New alignments, new businesses

A little history: for those who haven’t heard this pitch already. The Asian Venture Capital Journal originated back in the late 1980s as an education and awareness-raising arm of an initiative launched by some leaders in the Hong Kong financial and business community who were eager to see the territory build a venture capital and private equity capacity to befit its aspirations as a global financial center. Fast forward almost three decades, with those aspirations well and truly fulfilled, and AVCJ still has an inclination, as part of its original DNA, to bang the drum hard on behalf of Asia Pacific private equity, both for local ears, and for the wider international private equity industry who, up until a few years ago, were practically, or selectively, deaf to the call.

Now major shifts are beginning to reshape that larger global private equity landscape, and are throwing Asia into higher and higher relief. The recent revelation that Citi was contemplating a selloff or spinout of its $10 billion Citi Private Equity division looks like delivering on President Barack Obama’s stated intention to split proprietary investment functions off from deposit-taking banks even before that initiative faced Congress. That news should cause little immediate concern in Asia Pacific, where Citigroup Venture Capital International has moved the needle far less as an investor than the other inheritor of the Citigroup name, CVC Capital Partners. And CVC itself shows how successful a good spinout can be.

All the same, if Obama’s initiative does carry through, some big new – or repackaged – players could be entering the private equity stage shortly. Whether or not Citi already had plans to ease its financial burdens with a spinout, rather than heeding the legislative wind, the prospect is a bell-wether for others who may already be planning the same. And following soon after, we have the news that Apollo Management will be taking on board Grant Kelley and the team from Holdfast Capital to steer their new real estate arm’s expansion in Asia.

Apollo, up till now, had done few Asian investments, with its one major dip into the region’s private equity market, a $1 billion deal with Hong Kong-listed Malaysian cruise operator Star Cruises, effectively acting to split off an operation centered on Europe and Hawaii. But with Kelley and his people, the firm gains a running office and a highly-regarded business in Hong Kong, dedicated to a strategy that Apollo is apparently looking to push as its response to the opportunities generated by the global crisis.

Not every major global private equity player may be able to enter the region this way. As news elsewhere in this issue suggests, others may already have stumbled. But the few remaining laggards of global private equity – Clayton, Dubilier & Rice, Doughty Hanson & Co., Hellman & Friedman, to pick just a few names – as well as whatever new or spun-out entities emerge after the confrontation with Washington, can be expected to incorporate Asia Pacific in their strategies. There is still a lot of business to play for out here, and a lot of former market dominators who need to branch out into this region for the sake of their long-term business survival.

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• Topics
• Fundraising
• Regulation
• North America
• Holdfast Capital
• Grant Kelley