KKR is opening a Singapore office, writes Reuters. The New York-based firm is pushing ahead with raising a $6 billion Asia private equity fund, which would be the largest such fund ever devoted to the region.
Reuters – The public appearance of Henry Kravis at KKR’s new Singapore office underscores the private equity industry’s growing interest in Southeast Asia, at a time when regional funds are growing and deal volumes are falling.
Kravis will meet the press on Thursday as he opens the firm’s Singapore office, a rare move for the co-founder of KKR, who prefers to stay out of the limelight after decades of arranging some of the world’s largest leveraged buyouts.
The Kravis event occurs at an important time for KKR & Co LP , as the New York-based firm pushes ahead with raising a $6 billion Asia private equity fund, which would be the largest such fund ever devoted to the region.
While Asia, with its persistent growth, is an attractive target for global investment firms, striking acquisition deals in the region remains a challenge for the industry.
Competition among local and global investment firms is rising in Asia, where the number of targets remain small relative to the amount of money available.
In Southeast Asia, Blackstone Group and General Atlantic are also opening Singapore offices, while Warburg Pincus and Bain Capital are hunting for executives to build teams to invest in the region’s fast-growing economies.
But with deal volumes falling and an average equity investment per deal in Asia of around $40 million, according to an industry estimate, investors in private equity firms have their concerns.
Private equity M&A deals in the Asia-Pacific region fell 17 percent in the first nine months to $22 billion from a year earlier, according to Thomson Reuters data. The drop came as regional markets declined, forcing buyers to wait out the storm and sellers to wait for better valuations.
Investors are worried that managers will end up either overpaying in order to put a large pool of money to use, or will be unable to put the entire amount to use given the relatively small deal sizes.
Some investors, however, point out that corporates are in great need of capital across Asia, and the time will come when private equity cash will increasingly fill that void.
Asia now has $139 billion in so-called dry powder, or uninvested capital, with another $130 billion in new funds currently being raised for investments, according to Singapore-based data provider Preqin.
Preqin estimates that around $10 billion is being raised through Indonesia-focused funds alone.
Others are less concerned about firms striking bad deals if they invest too quickly or overpay due to competition. They maintain that Asia’s economies can absorb more capital, and that private equity is underpenetrated in the region.
Kravis’s visit to Asia coincides with a similar trip by rival Stephen Schwarzman, CEO and co-founder of Blackstone Group LP, who is hosting a press conference at his firm’s Hong Kong office on Friday.
At KKR’s new Southeast Asia headquarters on Thursday, Singapore Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam will give a speech alongside Kravis.
The last time Kravis delivered a speech in Asia was in November 2011, going off script to discuss U.S. presidential candidate Mitt Romney.
During that speech, he warned that private equity would face increased political and regulatory pressure if Romney, formerly CEO of Bain Capital, ran for president. Romney has since won the Republican nomination and is competing to capture the Oval Office from incumbent Barack Obama. (Reporting by Stephen Aldred; Editing by Ryan Woo)
Take your pick!
- Buyouts delivers exclusive news and analysis about private equity deals, fundraising, top-quartile managers and more. Get your FREE trial or subscribe now.
- VC Journal provides exclusive news and analysis about venture capital deals, fundraising, top-quartile investors and more. Get your FREE trial or subscribe now.