GPs see more cross-border M&A within Asia – AVCJ Forum

Alex Emery, head of Asia at Permira, said that while global M&A trends have previously involved European businesses going to the US, US companies expanding into Europe, and Asian companies going to the US or Europe, the latest wave has seen Asian businesses expanding across Asia.

"All our current portfolios in Asia are businesses in multiple countries. We don't have a single business that is a complete domestic business," he said, adding that M&A was a better way to help those businesses grow versus organic cross-border expansion.

"In every single one of our deals, we always intentionally involve people from multiple offices in Shanghai or Tokyo or Hong Kong," Emery said. "We try to think about who has the best industry know-how, the functional know-how, and the local geographic know-how. It is critically important."

While China entry is often a factor in these transactions, sometimes private equity investors deliberately target other markets.

Emmett Thomas, head of Asia at Advantage Partners, observed that his firm has focused on cross-border deals in Southeast Asia rather than China to limit challenges around competition. In one case, Advantage bought a mid-size Japanese beverage company that was trying unsuccessfully to take on Coca-Cola and Pepsi in markets across Asia. Advantage repositioned the business to target second- and third-tier markets where the big brands are less popular.

"Five to ten years ago, even in the mid-market, when we did a new investment, we would look at what was the China opportunity," Thomas said. "We've actually learned that for the mid-market companies that we typically invest in, it's hard to get the management team quality to really be successful in a big place like China. So, we're really redirected our portfolio focus towards Southeast Asia."

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• Topics
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