Fallout from the subprime credit turmoil looks sure to put the brakes on private equity transactions in North America but that is no reason to assume a similar slowdown looms for deals in Asia.
Marcus Thompson, managing director and chief investment officer for HSBC Private Equity (Asia), oversees a US$700 million regional private equity fund and a technology venture fund with committed capital of US$125 million. The aim in each case is to build a portfolio of 15 to 20 holdings, with an equity check - the size of an individual investment - of US$40 million to US$100 million in the private equity fund and US$3 million to US$10 million in the technology venture fund.
The larger fund invests mainly in well-established companies in the consumer products, service and manufacturing sectors. They may need an injection of capital to expand production or launch a brand, or a shareholder may be looking to sell out.
'In China it is largely expansion capital. In Southeast Asia it is more buyouts,' Mr Thompson said.
The smaller fund concentrates on companies with shorter track records which offer 'earlier stage opportunities'. Geographically, the focus is on enterprises in South Korea, Greater China, Southeast Asia and India.
He noted that negotiations were often protracted. In-house teams had to size up prospects for each target company over the next three to five years, sit with the management team to develop a blueprint and fix terms. The process could take two months or two years.