MSPEA rides out Volcker impact

Morgan Stanley Private Equity Asia (MSPEA) is in a different place; it is still affiliated to a bank. Raising $1.49 billion for its third fund in 2007, MSPEA received $400 million from Morgan Stanley and employees of the bank. The firm launched Fund IV in 2012 knowing that - under the Volcker Rule - the bank share was capped at 3%, or $50 million out of a $1.5 billion target.

Filling the balance sheet hole represents as significant challenge in an already difficult fundraising environment. However, MSPEA announced last week announced a final close of approximately $1.7 billion. Capital from institutional third parties is about 50% higher in dollar terms compared to Fund III.

Having reached a first close in late 2012, MSPEA went into the second phase of the fundraising with a number of deals in the pipeline. Two investments have already been completed from Fund IV - Korean tissue paper manufacturer Monalisa and India's Janalakshmi Financial Services - and at least five more are contracted. These include take-private deals for US-listed Sino Gas Holdings and Noah Education.

Chin Chou, CEO of MSPEA, sees take-privates as the most significant development in the firm's China business in the last 4-5 years. While he expects growth capital deals to remain dominant in the country, he sees privatizations as part of a broader opportunity set. Control transactions are part of this.

"In the past a number of the control deals in the market have been for export-oriented businesses and our preference has been on businesses catering to the domestic market," Chou tells AVCJ. "Eighteen months ago we acquired control of Hi-24, Beijing's largest convenience store chain, and there will be more control-oriented deals in China in the new fund."

Fund IV follows a similar strategy to that of its predecessor, pursing minority and control investments across the consumer, financial services, industrial products sectors, as well as service-related businesses in general. China and Korea will account for 80% of the corpus with the rest deployed mainly in India and Taiwan.

There have been two disclosed investments in Korea in the past two years - Monalisa and restaurant chain Nolboo - while the acquisition of a construction materials business from a local conglomerate Hanwha Group has been reported but not announced.

"We have done two buyouts in Korea in the last two years of companies facing succession planning issues and we expect these to continue," Chou says. "The large conglomerates in Korea also continue to streamline and focus their business objectives and that leads to deal flow involving non-core businesses."

 

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Fundraising
• Buyouts
• Fundraising
• Morgan Stanley Private Equity Asia
• buyout
• China
• South Korea