Chinese private equity: outward bound – Houlihan Lokey Quarterly Newsletter

02 November 2016

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In H1 2016, China-based funds invested US$7.4bn via cross-border deals into Europe and North America, already exceeding the US$5.8bn invested in 2015. China-based private equity investment firms continue to grow in size, number and sophistication, and they are paying increasing attention to overseas acquisition targets. While each firm has its own unique strategy, certain themes and trends are emerging in their outbound investment activity. Over the years, the role of Chinese private equity has evolved from helping foreign investors navigate and invest in China, to propelling domestic growth, and on to acquiring high-quality assets overseas and bringing brands and technology to China. With decelerating growth at home, there is now intensified impetus to diversify overseas as a currency hedge and to gain more direct exposure to the international macro trends.
 
Houlihan Lokey, in conjunction with M&A intelligence provider Mergermarket and the Asian Venture Capital Journal, takes a close look at outbound investment trends for Chinese private equity in this exclusive thought leadership newsletter, Chinese private equity: Outward bound.
 
Highlights and trends analyzed:
 
  • Asian outbound investments hit a record transaction value of US$9.8bn in 2015, and are continuing on this upward trend, posting US$8.7bn worth of such investments in H1 2016.
  • From 2011 to H1 2016, China-based private equity engaged in 13 private equity investments worth US$1.6bn, 23 private equity buyouts worth US$15.7bn, and 78 venture capital investments worth US$1.9bn.
  • Healthcare and medical transactions have been the most visible, with 25 deals worth US$817m from 2011 to H1 2016.
  • Information technology and technology-related deals also played heavily in outbound private equity activity, with 23 deals worth US$1.2bn from 2011-H1 2016.
  • An exclusive interview with Jeffrey Wilson, Director, who leads the Corporate Finance practice in Houlihan Lokey’s Hong Kong office, on navigating the challenges and risks surrounding Chinese private equity investment overseas.

Going the distance: The expanding lifecycles of private equity funds

08 December 2016

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While it is taking longer for managers to deploy capital, the entire lifecycle of private equity funds also appears to be lengthening. Managers are seeing longer fundraising periods, sourcing periods for creating and generating viable deals, and holding periods for investments. This longer lifecycle can also be attributed, in part, to the very competitive market for investors’ dollars.
 
Besides a change in the fundraising period, private equity partners have indicated that the timeline between investment and disposition has increased, taking 6-7+ years for most. Fund terms have followed in this same trend, with liquidated fund lifecycles taking up to 11-12+ years.
 
In order to understand the drivers of these longer lifecycles, and the impact that such a process will have on fundraising, deployment, and returns, Pepper Hamilton commissioned Mergermarket to interview 50 PE partners, directors, and principles from across the United States.
 
Key findings include:
 
  • 58% of those surveyed say that the PE fundraising period for their current fund was longer than the preceding one, with 16% describing it as having increased significantly.
  • More than half (56%) of respondents say that the timeframe from investment to disposition has increased over the past five years, translating to limited partners’ called capital being illiquid for longer and unavailable for general partners engaged in fundraising.
  • 52% of those surveyed expect the timeframe from investment to disposition to remain the same for the next three years, with equal proportions (16%) saying that it will increase and decrease somewhat for them.

PwC Private Equity Trend Report 2017

27 February 2017

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Mergermarket is pleased to provide the Private Equity Trend Report 2017 published by PwC, the 11th annual survey on current developments in German and international private equity (PE) investment.
 
Key findings include:
 
  • Only 37% of respondents say that their firms increased the volume of new investments made in the year, compared with 51% in 2015.
  • At the same time, more firms say they decreased the number of deals they sealed YoY, from 19% in 2015 to 29% in 2016.

A View From Both Sides: How PE firms and sellers can form wise partnerships

01 June 2017

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The private equity industry’s expanding fund timelines indicate that growth targets are increasingly difficult to achieve. To combat this, PE investors must find companies with compatible management teams and identify unsuitable targets as early as possible. Meanwhile, management teams also need to understand whether an investor’s operating style aligns with their internal culture.
 
To understand what PE investors look for in a target’s management team, as well as the qualities that management teams look for in potential investors, Kilberry in conjunction with Mergermarket interviewed both sides of the table for an in-depth analysis.
 
Key findings include:
 
  • PE investors think the quality of management at a target company contributes 31% to the success of a deal, while the company’s operating model/fundamentals contribute 37%, and the product 32%.
  • More than a quarter (28%) of portfolio company executives said their PE investors were too involved in managing the business, and nearly a quarter (24%) of PE investors said the biggest challenge they faced with management teams was their reluctance to cede control of day-to-day management.
  • The greatest number of PE investors (44%) said that external assessments were the most important formal method for evaluating a target company’s management team

Norwegian Private Equity Breakfast 2017

31 January 2017 - 08:30 am UTC

Take stock of Norwegian private equity activity and the trends driving the market for the year ahead with fellow Norwegian private equity funds.

This free seminar consisted of 2 panel discussions, both designed to give you practical tips and new ideas.

 

AVCJ Indonesia Forum

27 April 2017 - 11:09 am UTC

The 6th Annual AVCJ Indonesia Forum brought over 200 leading private equity and venture capital professionals and leading business executives on 27th of April for a day of high level discussions, debates and networking.

The speakers included some of the most successful private market investors from Indonesia and across the region discussing the forces shaping private markets and the shape of the ecosystem in Indonesia.

The event featured in-depth market analysis of consumer opportunities including healthcare and fintech, the cross-border opportunities, infrastructure development and funding and the LP perspective on how Indonesia fits into a private equity portfolio.

The Forum opened with a keynote address from one of the pioneers of private equity in Indonesia, Sandiaga Uno, co-founder of Saratoga Capital who offered overview of the investment landscape. The event also featured a fireside chat with the president director of Blue Bird Group, Noni Purnomo, who provided an insights into how traditional businesses stay relevant in a fast-changing economy.

Unquote German Private Equity Forum

24 May 2017 - 08:30 am UTC

The 12th edition of the unquote" German Private Equity Forum brought together international senior private equity professionals who debated the strategic direction of the asset class and provided insight on how deals are being executed in Germany.

This one-day event was the perfect size for you to get to know the whole audience. The programme included a manageable number of sessions with ample networking time - the perfect balance for anyone looking to build relationships and gain market insights.

On-stage, you could expect high-profile speakers from the world of German private equity. They offered their views on the future direction of the sector and invite comment from the audience.

It was a great opportunity to meet German fund and investors and to gain insights into deal activity, macros threats in the market and where to find opportunities. 

AVCJ Vietnam Forum

25 May 2017 - 08:30 am UTC

The inaugural AVCJ Vietnam Forum brought 190 leading private equity and venture capital professionals and leading business executives on 25th of May for a day of high-level discussions, debates and networking. The speakers included some of the most successful private market investors from across the region discussing the investment opportunities in Vietnam. The event featured in-depth market analysis of consumer opportunities including consumer and technology, the cross-border opportunities, privatisation of SOEs, real estate investment, and the LP perspective on how Vietnam fits into a private equity portfolio. The Forum opened with a keynote address from Mark Mobius, Executive Chairman of Templeton Emerging Markets Group who offered a macro view on the economic trends impacting emerging markets and Vietnam in particular. Thank you for your support and we hope to see you again at the event next year.

AVCJ Japan Forum

22 June 2017 - 04:10 pm UTC

A flurry of succession deals in the mid-market, an increase of corporate carve-outs for the buyout players, a local LP market that is making a push into alternatives, foreign LPs renewing their interest after a period of stellar returns, and government regulations that call for stricter corporate governance - all the ingredients to ensure Private Equity in Japan is experience the best market conditions in a generation. On the flip side, Japan is fast becoming the destination of choice for fundraising as local LPs start to make large-scale commitments to foreign GPs in the search for diversification and yield.
 
However, there is a concern that too much dry power in the market will drive up valuations and that global volatility could have a knock-on effect on investor confidence and market conditions.
 
AVCJ Japan Forum took place over 2 days which included networking with over 200 institutional investors who were looking to commit capital to private markets across the globe. 
 
 

AVCJ Taiwan Forum

06 December 2017 - 08:15 am UTC

Now in its fifth consecutive year, the AVCJ Taiwan Forum creates opportunities for positive communication between the public and private sectors, to discuss market opportunities and collectively create ideas that may influence the future of private market investing in Taiwan. The event will gather 300 senior private market investors, venture capitalists, institutional investors, regulators, and corporate executives from Taiwan and the rest of Asia for a day of quality debates, discussions, and networking.

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