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Guidance on hand for enterprises that show promise

Chris Davis

Private equity firms offer business expertise as well as capital

PRIVATE EQUITY investment in Asia is not only providing much needed funds for expansion and development, in many cases it includes sector-specific expertise and a wealth of international management experience.

While the traditional route for private equity companies is to buy controlling stakes in mature but sputtering enterprises and then try to turn them around, they often act more like venture capitalists in emerging economies such as those found in Asia.

They look for promising companies in industries ranging from information technology to textiles and seek to give them a boost, doing everything from injecting more capital for expansion to actively becoming involved with management and providing strategic guidance.

Baring Private Equity Asia is one company that seeks to deploy management influence in the companies in which it invests. Investment covers a broad spectrum of industries, including telecommunications, financial services, the automotive sector, telecom equipment, consumer products, educational tools, semiconductors, electronics and manufacturing.

Primary investment markets include China, India, Singapore, Hong Kong, Taiwan and South Korea.

'Baring aims to take full control or a substantial stake in a company, which normally includes a board seat and a significant influence on how the business operates,' said chief executive Jean Eric Salata.

He said Baring specialised in investing in companies and helping them to expand their activities by preparing them to progress to the next stage of maturity.

In addition to a controlling stake or shareholder rights, the company looks for proven management strategies, respectable market potential or share, and a clear trade sale exit.

'Often we can play a key role in providing guidance on issues such as good corporate governance and regulatory compliance demanded by the international business community,' Mr Salata said.

He said companies Baring invests in benefited from the expertise and experience its professionals could offer to their management structure and its network of strategic partnerships.

Value-added benefits are leveraged from Baring's pool of investment experts.

Mr Salata said Baring Private Equity had one of the most extensive on-the-ground networks of any international private equity provider. Its superior global reach provided the resources and investment expertise to help entrepreneurs build world-class businesses.

Baring Asia has a track record of exits via multiple paths, including public markets in Asia (Hong Kong, Singapore, South Korea and India), public markets in the US on both the Nasdaq and the New York Stock Exchange, and trade sales to corporate buyers. The company manages over US$850million in capital for financing and growth capital in the mid-market sector in Asia. It prefers to invest in rapidly growing, profitable companies with enterprise values of between US$50 million and US$200 million that have proven business models.

Mr Salata said investment can be used for recapitalisation, expansion or to provide liquidity to shareholders.

In July, Baring invested US$27 million in Minth Group, a privately owned Chinese company that produces automotive parts for companies such as Toyota, Nissan, Honda and Mazda.

As part of the deal, Gordon Shaw, managing director of Baring Asia's Shanghai office, joined Minth's board of directors.

Mr Salata said that as the role of private equity investment became more accepted and better understood across Asia, companies were viewing the investment process as an attractive way to develop their businesses.

'China is the most important growth market for private equity,' he said.

'We are seeing a growing trend in the number of company founders looking for private equity investment to drive their businesses forward or restructure parts of the business.'

There are many examples of company founders preferring to maintain a stake in their companies rather than opt for a buyout, in the belief that there is more money to be made in the long term than in a one-off payment.

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