VIDEO: Shaw Kwei & Partners' Kyle Shaw

Pre-2009, investment banks were committing capital from their balance sheets, hedge funds were targeting private equity deals and strategic investors were very keen for exposure to Asia, and China specifically. The situation has since turned on its head.

"Today the investment banks are restricted from doing private equity so you find they aren't investing; hedge funds have completely separated themselves from private equity and they aren't doing it anymore; strategic investors in Europe and North America seem to be hesitant about committing investment capital to China; and some of the GPs that had set up in Asia are now closing their Asian offices and retreating back to Europe or North America," Shaw says.

There has also been a change in the nature of the transactions available, which could play into the hands of Shaw Kwei, a control investor focused on China and Southeast Asia. The growth capital thesis whereby a PE investor would support capacity expansion ahead of an IPO and seek a 4x return on exit has been called into question by challenging IPO markets and slower growth.

"Most of the companies we looked at needed new money to expand capacity, buy new equipment, to meet what they saw as a growing market demand," Shaw says. "Today that has changed dramatically. There is not the sort of growth for companies. They are typically looking at a very competitive marketplace where they are trying to improve profits as opposed to simply grow sales."

Shaw Kwei is also seeing more buyout opportunities from three sources: succession planning situations where the founder has no children interested in taking over his business; shareholder disputes that can only be resolved by selling to a third party; and then distress and restructuring.

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• Topics
• Buyouts
• Greater China
• Southeast Asia
• China
• buyout
• Southeast Asia
• Shaw Kwei & Partners
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