Southeast Asia, China GPs bullish on exits in 2023

Rodney Muse, a co-founder and managing partner of Navis Capital Partners, which largely concentrates on Southeast Asia, noted that 2022 represented a record year for the firm in terms of liquidity. Distributions amounted to nearly USD 2bn - a sizeable amount given Navis' total assets under management are about USD 5bn.

Muse highlighted the importance of strategic relevance in securing exits: "If you have a business that has some importance in the global manufacturing ecosystem or very strong consumer exposure to a high growth market, those businesses still attract strategic interest throughout the cycle.”

Navis has made 100 investments since its inception in 1998 and completed 65 exits. Of those exits, 80% were sales to strategic investors following competitive processes. The firm puts a lot of thought into how portfolio companies might integrate with future strategic owners in a seamless way, emphasizing issues like quality of reporting and environment, social, and governance (ESG).

 

“The one thing that I think has changed or will change is situations where PE outbids strategics will be fewer just on a pure cost of capital basis," Muse added. "The strategic rationale should trump the idea of PE underwriting to a certain return. I think that was a little bit in play last year, and it'll continue to be in play going forward."

Mengyang Yang, an executive director and head of Hong Kong private equity at CICC Capital, expects strategic exits to become more important in China as well. To date, IPOs have been the dominant liquidity route. They accounted for 34 of the 50 liquidity events CICC recorded in 2022.

Both Yang and Hongwei Chen, a partner of Forebright Capital, anticipate increased investment and exit activity in China as the country opens up.

Chen also echoed the point about robust liquidity in spite of challenging conditions in recent years. Forebright's distributions to LPs in the last 24 months exceeded the overall size of its most recent fund. Chen believes the momentum will continue into 2023, driven by domestic IPOs.

China has seen various waves of take-privates involving domestic companies listed overseas, often with a view to re-listing these businesses in the domestic markets. Forebright is interested in this theme, especially as valuations are often more attractive than for similar companies under private ownership. 

"Even though we are by and large a minority growth type of investor, we have completed four take-private transactions of US-listed Chinese companies. And all four have generated extremely strong results," said Chen.

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• Topics
• Greater China
• Southeast Asia
• IPO
• Trade sale
• China
• Southeast Asia
• CICC
• Forebright Capital
• Navis Management