GPs prioritise specialisation, value creation in Asia - AVCJ Forum

“Four to five years ago, if we were on this panel, people were just going to focus on what sector was the hottest or what was the hottest company and try to invest. That’s no longer the dominating theme for Asian private equity,” said X.D. Yang, a managing director and Asia chairman at The Carlyle Group, who also noted a general shift towards control buyouts.

There are more sector specialists, while global managers tend to focus on fewer sectors than they did in years past. Around 70% of TPG Capital’s deal flow in the region is in healthcare and consumer, observed Ganen Sarvananthan, a managing partner at the firm, adding that a tighter focus makes it easier to navigate challenging markets and drive growth.

“The most important thing is really being clear around what you are good at in terms of investing in and how you are going to generate the growth," Sarvananthan said.

Heath Zarin, founder, chairman, and CEO of EmergeVest, which concentrates on supply chain and technology-related investments, echoed the sector specialisation is a source of comfort in volatile markets. He also believes it allows for differentiation in origination.

“Industry specialisation is important because it can help you to originate proprietary deal flow and be very proactive about creating opportunities and valuing those opportunities in a very informed way,” Zarin added, noting that 90% of his firm’s deals are negotiated on a bilateral basis.

In addition to sector focus, Carlyle’s Yang highlighted the importance of recruiting the right management – although he believes Asia’s executive talent pool is relatively shallow – and digitalisation in a value-creation context.

He observed that some mid-size companies, with enterprise values of USD 500m-USD 2bn, either have insufficient budget or they lack the appropriate skills to implement a sound digital strategy. Carlyle has a dedicated team to handle such needs, from basic cybersecurity to wholesale digitalisation.

Zarin added that it has perhaps never been more important to have “a very comprehensive take” on how to add value. “Driving financial results – revenue, gross profit, EBITDA and free cash flow generation – [will be] even more important going forward,” he said.

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