Salata closes $4bn fund, sees more big deals
Baring Private Equity's founding partner and CEO, Jean Eric Salata, says he sees more large-scale buyout opportunities arising across Asia after the firm closed its sixth fund yesterday at a shade under $4 billion, far higher than it was initially targeting.
The size of Baring Private Equity Asia VI ended up at more than the combined value of the last two funds the firm has raised, pointing to an ongoing shift towards larger deals.
It ranks alongside similar pan-Asia PE funds which closed last year, including Carlyle Asia Partners IV ($3.9 billion), Affinity Equity Partners IV ($3.8 billion), CVC Capital Partners Asia Pacific IV ($3.5 billion) and TPG Asia VI ($3.3 billion). Mid-market focused PE funds typically raise smaller funds.
Salata said he expected to see more big buyout deals in China and India as well as Asia’s more traditional buyout markets of Australia, Korea and Japan. Even minority investments were bigger these days, he added, with many companies in distress and looking to shore up their balance sheets by attracting an investor willing to depart with $100-200 million for an equity stake.
“This is not an opportunity set that we suddenly realised,” Salata stated, noting the firm had been investing in larger-sized deals gradually since 2008.
The average investment size in Baring Asia’s Fund VI was $50 million based on Salata’s estimate of “around 80” limited partners in Fund VI, up from “40-50” in Fund V.
Several sovereign wealth funds (based in Asia and the Middle East) and pension funds have each committed $200-300 million to the fund, added Salata.
Additionally, Baring Asia's partners committed $138 million to Fund VI, accounting for 3.5% of the fund, the highest percentage and total amount. Salata said that the firm's partners had committed capital to each of the firm's previous funds, including $60-70 million to Fund V.
Baring Asia’s Fund VI received $6 billion of commitments, but “capped capital commitments at a level we were comfortable we could invest well”, added Salata. The firm had initially targeted $3 billion when it started fundraising last July.
A large number of PE funds are raising capital, including RRJ Capital which is targeting more than $4 billion this year for its third Asia fund.
A November 2014 global survey of 260 PE and venture capital fund managers, conducted by data provider Preqin, found 26% of respondents were raising capital for a new vehicle in the fourth quarter of 2014, with a further 24% planning to launch a new fund in the first half of 2015.
Salata said the fact more PE funds were active in the region would contribute to the development of an active secondary market, opening “a whole new window for exits”.
That window was highlighted this month, when Baring PE Asia sold a 100% stake in specialist retailer Primo Japan to another PE fund, Longreach.
It has also teamed up with other PE funds to make investments. Last year it committed around $675 million in a $3 billion deal to take then-New York-listed Chinese gaming firm Giant Interactive private, alongside Chinese PE firms Hony Capital and CDH Investments.
Salata declined to classify Barings as either growth- or buyout-focused. Fund VI’s focus was on both, he said, with IPO the exit route for growth companies (in which the fund has a minority stake) and trade sale as the exit for companies in which the fund is the controlling shareholder.
Baring PE Asia’s previous fund – the $2.46 billion Asia V which closed in 2011 – was evenly split between control (53%) and minority growth (47%) investments.
Since that fund was raised in 2011, Baring Asia has doubled the size of its team to 110 people, building in both investment and operations, said Salata.