CVC hits hard cap for Asia

"We are focusing on control and joint control deals in our core sectors," says Roy Kuan, managing partner at CVC (pictured). "Competition generally seems to have decreased, perhaps due to a slowdown in fundraising and the challenging economic environment and private equity firms focusing on their portfolios."

Consolidation, moderating growth, rising competition and succession planning are seen as the main drivers of nascent Chinese buyouts. The two restaurant deals, Da Niang Dumpling Holdings and South Beauty, follow the succession planning model. The founders retain a minority interest and board seats, but day-to-day duties have passed to revitalized management teams.

This formed part of the fundraising narrative for CVC Capital Partners Asia Pacific IV, which closed this week at the hard cap of $3.5 billion, after just under a year in the market. 

The PE firm has benefited from the swing back to pan-regional funds, but speed of fundraising is tied to past performance. According to data released by Oregon State Investment Council, CVC's 2008 vintage third fund had delivered an IRR of 13.8% and a net multiple of 1.47x as of December 2013. KKR's first Asian fund (2007)had an IRR of 12.9% and a net multiple of 1.5x, while Affinity Equity Partners' third fund (2007) was on 12.8% and 1.5x.

KKR took just over a year to raise $6 billion for its second Asia fund, finishing last May. Affinity announced a final close of $3.8 billion on Fund IV in January after about 15 months in the market.

The Carlyle Group and TPG Capital launched their latest vehicles in the summer of 2012 but have yet to finish, although the latter is expected to do so imminently. Performance data from California Public Employees' Retirement System (CalPERS) - accurate as of September 2013, so three months behind the others - had TPG Asia V (2007) at 0.4% and 1.1x and Carlyle Asia Partners III (2008) at 6.5% and 1.2x.

CVC's returns have been buoyed by deals such as Matahari Department Store. It took a controlling stake in the Indonesian retailer in 2010 at a valuation of $892 million and made a partial exit last year that valued the business at close to $3.3 billion. After this and a clutch of other Southeast Asia deals in 2010-2011, activity has tailed off somewhat due to heady valuations and then macro instability. But Kuan remains positive on the region.

"Our Southeast Asia team believes there was a period in 2012-2013 that was more challenging in terms of valuations in Indonesia and Malaysia, so there was a focus on other markets, such as the Philippines," he says. "The economic issues didn't materially affect the portfolio because the companies are mostly defensive in nature."

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• Topics
• Buyout
• Fundraising
• CVC Capital Partners
• Asia
• Fundraising