Q&A: Partners Group's Andreas Baumann

Q: How important is direct investment becoming to Partners Group globally?

A: We have always been a direct investor and there has always been a mix of lead transactions and joint investments. The first Partners Group-led buyout transaction in Europe was in 1999, so these types of deals go back quite some time. In terms of weighting in what we do year-on-year, they have become more prominent. What is new is the scale, which is a result of the build-out of our footprint around the world and the addition of senior investment professionals with direct investment backgrounds.

Q: What resources do you have in this area in Asia?

A: We have separate teams looking at primaries, secondaries and directs. On the direct private equity investment side, there are about 15 dedicated professionals in Asia. In addition to that, we have an industry value creation team of around 20 people globally that provides operational support.

Q: So Trimco International and CSS Corp. are the first Partners Group-led deals in Asia?

A: We have three categories of deal. There are joint investments, where we have a rather passive role, and then at the other end of the spectrum there are lead transactions, where we take a controlling stake in a company on our own. In between those two we may do deals not as a co-investor but as a joint lead investor, where we underwrite the deal with a partner, conduct due diligence together and share the costs, and post-transaction you have equal representation on the board. Partners Group Direct Investments 2012 will only do deals where we are the lead or joint lead. Trimco and CSS fall squarely within the lead category and we are working on a couple of others in Asia that are at advanced stages. A couple more would fall into the joint lead category.

Q: Is control a prerequisite?

A: We don't necessarily have a restriction only to do buyouts, but this is our strong preference. We believe in active ownership to make companies bigger and better and that is best achieved through majority stakes. In the US, Europe and other developed markets, a deal can be more than $1 billion in enterprise value and still be mid-cap. In emerging Asia it typically goes from $100 million in enterprise value at the lowest end all the way up to $1 billion, but the sweet spot is $250-500 million.

Q: Where in Asia do you see the best opportunities?

A: On a relative scale, many sub-regions and countries look attractive from a pricing perspective compared to 5-6 years ago. There are certainly challenges in the region that we factor in and partially explain the pricing. But overall we find it is a good time to invest and the environment offers good opportunities that are skewed towards the control investor. We've had a fair bit of success finding interesting and actionable opportunities in India. You have secondary buyouts and buyouts from entrepreneurs willing to sell majority stakes who in the past would not have been. In China, you have entrepreneurs who founded businesses in the late 1970s and 1980s and might not have an ideal successor. Many of these industries are fragmented and the entrepreneurs also recognize that consolidation might make sense. We do, however, like situations where the original founders are still involved in the business and continue to hold a significant stake.

Q: Both Trimco and CSS were secondary buyouts from other GPs. Is this coincidence or part of a strategy that leverages your primaries business?

A: It's more a coincidence. We are not in the business of buying companies out of other PE portfolios, but we may do so occasionally. In private markets, as the name implies, information comes at a premium and if we have better information than other potential investors we will use that to our benefit.

Q: Are there likely to be situations in which you are competing for direct deals against portfolio GPs?

A: Ideally, we wouldn't need to compete with anyone and I like to think our targets are slightly different, but sometimes there is overlap. The angles we look for tend to be around situations where we can help companies become more regional or global - and that is the case with both Trimco and CSS. This is something we can do as a global firm and we feel it gives us a leg up compared to a local GP that only does deals in China or India or Southeast Asia.

Q: Global presence aside, what advantages does Partners Group have over Asian GPs?

A: Markets are maturing, offering opportunities like succession planning, consolidation and secondary buyouts where you can buy majority stakes. But there is a mismatch in the market terms of skills to take advantage of these openings. Fundamentally, the business of active ownership is different from the growth investing model, which often tends to be more passive. And the universe of private equity firms in Asia is skewed more towards the growth model.

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• Topics
• Buyouts
• Buyout
• Partners Group
• Asia
• buyout
• Direct investment
• Co-investment