It has taken the Asian private equity industry nearly two
decades to reach the US$100 billion aggregate fund pool benchmark.
During this period, no other fund component has rivalled the speedy
growth achieved by that of buyout funds. In the five-and-a-half
years ending June 2003, the buyout fund pool in Asia has reached a
staggering US$11.3 billion. The meteoric growth rate of this newest
pool of capital in private equity unfolds an investment trend in
Asian private equity that has been rapidly evolving for the past
Buyouts in Asia have demonstrated their ability to sustain
investors' interest despite suffering setbacks during the
technology bubble era. In the twelve months ending June 2003,
buyouts re-affirmed their profile in the Asian private equity
landscape, bringing in an impressive US$2.1 billion of
fresh capital, as well as a sizeable investment total of US$4.1
billion. Most importantly, as investors disposed of their equity
holdings in earlier buyout transactions, exit performances verified
by encouraging returns added much gloss to the industry.
Yet buyouts remain exclusive to a handful of markets, namely
Australia, Hong Kong, Japan and South Korea. Asia's largest economy
is by far the most developed buyout market, accounting for US$5
billion, or 43.1% of the aggregate buyout fund pool to-date. In
2002 and the first half of 2003, outside of Japan, it has been
difficult for private equity firms to raise funds; yet the buyout
fund pool in Japan grew by an additional 50%, from just under
US$2.5 billion to US$5 billion.
The twelve months ending June 2003 marked a new direction in the
deployment of buyout capital. The banking and finance sector, which
once captured the largest percentage of invested capital, no longer
remains as buyout investors' prime investment target. Instead the
technology, media and telecommunications ('TMT') sector is offering
attractive opportunities, with eleven transactions adding up to a
grand sum of US$1 billion, or 24% of the transaction total for the
This second survey of Asian buyouts has affirmed Japan as the
undisputed leader in Asian buyouts. It led all other regional
countries/economies in having the largest pool of buyout capital
under management as well as being home to more than 69 buyout
transactions. Japanese institutions' staunch support of buyouts has
been pivotal to the development of this investment discipline in
Asian private equity. Their unfaltering faith has been rewarded
with a significant number of divestments in earlier buyout
transactions demonstrating more than positive returns.
The following charts cover an analysis of buyouts in:
- Asia including Japan (1998 - 2003/June);
- Asia including Japan (July 2002 - June 2003);
- Japan only (July 2002 - June 2003); and
- Asia ex-Japan (July 2002 - June 2003).
(i) Overview of Asian buyouts (1998 –
2003/June) Asia (including Japan)
- As at the end of June, the Asian private
equity industry was home to no less than
US$11.3 billion of capital designated for
- During the technology bubble period at the
end of the last decade, buyout funds were
overshadowed by others, but since 2002, they
have begun to dominate the Asian private equity
- In the first half of 2003, buyout funds
accounted for more than 53% of fresh funds to
come in, further evidencing fund investors'
growing interest in this investment
- Japan has firmly established itself as the
centre for buyouts in Asia, with the country
claiming 43.1% or US$5 billion of the total
buyout fund pool.
- The buyout fund pool in Japan has grown
exponentially in the eighteen months ending
June 2003. The period accounted for the
accumulation of over 50% of the US$5 billion in
- In the same time period, outside of Japan,
buyout funds have lost momentum as no
meaningful amount has been raised.
- Japan's ability to bring in a handsome pool
of capital underscores the crucial role of
domestic institutions in propelling buyout
activities in Asia's largest economy.
- At the end of June 2003, 222 buyout
transactions were known to have taken place in
Asian private equity, commanding an awesome
transaction total of US$15.1 billion.
- In the overall buyout investment landscape,
close to 80% of the buyout transactions took
place in the relatively mature economies of
Asia, indicating privatisation movements by
some Asian governments have failed to draw
buyout investors' interests.
- Japan and South Korea accounted for
approximately 58% of the investment total,
affirming Northeast Asia as the hotbed of
buyout transactions. The former took up 31%, or
US$4.5 billion of the overall transaction
total, followed closely by the latter which
claimed US$4 billion, or 27%.
- Both Australia and Hong Kong have firmly
established themselves as the second
most-favoured group of markets, attracting
US$1.9 billion and US$1.5 billion respectively
from private equity investors.
- Six years since the Asian 1997-98 Financial
Crisis, buyout activities in Thailand have
virtually dried up, despite the fact that the
country was the epicentre of the crisis and
home to early buyout transactions.
- Overall, Asian buyout investors' portfolio
is a picture of even distribution among
- The banking and finance sector led in
taking up 20% or US$2.9 billion of the
investment total, with consumer goods and the
TMT sectors each taking up equal portions, at
17% or US$2.5 billion and US$2.6 billion
respectively, closely followed by industrial
manufacturing goods which raised US$2.3
(ii) Overview of Asian buyouts (July
2002 – June 2003) Asia (including
- In the twelve months ending June 2003, an
additional US$2.1 billion came in for buyout
- Buyout funds took up the lion's share of
the overall fund pool. The US$2.1 billion
recorded represented approximately 50% of the
US$4.2 billion recorded in the twelve months
ending June 2003.
- Japanese institutions accounted for over
90% of the fund sources, with those from
Europe, Middle East and USA being the other
fund source origins.
- Japan maintained its lead in accounting for
99.7% of the US$2.1 billion.
- Countries/economies outside of Japan
reported a paltry US$56 million.
- A total of US$4.1 billion was recorded
through 53 buyout transactions in the period
under survey. The amount accounted for 26.4% of
the transaction aggregate on record, indicating
vibrant buyout activities in the 12 months
ending June 2003.
- Japan maintained its leading position as
the most active buyout transaction centre. One
in every three deals was completed in Asia's
- Singapore took the title as the second
most-favoured investment destination,
accounting for US$609 million, or 15% of the
transaction total, followed by Hong Kong, which
took 14% or US$570 million.
- The TMT sector attracted the largest pool
of capital from investors, with more than 24%,
or US$1 billion of the invested amount,
allocated to this sector through 11 deals.
- An additional 33%, or US$1.4 billion, of
the invested capital was quite evenly divided
between companies in the services and consumer
- Banking and finance fell to become the
sector that attracted the least amount of
capital, illustrating the complexities in
consummating deals in this group of
- The average deal size has increased to
US$77 million, 13% higher than the average of
US$68 million recorded between 1998 and June
2002, indicating investors' growing confidence
to deploy larger sums into buyout
- 16 divestments were recorded in the twelve
months ending June 2003, of which twelve were
completed through trade sales and three via
write-offs, while the remaining one was a
- Trade sale divestment performance is
encouraging. With the exception of one, all
remaining twelve trade sales recorded positive
internal rate of returns, ranging from 2% to
(iii) Overview of Asian buyouts (July
2002 – June 2003) Japan
- Twenty transactions, commanding a total of
US$1.47 billion, were recorded in the twelve
months ending June 2003.
- Average buyout deal size stood at US$73.5
million, 11% higher than the US$66 million
average for the period between 1998 and June
2003, indicating investors' readiness to deploy
larger sum to buyouts.
- Overall, buyout investors have been
cautious not to bet on one particular industry.
Unlike in the past when consumer goods and
banking and finance sectors attracted the bulk
of capital, in the 12 months ending June 2003,
four principal industrial sectors, services,
industrial manufacturing goods, consumer goods
as well as the food and beverage sector
received fairly even sums from buyout
investors. These four groups of companies took
up 89% or US$1.3 billion, of the total
- Unlike buyout transactions in other
economies outside of Japan, where the TMT
sector dominated, in Asia's largest economy,
the services sector led in taking up US$423
million or 29% of the investment total. This
was followed by both the industrial
manufacturing and consumer goods sectors, each
of which raised US$317 million and US$311
million respectively. TMT trailed behind as the
fifth most-favoured investment sector,
receiving US$164 million.
- Buyout transactions remain very much a
"domestic affair". Unlike firms based in Hong
Kong, which have a pan-Asia investment focus,
buyout capital in Japan was directed solely at
local companies. This trend, coupled with the
increasing number of transactions taking place
in the country, evidence a deep and maturing
buyout market in Asia's largest economy.
Ranking of buyout houses
- Domestic institutions led in participating
in the largest transaction total, indicating
the growing prominence of local establishments
in Japan's buyout landscape.
- The twelve months ending June 2003 ushered
in a new group of buyout investors that were
ready to participate in large
- For the first time, the government's
Development Bank of Japan was known to have
participated in a buyout transaction, further
suggesting policy makers in Asia's largest
economy are taking an active role in Japan's
overall economic restructuring strategy.
- During the period under survey, pioneer
investors have demonstrated discretion in the
deployment of capital. Advantage Partners,MKS
Partners and Ripplewood Holdings have all
chosen to engage in modest sized deals.
- CVC Asia Pacific secured a foothold in
Japan when it participated in one transaction
that amounted to US$131 million.
- The number of buyout players in Japan has
increased in parallel with growing activities
in the country.
(iv) Overview of Asian Buyouts (July
2002 – June 2003) Asia (ex-Japan)
- A total of US$2.62 billion was deployed
into 33 transactions during the period under
- The twelve months ending June 2003 saw
vibrant investment activities with the
investment total accounting for 25% of all
buyout transactions recorded between 1998 and
- Outside of Japan, the average transaction
size was US$79 million. This is in fact
slightly higher than the US$73.5 million
recorded for Japan over the same period. It is
also 16% higher than the average, which is
US$68 million, on the aggregate investment
total for the period of 1998 to June 2003. The
trend further underscores investors'
increasingly positive assessment of prospects
in Asian buyouts.
- Singapore scored top marks when its buyout
transaction total accounted for 23%, or US$609
million, of the total buyout investment amount
during the period under survey.
- Hong Kong trailed Singapore in taking up
the second position in the list of
"most-favoured buyout investment destinations."
Three companies based in the territory raised
US$570 million from buyout investors.
- Australia came in third, accounting for
US$471 million, or 18% of the investment total.
However, buyout transaction sizes in Australia
were modest as the investment aggregate
recorded was distributed among 18 companies,
representing an average US$26 million for each
- South Korea, once Asian buyout investors'
most-favoured destination, slipped to fourth
place with two deals amounting to US$367
- In sharp contrast to the investment profile
in Japan, buyout investors outside of this
country, favoured the TMT sector, with nine
companies raising a total of US$839 million,
accounting for 32% of the transaction total,
followed by both the energy/natural resources
and infrastructure sectors, which took up
US$438 million and US$437 million
Ranking of buyout houses
- CVC Asia Pacific led, having committed the
largest transaction total.
- Similar to the trend in Japan, during the
period under survey, a new list of investors
were known to have participated in buyout
- Pioneer buyout investors, such as Newbridge
Capital, The Carlyle Group as well as JP Morgan
Partners Asia exercised caution as each
recorded one transaction.
- PPM Ventures, one of the earliest and most
active players in Asian buyouts, has taken a
low profile, with no transactions known to have
been completed by the house during the period
Asia Private Equity
Ms Kathleen Ng joined the Asian private equity/venture capital
industry in 1989. She is publisher and editor of the Asia
Private Equity Review (APER), a leading independent
authoritative monthly report on Asian private equity.
The APER is associated with the Institute of Asian Private
Equity Investment (IAPEI), which is dedicated to advancing
professional standards and management skills in the Asian private
equity industry. To date, the IAPEI has provided training to over
400 managers from over 28 countries around the world.
Ms Ng has a long and distinguished record of over 13 years as a
leading analyst, coupled with an unmatched knowledge of the players
and organizations in the industry.