different customers and from backers including Centurion companies’ strengths: 58 Suyun geographies. A merger seemed the obvious step. Private Equity and New Horizon can bring its B2C expertise to “We said, ‘Okay, you have the consumer Capital, and has expanded into GoGoVan’s markets in Southeast market – how about if we work together in Singapore, Taiwan, South Korea Asia and Korea, while its partner the B2B market?’” says Steven Lam, founder of and mainland China. can implement its B2B service GoGoVan. “And the combined company can 58 Suyun, by contrast, began through 58 Suyun’s existing focus on both Southeast Asia and China, with a in 2014 as a division of 58 Daojia, network in mainland China. leadership position in both markets.” the online-to-offline local services Online logistics: Double team Lam will serve as CEO of the With the recently announced all-stock merger, subsidiary of US-listed classified combined entity, while 58 Daojia for a valuation estimated at over $1 billion, the site 58.com whose investors include Tencent founder Xiaohua Chen will be its chairman. companies can now put that hypothesis to the Holdings and Alibaba Group. The company There are a plans for a $200 million funding test as Asia’s largest intra-city logistics platform. achieved early success with a B2C model focused round following the conclusion of the merger, Despite their complementary strategies, the on China but had begun to target corporate and the company is reviewing potential investors two companies arrived at the market from nearly customers that could offer more stable demand for their ability to contribute to its expansion opposite directions. Lam founded GoGoVan in – however, this proposal concerned its parent. plans. “With Tencent and Alibaba already at bat, Hong Kong in 2013 after a previous start-up idea “The more it gets to the B2B world, the further we are not seeking out big names,” Choy says. – branded take-away food boxes – faltered due away it is from the rest of Daojia’s business, which “But we do want people who can benefit the to difficulties arranging transportation. is focused on retail customers,” says Jeremy company in the long term.” Navis’ Asia poultry play takes flight
EVEN FOR TWO CHINA-BASED FOOD growth potential in the company, particularly in market. When CVF’s CEO stepped down a year conglomerates, Cherry Valley Group (CVF) may Asia, but its legacy operations and lack of a clear after the acquisition he was replaced by the seem like an unlikely investment choice. But strategy were holding it back. company’s head of China, who had played in Beijing Capital Agribusiness Group and CITIC “If you’re in ducks and duck genetics, you building a distribution network in the country. Agri Fund Management saw the UK-based duck have to have some interaction with China. Cherry Navis also streamlined CVF by selling the breeder and genetics supplier as a way to satisfy Valley had made some moves, but it’s a long way legacy processing division to another UK poultry a considerable home-grown demand. from Lincolnshire to penetrate China,” Ireland player, freeing up management to focus on the “Nine in 10 of all Peking ducks in the world says. “There was a huge growth opportunity genetics operation. Navis had already hired a are consumed in China,” says with a superior product, but new chief geneticist, and now moved her team David Ireland, a senior partner they were running in a rural UK from the previous breeding facility, located at the with Navis Capital Partners, which environment.” processing plant, to a new, modern headquarters. recently sold CVF to the firms for Navis’ chance came in 2010, Seven years later, CVF’s new course has an undisclosed amount. “They felt when CVF, having resolved its brought it recognition in its most exciting like it was bringing something financial difficulties, began to market. Navis sees its 2.8x money multiple as a home, even though the business approach potential buyers again. vindication of its patient approach. was born and cultivated in the The firm’s willingness to take on “All agriculture businesses are up and down UK.” Cherry Valley: Chinese target both the legacy duck processing – we had a very good position, but every year Navis had known CVF for business and the more novel you have a host of challenges with feed costs some time before buying it. The GP considered genetics operation proved the deciding factor, and markets and all the rest,” says Ireland. “But we an acquisition in 2003 but didn’t follow through, and it bought a controlling stake through were able to navigate those, and when we did and following the acquisition of Thailand-based Bangkok Ranch – which later reverted to Navis get to the market, between a really dominant duck processor Bangkok Ranch in 2007, it when the firm sold Bangkok Ranch in 2013. position, an established management team and became a customer. CVF supplied duck genetic The GP saw its main value proposition as a good reputation, the asset was very sought stock to Bangkok Ranch. Navis saw considerable its ability to reshape the business for the Asia after.”
12 avcj.com | September 05 2017 | Volume 30 | Number 33 DEAL OF THE WEEK [email protected] Lock & Lock primed for regional expansion
THE LAUNCH OF ITS SIGNATURE FOUR- means it hasn’t struggled as much as other and Korea, management has set its sights on sided locking food container in 1998 established Korean brands, according to a source familiar expansion in Southeast Asia. Vietnam, which is Korea’s Lock & Lock as a global player. The with the company. The founders are now relying already a production base for Lock & Lock, is seen company now exports its kitchen household on Affinity Equity Partners to take the company as an important end-user market. goods to 119 countries and has 87 directly- to the next level in terms of new growth “Vietnam is a different story to China – it is owned stores overseas. However, recent years opportunities and improved entering the modern trade space, have not been kind. Sales in China, which management systems. with growth in hypermarkets, account for about 40% of aggregate revenue The transaction is worth department stores and shopping declined in 2014 and 2015, forcing Lock & Lock to KRW629.3 billion ($562 million), malls really just getting started,” embark on a challenging overhaul. valuing the business at KRW990 says the source. “The company has First, the company stopped supplying Chinese million. CEO Jun-il Kim will good relationships with modern hypermarkets directly and opted to use agents transfer 29 million shares – a retailers so it can target offline instead. Revenue fell but margins remained 52.79% equity interest – to channels as well as online sales.” strong because inventory risk was removed: if Affinity for KRW18, 000 apiece. Food containers: SE Asia angle Through developing a a hypermarket didn’t sell products, it returned The GP is buying a further 5.93 diversified product portfolio and them to the agent rather than the manufacturer. million shares, or 10.77%, from Chang-ho Kim for a strong overseas sales network, the hope is that Lock & Lock also abandoned unprofitable TV the same price. Jun-il Kim is expected to reinvest Lock & Lock can become an attractive acquisition home-shopping channels in favor of e-commerce in the business once the deal closes and remain target for global brands such as WMF Group and platforms and launched a B2B service that involved in its management in some capacity. World Kitchen. “The plan is to turn the company enabled clients to source products wholesale for Affinity will continue Lock & Lock’s focus on into a formidable player in Southeast Asia and use in promotional activities. online distribution channels, but there are also China, so that global players will be attracted to Political tensions between China and plans to open additional offline stores, including it when they want to expand into these markets,” South Korea haven’t helped, but the strong smaller format outlets as well as the flagship the source adds. “In Korea, there are already some performance of Lock & Lock’s online business stores that exist at present. Beyond China global brands keen on buying it.”
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avcj.com 3rd Annual Private Equity & Venture Forum Philippines 2017 11 October | Fairmont Makati Hotel, Manila
GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjphilippines.com Snapshot of confirmed speakers includes: REGISTER NOW!
Will Ongkowidjaja Michael Rodriguez Co-Founder & Managing Partner Managing Director ALPHA JWC VENTURES MACQUARIE INFRASTRUCTURE & REAL ASSETS
Adrian Teng Kelvin Teo Group Finance Director Co-Founder and Director JARDINE CYCLE & CARRIAGE LIMITED FUNDING SOCIETIES-MODALKU
Inanc Balci Cyrus Driver Co-Founder and CEO Managing Director, Head Private Equity Asia LAZADA PHILIPPINES PARTNERS GROUP (SINGAPORE)
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Registration Enquiries: Sponsorship Enquiries: Anil Nathani T: +852 2158 9636 Darryl Mag T: +852 2158 9639 E: [email protected] E: [email protected] Enquiry
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AVCJ17_Phil_ad_0509.indd 1 5/9/17 5:08 pm 3rd Annual Private Equity & Venture Forum BARNABY LYONS | INDUSTRY Q&A Philippines 2017 [email protected] 11 October | Fairmont Makati Hotel, Manila Distress delivers Barnaby Lyons, managing director and head of Asia at Bain Capital Credit, discusses the opportunities available in the region’s private credit space and the changing attitudes of investors toward the space
Q: What do you see as the A: The Reserve Bank of India (RBI) caliber would add benefits in and returns are getting tighter in most attractive investment and the Modi government addition to our own platform that space. There are still pockets opportunities in Asia’s private recognize this as a pretty in Mumbai. Piramal benefits of opportunity, but in the US in credit space? significant threat to the growth from Bain Capital’s expertise particular it’s very quiet. We see GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjphilippines.com A: The most compelling thematic of India’s economy, and there’s in structuring, diligence, and that in our own funds – relatively opportunities in Asia are non- been a host of actions over the operational turnaround, while less of our global special performing loans (NPLs) in China last 12-18 months to attract bringing its long history in India situations fund is being allocated Snapshot of confirmed and distressed assets in India. But foreign capital and streamline REGISTER these are just one part of a much processes to resolve that distress. speakers includes: wider private credit opportunity There’s a new bankruptcy regime “The level of across the region. We have a that sets clear timelines – it’s competition is NOW! very active business providing yet to be fully tested, but on primary capital solutions to a paper it’s a massive change. not comparable range of borrowers who cannot There are also improved tax Will Ongkowidjaja Michael Rodriguez access traditional financing, and rules to provide clarity to foreign to what we see Co-Founder & Managing Partner Managing Director are active across each of the investors, and the closure of in Europe and ALPHA JWC VENTURES MACQUARIE INFRASTRUCTURE & major economies. a variety of loopholes which REAL ASSETS historically allowed non-cash North America” Q: What has changed to make transactions with banks. Chinese NPLs more attractive? A: China has been looked at Q: What factors affect your and connections to government, to North America; Europe and Adrian Teng Kelvin Teo many times in the past, but approach to this market, and promoters, and local banks, with Asia have been the growth Group Finance Director Co-Founder and Director we didn’t see that opportunity how do you address them? a different perspective than a US drivers. JARDINE CYCLE & CARRIAGE LIMITED FUNDING SOCIETIES-MODALKU set as investible for reasons A: Investing in India is not without institution would have access to. including the development and its challenges, especially in Q: How do you see the market sophistication of infrastructure distressed situations where Q: To what extent do you see changing in the future? and the court system. A local market dynamics and other GPs and LPs responding A: Looking over the last 15 years lot of those factors have local stakeholder management to the opportunity in Asian of special situations investing in fundamentally shifted today. is critical. We’ve set up a private credit? Asia, there have been successes, Inanc Balci Cyrus Driver It’s province and city specific, compelling joint venture in India A: There’s been limited focus on Asia but also failures. Where there Co-Founder and CEO Managing Director, Head Private Equity Asia but in certain markets there with Piramal Enterprises, a well- from a private credit perspective have been failures they have LAZADA PHILIPPINES PARTNERS GROUP (SINGAPORE) is a professionalized judiciary regarded and successful local among GPs, although interest been around managers who measured by clear KPIs [key conglomerate, to do distressed has been increasing. There were too siloed in particular performance indicators] investing for control deals. There are a few regional investors to segments and subject to the For the latest programme and speaker line-up, visit avcjphilippines.com around law enforcement; are large businesses and good be aware of, and a few global volatility of certain economies there’s clear and standardized assets which ar distressed, and investors, ourselves included, and sectors, or who pivoted to Registration Enquiries: Sponsorship Enquiries: documentation, and the ability our capital and operational are building platforms, but things they weren’t qualified to to track underlying collateral, expertise can reinvigorate them. the level of competition is not do, with a completely different Anil Nathani T: +852 2158 9636 Darryl Mag T: +852 2158 9639 security, lien enforcement; and comparable to what we see in risk profile. So LPs who were at E: [email protected] E: [email protected] Enquiry that will help to underwrite Q: What prompted you to take Europe and North America. It’s the forefront of exploring the assets. We’re also seeing an this approach, and how does difficult and expensive from region have both positive and Asia Series Sponsor Co-Sponsors increased flow of opportunities it compare to your investment the human capital standpoint negative experiences, but now given the rising underlying pools strategy in other markets? to invest in teams around the we are really starting to see of NPLs at the banks. So we A: It’s rare that Bain Capital pursues region, and as a result LPs haven’t interest. People appreciate the view the Chinese NPL market as this kind of partnership. We’ve had that many options. I do point we’re at – they see this as an executable, interesting and chosen to JV in this segment think people are waking up to the beginning of an NPL and scalable opportunity. because distressed situations the opportunity and LPs are credit cycle rather than midway VC Partner require significant stakeholder appreciating the dynamic. Many through it, which is where we are Q: And what has changed with management and operational of them have allocated heavily in Europe, or beyond the end of regard to India’s distressed hands-on work, and we felt that to direct lending and special it, which is where we are in North assets? having a local partner of Piramal’s situations strategies in the West, America. Join your peers avcjphilippines.com #avcjphilippines Number 33 | Volume 30 | September 05 2017 | avcj.com 15
AVCJ17_Phil_ad_0509.indd 1 5/9/17 5:08 pm Private Equity & Venture Forum Malaysia 2017 19 September 2017 | Grand Hyatt, Kuala Lumpur
GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjmalaysia.com NEW SPEAKERS CONFIRMED! For the latest programme and speaker line-up, please visit avcjmalaysia.com
The AVCJ Malaysia Forum returns to Kuala Lumpur on 19 September, 2017. This event will focus on the opportunities, the issues and the challenges in private equity, venture capital and other types of alternative assets for investors based in Malaysia and Southeast Asia.
Topics to be discussed include: THE DELEGATES Network with an audience of 1 The opportunities globally in alternative assets 200+ senior professionals including: Private equity and The role of Southeast Asian entrepreneurship and venture capital GPs 2 innovation in the global ecosystem International and 3 Is there a role for private equity in corporate M&A? domestic LPs Investment bankers Debt opportunities: mezzanine financing, NPLs, Corporate executives 4 private debt Government regulators 5 Value Creation: Unleashing value in ASEAN Entrepreneurs companies Legal advisers
Registration enquiries: Gavin Lam Sponsorship enquiries: Anil Nathani T: +852 2158 9675 T: +852 2158 9636 E: [email protected] E: Anil.Nathani @acuris.com Enquiry
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