H&Q Asia Pacific, one of Asia's pre-eminent private equity firms, has announced a partnership with $9 billion US private equity fund, Thomas H Lee Partners.
The partnership reflects H&Q's belief that attractive transactions in the North Asian region will begin to get bigger in size and that working with a globally experienced partner to bid for such transactions will give it a competitive edge.
"We are tremendously excited by the number and nature of opportunities that exist in Asia today and those that we believe will emerge in the next few years," says Dr Ta-lin Hsu, founder and chairman of H&Q Asia Pacific. "By creating a platform to work together, we hope to draw upon the unique competitive advantages and complementary strengths of each firm to capitalize on these regional opportunities."
To spearhead its investments in the Greater China region, H&Q has brought on board ex-JPMorgan banker Andrew Kuo as managing director and head of Greater China. Kuo has been JPMorgan's head of investment banking in Hong Kong since 2002, and has spent the last 17 years focused on the Greater China region. Kuo and H&Q chairman Dr Hsu got to know each other when they worked alongside each other during the listing of one of H&Q's portfolio companies, Chinese semiconductor foundry, SMIC.
Commenting on his new role Kuo says, "A significant window for private equity investment opportunities into China has now opened up. Having spent several years focused on the Greater China region as a banker bridging together various parties in a transaction, I'm now looking forward to using my insights and experience to represent investors."
Dr Hsu points out that while transaction sizes below $100 million have traditionally represented the sweet spot, he sees this changing as China continues to deregulate and larger deal sizes become the norm. In this context, H&Q will be paying close attention to the financial services sector in China.
"There are some interesting opportunities in the Chinese financial services sector, which remains primitive," he adds. "Financial consolidation is bound to happen further along the line as we have seen it happen in Japan, Korea and Taiwan."
In addition, the team will be looking for opportunities in China that take advantage of its manufacturing edge, as well as branded consumer opportunities that cater to China's rapidly expanding middle class. For example, H&Q has alread made successful investments in the Starbucks franchise in Beijing and Tianjin.
H&Q currently manages about $2 billion in investments, including a recent $200 million mandate from Korea's National Pension Corporation. The group is currently in the process of raising money for a new fund, which is likely to focus on North Asia, including Greater China, Korea and Japan.
For Boston-based THL Partners, the new tie-up gives the US and European buyout player a firm footing in the Asian region, both for deal flow concerning new investment opportunities, as well as the ability to assist its existing US and European portfolio companies with expansion and outsourcing opportunities in Asia.
THL's co-president Scott Sperling says, "This relationships will provide us with an unmatched ability to help our companies exploit both operating benefits and expansion opportunities into this very important region. It will also provide our investment team with a strong local partner to help explore investment opportunities that may arise in these large and rapidly growing markets."