Alpinvest @Davos: Buyout Firms Heading East

DAVOS, Switzerland (Reuters) – Emerging markets are destined to make up a bigger share of private equity deals as buyout firms seek a larger slice of their growth, the chief executive of leading private equity investor Alpinvest said.

Private equity dealmaking is starting to re-emerge after a torrid year in 2009, when falling sales and high debt burdens rocked the industry’s portfolio companies.

But with new debt for deals now more expensive, buyout houses are likely to look to emerging markets as they seek out higher growth companies to meet their target returns.

“In 2009 almost 25 percent of the big buyouts were done in Asia,” said Volkert Doeksen, Chief Executive Officer of Alpinvest.

“It won’t necessarily mean it will be 25 percent in the next couple of years, but it is a signal that, over time, non-traditional markets will become a bigger element in private equity,” he said.

Alpinvest is one of the world’s largest investors in private equity, managing around 40 billion euros ($56.16 billion) in investments for Dutch pension funds ABP and PfZW.

Private equity firms including KKR [KKR.UL], the Carlyle Group [CYL.UL] and CVC have been gearing up their presence in Asia, with CVC this week backing a $770 million buyout of Indonesian department store chain Matahari (MPPA.JK).

But investors remain cautious about the risks of ploughing too much money into these emerging economies.

“There is still the necessity to prove that these markets can produce consistent positive returns — there are signs that they may and will but private equity investors, including my fund, are still careful,” Doeksen said. ($1=.7122 Euro)

(Additional reporting by Simon Meads in London, Editing by Hans Peters)