KPMG Private Equity Asia Pacific

CorporatePerceptionsofPrivateEquityASIAPACIFIC’SNEWCORPORATELANDSCAPEADVISORYContents1Introduction2Aboutthesurvey3KPMGfindings4Changingperceptions10Privateequityandtheroleofmanagement13Regulatoryhurdles14Thevisibilityofprivateequity18Appendix:DynamicsoftheAsiaPacificprivateequitymarket24Contactus©2008KPMGInternational.KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.1CorporatePerceptionsofPrivateEquityIntroductionDavidNottRegionalLeader,AsiaPacificKPMG’sPrivateEquityGroupPrivateequityflowsaregrowinginimportanceacrossAsiaPacific.In2007,Asianprivateequitybidsmadeupjust9percentofallprivateequityoffersglobally,butsofarin2008,thisproportionhasrisento13percent.ThereisanemergingtrendofAsia-basedfundsinvestingoutsideoftheregion,withCompagniaItalianaFormeAcciaio,theItalianmachineryproducer,beingsnappedbyaconsortiumofChineseandUSprivateequityfirmsinJune2008,closelyfollowedbytheUSD368millionsaleofNordAngliaEducation,theUKeducationcompany,toHongKong-basedBaringPrivateEquityAsia.Withprivateequityfirmsnowfirmlyentrenchedintheregion,thewayinwhichtheyareperceivedisbecominganincreasinglyimportantissue.Inareportpublishedinlate2007,weconsideredprivateequity’scontributiontoeconomicgrowthintheregionandaddressedsomeofthemythsandmisperceptionssurroundingtheindustry.InthisnewKPMGstudy,wehaveturnedourattentiontotherelationshipbetweenprivateequityandAsiancorporateorstrategicinvestors.Weassesstheextenttowhichthesedifferentsourcesofcapitalmightcompete,orcooperate,inthefuture.Thefindingsofourresearchareundoubtedlymixed,buttherearealsoclearimplications.Whiletherearesomenegativeperceptions,amajorityofcorporatesappreciatethatprivateequitycanaddvalueandimproveperformance.AnarrowmajorityalsoexpressedwillingnesstopartnerwithprivateequityintheirM&Aactivityandmanyarewillingtoacceptfundingfromeitherprivateequityorsovereignwealthfunds.Itisapparentthatprivateequitycompanieshavehadsomesuccessinimprovingtheirpublicimageandengagingmoreconstructivelywiththecorporatecommunity.However,thereismoreworktobedoneandsomeinterestingdifferencesinperceptionsarestillevidentindifferentpartsoftheregion.ThisisthefirstinanewseriesofKPMGreportslookingatthenewcorporatelandscapeinAsiaPacificinthelightofthefinancialturbulencewehaveseenduring2008.Wehopethesereportswillhavewide-rangingrelevancetobothprivateequityandstrategiccorporateinvestorsacrosstheregion.©2008KPMGInternational.KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.Whatindustrysectordoyouoperatein?1%23%13%18%14%12%6%3%3%3%4%FinancialServicesIndustrialsConsumerEnergy,Mining&UtilitiesTelecom,Media&TechnologyPharma,Medical&BiotechInfrastructureTransportation&LogisticsLeisureRealEstateConstruction2CorporatePerceptionsofPrivateEquityAboutthesurveyThisreportisbasedonresearchconductedbyRemark,theresearchandpublicationsdivisionofmergermarket,inSeptember2008.Remarkcanvassedtheopinionsof150mid-marketAsiancorporatesbasedacrossAustralia,HongKong,Japan,SouthKorea,China,Taiwan,Philippines,Malaysia,Thailand,SingaporeandIndonesia,touncovertheirviewsandperceptionsofAsianprivateequityfirms.Therespondentscomefromabroadrangeofsectors,withfinancialservices(23percent)andconsumerandindustrialsectors(35percent)mostheavilyrepresented.75percentofthecompaniessurveyedhaveaturnoverofmorethanUSD100millionand90percentarepubliclylisted.Whatcountryorregionareyouheadquarteredin?SouthKorea15%8%8%6%Australia6%6%6%6%7%Thailand17%15%JapanSingaporeHongKongMalaysiaChinaTaiwanIndonesiaPhilippines©2008KPMGInternational.KPMGInternationalisaSwisscooperative.MemberfirmsoftheKPMGnetworkofindependentfirmsareaffiliatedwithKPMGInternational.KPMGInternationalprovidesnoclientservices.NomemberfirmhasanyauthoritytoobligateorbindKPMGInternationaloranyothermemberfirmvis-à-visthirdparties,nordoesKPMGInternationalhaveanysuchauthoritytoobligateorbindanymemberfirm.Allrightsreserved.3CorporatePerceptionsofPrivateEquityKPMGfindingslThemajorityofrespondents(65percent)sawprivateequityfirmsasaforceforgoodintheregion.WhilerespondentsinChinaareparticularlypositivetowardsprivateequity,with91percentbelievingthattheindustryhasapositiveinfluence,interestinglythesentimentwasfarloweramongrespondentsinHongKong,akeyfundraisingmarketintheregion;hereonly35percentagreedwiththisassertion.lRespondentsare,byandlarge,amenabletoprivateequityfirmsandsovereignwealthfunds(SWFs)andwillingtoengagewiththemforfundingasanalternativetoanIPO.Acombined75percentnotedthattheyhadeitherconsideredprivateequity/SWFfundinginthep