M&A

11 November, 2009

China seen top pick as small deals grow in Asia -Carlyle

By George Chen and Narayanan Somasundaram

HONG KONG, Nov 12 (Reuters) - Asian entrepreneurs are shedding their aversion to selling their companies, opening small to mid-sized deal opportunities for global private equity firms in the world's most attractive region, Carlyle's David Rubenstein said on Thursday.

Rubenstein, a co-founder of the Washington D.C.-based Carlyle Group [CYL.UL], said the industry would not see any more big buyout funds of $20 billion in the next five to six years as both managers and investors became more cautious.

Emerging markets in Asia would be the most attractive destinations for private equity investments, given rapid economic recovery and a lack of domestic leaders in many sectors, said Rubenstein, a legendary figure in the private equity industry.

China would be the single most attractive country for Carlyle in the next couple of years, he said.

"I think owners will be more likely to sell their companies in Asia," Rubenstein told an audience at the AVCJ Private Equity & Venture Capital Forum 2009 in Hong Kong. "Selling is no longer a loss of face; it is not an issue of failure or embarassment."

Buyout deals in Asia are rare, partly as a result of cultural differences, with many Asian entrepreneurs hesitant to change the management of family-owned businesses. In some countries, such as China and India, selling a family business, which might have been established decades earlier by previous generations, was previously considered a source of shame.

"Emerging Asia is the most resilent and most attractive of the emerging markets. They have done reasonably well in the economic downturn," said Rubenstein, who traveled to Beijing early this week for meetings with senior Chinese government officials.

However, tightening regulations and a lack of operational experts to improve the portfolio companies of private equity funds remained the two main challenges to dealmaking in Asia, said Rubenstein, adding that more funds coming to Asia had also pushed valuations to higher levels.

Carlyle's most recent Asia buyout fund, launched in July 2006, raised $1.8 billion and has invested in various projects across Asia.

In China, Carlyle has already made about 50 transactions worth a combined total of more than $2 billion.

One of the most successful investments for Carlyle in the region was its landmark deal with China Pacific Insurance (Group) Co (601601.SS), China's No.3 life insurer, which is seeking to list in Hong Kong, allowing Carlyle to sell part of its stake for several times its original investment. [ID:nSP383297]

The Carlyle Group has been actively making deals in the Greater China region in recent months. In September, Carlyle struck a $1 billion deal with Taiwan Mobile, taking a big chunk of the island's leading telecommunications group. [ID:nTP280376]

For related Asian private equity news, Reuters 3000 Xtra users can double click on: [LEN-RTRS-ASIA-PVE] (Editing by Chris Lewis)

Source: http://www.reuters.com