Your focus is on infrastructure deals in Europe and straight private equity in Asia. Why have you decided to split that focus?
One of the reasons we have chosen the infrastructure core of Europe and the private equity platform for Asia is precisely because we believe these are areas that — although they are becoming more crowded — are not overcrowded compared to many of the other spaces… If you looked at Asia in particular on the Asian private equity side, people talk about the space being overcrowded but I come back to the fact that in relation to the sort of markets you see in the U.S. and in Europe these markets have a long, long way to mature.
You mentioned that buyouts are hard to get done in Asia, why is this and is this improving?
Our perspective is that a lot of these companies are going through a growth phase. In many of the good companies, the entrepreneurs do not want to give up control. What we have found is that if you want to get access to those good companies, you have to be prepared to go in on a growth capital or expansion capital basis. There are occasionally the big buyouts that get done. Even a lot of the big buyout shops that are coming in from America are starting to realize that you do have to look more at the expansion capital growth side of the industry. I think it’s because people don’t want to relinquish control. That’s the primary reason that they’re hard to do.
What’s your role as an investor when operating in Asia?
The Asian entrepreneurs are going on a bit of a journey. They’re going on a journey from this sort of unsophisticated end of the spectrum and moving toward the more sophisticated markets that you see in the U.S. and in Europe. We see ourselves as helping them along the way. We’re looking at companies that even though we’re going in as minority [investors] frequently and we’re going in as growth and expansion capital, we have identified companies that are interested in reorganizing their balance sheets, companies that have an international perspective, companies that understand the exacting standards that international investors require…and companies that are big enough that they eventually will want to get listed. We’re helping them skate their way along to the buyout end of the market. It’s not saying that these companies are totally unsophisticated. They’re not. They understand that they need to become more efficient in their operations… and they’re moving along the spectrum from one extreme to another. It will become a buyout market eventually. That’s two, three or four years away.
What kinds of companies are you looking for in the Asian market?
We like the companies that are not the bigger companies but the ones that are significant in their space in terms of their strategy. We don’t want to invest in businesses that are so big that they’ve just become very complex companies. We’re just helping them expand to become more substantial and more focused businesses. In this area it’s very hard to get the buyout. We like companies that have a brand and have an intellectual capital base that allows them to leverage that into other markets within Asia.
What are the most common mistakes private equity firms make when investing in Asia?
You need to make sure you’re interests are aligned just as you would in any other market. The people who are local to the market would argue this as well. It’s not that different from anywhere else. You also need to know what their outlook is. Do they have an international outlook? I don’t mean international outlook as in they are looking to export. I mean, is it international as far as understanding what’s required from foreign investors? That’s quite important.