Darby, which is the private equity arm of Franklin Templeton Investments, says Wallace will be based in Hong Kong and will focus on attracting additional funds to support the firmÆs existing mezzanine activities in Asia and help expand its private equity capability in the region. He will also be pursuing other growth opportunities such as infrastructure investments.
Wallace says a desire to ôlearn a new skill setö contributed to his decision to move to the buy-side, while the combined experience of the people running Darby was the key to why he ended up there.
ôThese people have been doing this business for 30-40 years and they have an unbelievable range of experience that I can learn a lot from,ö Wallace says. ôTheir strategy of making mezzanine investments into growth companies and to provide capital for leveraged buyouts also fits well with the clients I have worked with as a banker.ö
Darby was set up in 1994 by former US Treasury Secretary and Dillon Read & Co chairman Nicholas F. Brady, who still serves as its chairman. CEO Richard H. Frank is a former World Bank managing director and CFO of the International Finance Corporation.
Wallace will report directly to Frank in Washington.
ôSean has precisely the depth of capital markets experience and regional knowledge that we need to take our Asia platform to a new level,ö Frank said in a statement announcing the appointment. ôWe firmly believe that DarbyÆs competitive edge lies in our ability to leverage the local insight of our investment professionals, especially those of SeanÆs calibre, in our efforts to achieve attractive returns for our investors.ö
Since its inception, the firm has played a pioneering role in bringing mezzanine financing - a hybrid of both debt and equity - to emerging market regions, initially in Latin America and Asia and more recently in Central and Eastern Europe.
The new hire says Darby has just seen the first close of its second Asia Mezzanine fund at the size of ôseveral hundred million dollarsö and may see a second close later this year. The fund has made its first two investments in the form of a financing for Shayne International Holdings, a leading furniture maker and exporter, and an investment into AUPU, a bathroom appliance maker. Both companies are based in Hangzhou in China.
DarbyÆs first Asia mezzanine fund, which totalled $250 million, became fully invested in 2004.
ôOne of our focuses is to provide growth capital for smaller companies, which can be in the range of $20 million to $40 million and on a five- to 10-year basis. Typically private equity investments are three- to five years, but we can be a bit more patient,ö Wallace says.
The other key focus, he adds, will be to build a pool of capital that can be made available for LBOs and mezzanine financing throughout the region, including Japan and Australia.
Darby has a close relationship with its parent company, one of the largest mutual fund and money managers in the world, which among other things sees Franklin Templeton provide seed capital amounting to 10% of every fund it sets up.
ôDarby has a high degree of independence, but also a lot of support from Franklin Templeton, which is an exciting combination,ö Wallace says.
Wallace has been with JPMorgan almost nine years, initially within the investment banking department in New York. He transferred to Hong Kong in 2001 to become co-head of investment banking for Asia ex-Japan and assumed his most recent position as head of capital markets in 2005. Prior to joining JPMorgan he also worked at Merrill Lynch and Bear Stearns.
Under his leadership JPMorgan has made great strides within equity capital markets in the region, not least with regard to the ever-so-important Chinese market.
Among its key transactions last year was China Merchants BankÆs $2.4 billion IPO where it was one of three bookrunners. It was also called up on to arrange a secondary share sale for CNOOC together with Credit Suisse and Goldman Sachs last year, which at $1.98 billion ended up being the largest placement in Asia ex-Japan in 2007.
Wallace is the second top banker to leave JPMorgan to go into private equity in just over three months after Asia Pacific Chairman Ralph Parks resigned in November to join buyout firm Oaktree Capital Management.
According to people familiar with the situation, the bank has no immediate plan to hire an exact replacement for Wallace, relying instead on its team of managing directors who are in charge of the individual business areas within capital markets. These includes co-heads of equity capital markets Jonathan Back and Kester Ng and head of credit markets Chris Nicholas.