After a decade of investing in China, American private equity firm Baird Capital has made its first foray into southeast Asia, buying a stake in a Malaysian bereavement services company.
Baird Capital, which invests in small to mid-sized companies, said the region is increasingly attractive for minority investments and provides good exit opportunities for its portfolio companies.
Since 2007, it has primarily been investing in China where it has provided growth capital to companies like Kedu Healthcare, a medical equipment company, and Xinghe Valve, which makes valves for the oil and gas industry.
But in February Baird Capital made its maiden investment outside China, in Nirvana Asia, as its global US$310 million fund begins to deploy capital in the region. Nirvana, which offers burial and funeral services in Malaysia, Indonesia, Singapore and China, was taken private in 2016 by CVC Capital Partners and delisted from the Hong Kong stock exchange.
The investment in Nirvana Asia was led by Andy Tse, who joined Baird Capital in January 2017 as a partner to help the private equity manager scout out investment opportunities in the technology and services sector in the region.
“Apart from direct investments, Asia also presents attractive follow-on investment opportunities for our existing portfolio companies in Europe,” said Tse. “We could be looking at acquiring similar companies in Asia as those in our European portfolio as a way to expand the latter’s businesses. The Asian companies we are interested in are those that operate on a lower production-cost base compared to Europe.”
He did not reveal the size of Baird Capital’s investment in Nirvana.
In Europe and the US, Baird Capital pursues buyout opportunities rather than minority stakes as it does in Asia. Tse said that because economic growth in the region is still robust, and a lot of Asian companies are still run by the original founders who have not yet reached retirement age, buyout opportunities in Asia are not as attractive as those that can be found outside the region.
“But that is slowly changing, as I believe that eventually there will be more buyout opportunities in Asia,” said Tse.
That change is being helped along by deeper and more developed Asian debt markets for sponsors to finance their leveraged buyouts. And the increasing maturity of management among Asian companies may make it possible for the founders and owners to exit the business through a sale, he said.
Baird Capital is ultimately controlled by Baird Financial Group, an employee-owned group that also runs investment banking, fixed income, equities trading and asset management businesses. In China, Baird Capital leverages the group’s investment banking arm in Shanghai to help it access other companies and private equity managers, which could be potential buyers when the fund eventually seeks to exit from its investments.
“Asia presents attractive exit opportunities for private equity funds. Asian companies, including Chinese corporates, are increasingly interested in buying companies in Europe and the US as these companies also have end-clients located in China,” said Tse.
Baird Capital has investments in 57 companies globally, according to the its 2016 annual report.
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