Corporate Perceptions of Private Equity - Asia-Pacific Nov-2008 - KPMG

ASI A PAC I F I C ’ S N E W C O R P O R AT E L A N D S C A P E
Corporate Perceptions of
Private Equity
ADVI SO RY
Contents
1 Introduction
2 About the survey
3 KPMG findings
4 Changing perceptions
10 Private equity and the role of management
13 Regulatory hurdles
14 The visibility of private equity
18 Appendix: Dynamics of the Asia Pacific private equity market
24 Contact us
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Corporate Perceptions of Private Equity 1
Introduction
Private equity flows are growing in importance across Asia Pacific. In 2007, Asian
private equity bids made up just 9 percent of all private equity offers globally, but
so far in 2008, this proportion has risen to 13 percent. There is an emerging trend
of Asia-based funds investing outside of the region, with Compagnia Italiana
Forme Acciaio, the Italian machinery producer, being snapped by a consortium of
Chinese and US private equity firms in June 2008, closely followed by the USD
368 million sale of Nord Anglia Education, the UK education company, to Hong
David Nott Kong-based Baring Private Equity Asia.
Regional Leader, Asia Pacific
KPMG’s Private Equity Group With private equity firms now firmly entrenched in the region, the way in which
they are perceived is becoming an increasingly important issue. In a report
published in late 2007, we considered private equity’s contribution to economic
growth in the region and addressed some of the myths and misperceptions
surrounding the industry. In this new KPMG study, we have turned our attention
to the relationship between private equity and Asian corporate or strategic
investors. We assess the extent to which these different sources of capital might
compete, or cooperate, in the future.
The findings of our research are undoubtedly mixed, but there are also clear
implications. While there are some negative perceptions, a majority of corporates
appreciate that private equity can add value and improve performance. A narrow
majority also expressed willingness to partner with private equity in their M&A
activity and many are willing to accept funding from either private equity or
sovereign wealth funds.
It is apparent that private equity companies have had some success in improving
their public image and engaging more constructively with the corporate
community. However, there is more work to be done and some interesting
differences in perceptions are still evident in different parts of the region.
This is the first in a new series of KPMG reports looking at the new corporate
landscape in Asia Pacific in the light of the financial turbulence we have seen
during 2008. We hope these reports will have wide-ranging relevance to both
private equity and strategic corporate investors across the region.
2 Corporate Perceptions of Private Equity
About the survey
This report is based on research conducted by Remark, the research and

publications division of mergermarket, in September 2008. Remark canvassed
the opinions of 150 mid-market Asian corporates based across Australia, Hong
Kong, Japan, South Korea, China, Taiwan, Philippines, Malaysia, Thailand,
Singapore and Indonesia, to uncover their views and perceptions of Asian private
equity firms.
The respondents come from a broad range of sectors, with financial services
(23 percent) and consumer and industrial sectors (35 percent) most heavily
represented. 75 percent of the companies surveyed have a turnover of more
than USD 100 million and 90 percent are publicly listed.
What country or region are you headquartered in?
6% Australia Thailand
6% 17%
Japan Singapore
6%
Hong Kong Malaysia
6%
China Taiwan
15%
6% South Korea
Indonesia
7%
Philippines
15%
8%
8%
What industry sector do you operate in?
1%
3% Financial Services
3%
3%
4% 23% Industrials
6% Consumer
Energy, Mining & Utilities

12%
Telecom, Media & Technology
18% Pharma, Medical & Biotech
Infrastructure
13%
14% Transportation & Logistics
Leisure
Real Estate
Construction
KPMG findings
l• The majority of respondents (65 percent) saw private equity firms as a force for good in the region.
While respondents in China are particularly positive towards private equity, with 91 percent
believing that the industry has a positive influence, interestingly the sentiment was far lower among
respondents in Hong Kong, a key fund raising market in the region; here only 35 percent agreed with
this assertion.
l• Respondents are, by and large, amenable to private equity firms and sovereign wealth funds (SWFs)
and willing to engage with them for funding as an alternative to an IPO. A combined 75 percent
noted that they had either considered private equity/SWF funding in the past, or would do so given
the opportunity in the future.
l• The key strengths of the private equity industry were considered to be its ability to optimise financing
structures, its ability to structure deals and the network of leading industry executives that it is able to
draw on to provide insights and work with portfolio companies.
l• Financial investors are becoming more common within the Asia Pacific region, with 41 percent of
respondents believing that private equity firms are now more active within their particular sector
compared to two years ago. But while it would appear that private equity firms have become
more active and visible within the region, this is from a very low base, and despite this increase in
visibility, a significant minority of respondents (46 percent) stated that they have not faced private
equity competition in a deal situation.
l• While the bulk of respondents accept that private equity firms are a force for good within their
industry, the asset class is afflicted by some uncertainty and negative perceptions of what it can offer.
It is inevitable in a survey of this nature that such perceptions would surface. In addition, the jury is
out on whether a viable management buyout model exists in Asia, with exactly the same proportion
of respondents (32 percent) judging that such a model will have either a minor or major impact on
business performance. Furthermore, over 27 percent of respondents did not believe that the private
equity model can offer them any lessons or advice.
Changing perceptions
The private equity industry has been working hard on its image over the past
year. Deal flow may have slowed, but private equity firms are increasingly visible
and active in the market.
Moreover, perceptions in the corporate sector are becoming more nuanced.

Many of the participants in our survey appreciate that private equity can add
value and improve performance. A majority of respondents (65 percent) believed
that private equity firms are a force for good, insofar as they help transform their
acquisition target by enhancing its growth, governance and performance.
However, a substantial minority (35 percent) thought otherwise. Many saw

private equity as having too short-term a perspective, while some respondents
suggested that the private equity industry may have been tarnished by a
perception that they overpaid for assets in the past. Having done so, they then
created undue pressure on companies to deliver results.
Drilling down into the responses, a difference in perception seems to emerge

between what are generally regarded as ‘buyout’ and those regarded as ‘growth
capital’ markets. In Australia and Japan, more traditional ‘buyout’ markets, while
the majority of respondents have a positive perception of private equity, with 61
and 59 percent respectively agreeing with the assertion that they help transform
a business to enhance growth, governance and performance, this is less than the
regional average. Meanwhile respondents from growth capital markets such as
the Philippines (100 percent), China (91 percent), Indonesia (82 percent), Thailand
(80 percent) were all far more favourably disposed towards private equity.
Interestingly, in Hong Kong, a key fund raising market, respondents are the
most reticent in their view of private equity. Just 35 percent agreeed with the
assertion that private equity can add value and improve performance, which is
possibly a reflection of the limited number of private equity backed transactions,
and therefore limited exposure, to date in this market.
Majority of respondents believe private equity is a force for good
Private equity firms assert that they bring more than debt to a deal/investee
company in that they help transform a business to enhance growth,
governance and performance. What do you think of this assertion?
Agree
35% 65% Disagree
Private equity funds seen as adding value and managing more efficiently
Private equity firms assert that they help transform a business to enhance
growth, governance and performance. Why do you agree with this
assertion?
Not sure
11%
21%
They are impelled to do this as they need to achieve a
ROI
10%
They bring skills & experience gained from working with
2%
2% other companies
3% 16% They enhance management & operational processes
3%
They take active participation in company management
6%
They have a quick/responsive management style
10%
16% They bring in new, experienced management
They improve financing structures
They make the management more commercial
Other
No response
Looking at why respondents see private equity as ultimately beneficial there are
signs that, while there is a generally positive feeling about the industry, it needs
to state its case more clearly in terms of how it goes about creating value for its
portfolio businesses — of those who replied positively 21 percent were unclear
how they go about this. Where people were clearer on how private equity helps
transform businesses, the majority of responses broadly identified how they
work closely with the management of their portfolio companies: 16 percent
spoke about how they bring skill and experience gained from working with other
companies, 10 percent detailed how they work to enhance management and
operational processes, and 15 percent related a broad range of things, from
‘active management’, to bringing in new management and making existing
management more commercial. Of the remaining responses, some 16 percent
drew out the fact that private equity invests with a clear investment thesis, to
create a positive return on investment, and that this very fact has a beneficial
impact on their investments.
As one respondent put it, “Private equity always tries to input more than just
money because their return on investment is linked with the growth of the
company”. Another pointed to bringing “discipline in financial management”,
while yet another pointed to the fact that “private equity helps enhance
governance and management through becoming independent directors and
working with corporate boards.”
Financing skills seen as the key strength of private equity
What do you consider to be the strengths of private equity?
Ability to optimise financing structure 54%
Ability to structure deals 43%
Networks of leading industry executives who are able

43%
to provide valuable management/industry insights
Ability to make quick decisions 40%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55%
Percentage of respondents
Some 54 percent of respondents considered that the private equity industry’s

ability to optimise deal financing structures is one of its strengths. A further 43
percent believed that private equity is similarly able to structure deals efficiently
and innovatively. This is matched by 43 percent of respondents that pointed to
the strength of private equity’s connections to leading industry executives, who
are able to provide valuable experience and industry insight. 40 percent also
judge that one of the sector’s strengths is its ability to act quickly and make
swift decisions. “They have a lot of flexibility in terms of management,” one
respondent commented.
Interestingly, while many respondents perceive that private equity takes a short-
term investment outlook, a number of respondents said quite the opposite: that
private equity was able to take a longer-term viewpoint when compared to public
markets. This sentiment was more prevalent in the emerging markets of China
and Southeast Asia, where growth capital models are more prevalent and where
stock markets have typically been more volatile. “Private equity offers more
stability to the company insofar as they are longer-term when compared to the
short term equity flows coming from the public markets” noted one respondent.
Short-term profit motive seen as a weakness
What do you consider to be the weaknesses of private equity?
Short-term profit motive 42%
Lack of transparency 21%
Lack of strategic relationship 20%
Debt-financing model 19%
Aggressive management style 13%
Lack of past credibility/stability 8%
Don’t know/other 7%
Lack of general management knowledge/sector

sector knowledge 5%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Echoing the negative responses to the assertion that private equity helps
transform businesses through enhancing growth, governance and performance,
a significant 42 percent of overall respondents judged that private equity’s short-
term approach to investment is its key weakness, while another 20 percent
complained about private equity’s inability to build strategic relationships with
their portfolio businesses.
“They don’t see the whole picture — theirs is a very narrow view just focused
on assessment” one respondent noted, while another said “private equity
does not take much responsibility as their capital is from investors rather than
themselves.” Another respondent added “they disturb the daily operations of a
company. Their management style is too aggressive.”
Mirroring concerns elsewhere in the world about the private equity industry’s
lack of transparency, 21 percent of respondents noted this as a weakness of the
industry. Private equity was also noted by a small number of respondents to have
a negative management culture and lack of general management expertise —
weaknesses that may, to a degree, reflect the relative immaturity of the industry
in the region.
In a survey of this nature, one has to expect that such strong views would come
from some elements of the corporate sector. There were however equally strong
from those in the corporate sector who saw some strengths in the private equity
model.
Corporates see they have some advantages over private equity
In what areas would you consider corporates like yourself have an

advantage over private equity?
Industry knowledge 50%
Management expertise 48%
Can achieve synergies 35%
Industry contacts 31%
Can cross-secure debt against rest of operations 22%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55%
50 percent of respondents believed that one of their main advantages over

private equity investors is their superior industry knowledge. Another 48 percent
believed that they possess management expertise over and above that which
private equity firms can bring.
Private equity companies often compensate for their lack of deep industry
knowledge by engaging leading industry executives, such as former CEOs, from
the market. However this is clearly an area where some firms will have stronger
networks than others. This could help them attain a competitive advantage.
In the current market where there is less leverage and debt is more expensive,
the ability of corporates to achieve synergies may prove to be a more important
advantage. 35 percent also thought that the extraction of synergies is an area
where corporates can lead over their private equity counterparts and there are
recent examples where corporate buyers have been able to outbid private equity
consortia precisely for this reason.
Private equity and the role of

management
The alignment of the interests of shareholders and management through equity

incentives has been cited as a key aspect of the governance and performance
model adopted by private equity firms. However, the mixed levels of enthusiasm
among our survey respondents suggest this model has not translated easily to
the Asia Pacific context.
The majority of respondents — some 64 percent — considered that the

implementation of management equity models in Asia will have some sort of
positive impact on company performance, but they are evenly divided as to
whether such incentives have a ‘major’ or ‘minor’ effect.
One respondent notes that “management equity models have got their place but
private equity firms have got to pick their targets correctly.”
In this respect, it seems performance incentives do not necessarily need to be

linked to equity. Hong Kong-based respondents are particularly sceptical about
the viability of an equity management model, with 30 percent expressing doubts
and just 13 percent stating that such a model could have an immediate and major
impact on performance.
Equity-based incentives are certainly welcomed more strongly in some sectors.

In the consumer sector, for example, 52 percent believed that such a model can
have a positive impact on business performance.
A quarter of respondents stated that in order to overcome the effectiveness

of the equity management model, corporates should offer other performance
incentives, while 14 percent believed that stable long-term employment contracts
should suffice. However, 20 percent believed that no incentive is required to
incentivise key management staff, with one respondent saying “it’s not required,
primarily because our management team’s skill-sets don’t match what is required
by private equity firms.”
Role of management equity models
What is your view on the management equity model (giving them sizeable
incentives in the form of equity in the company, very closely linked to
company performance) employed by private equity?
Not sure what this is
This sort of incentive model does not work in Asia Pacific

24%
32% This sort of incentive model will only have a minor impact
on company performance
This sort of incentive model will have an immediate and

major impact on company performance
12%
32%
Alternatives to management equity incentives
How do you compete with private equity and retain key management talent
in these circumstances?
Offer other performance incentives 25%
No incentive required 20%
Not sure 17%
Offer stable/long-term relationship 14%
By being reputable/credible 12%
Offer competitive salaries 11%
Other 6%
Provide a good work environment 5%
0% 5% 10% 15% 20% 25%
Learning from private equity
In what ways can corporates like yourself learn from the private equity
model of buying, managing and selling companies?
No lessons to be learnt 27%
Have strong management processes in place 20%
Act quickly 17%
Optimise ROI/minimise risk 13%
Not sure 9%
Conduct efficient financing/valuation processes 8%
Pay attention to detail 5%
Other 5%
Be flexible 4%
Be transparent 2%
0% 5% 10% 15% 20% 25%
As might be expected, some 27 percent of respondents believed that they have

nothing to learn from the private equity model. However, many respondents
cited a number of key learnings from the private equity model such as the need
to have strong management in place (noted by 20 percent of respondents), to act

quickly (17 percent), and to actively manage risk and returns (13 percent).
As one respondent put it, private equity demonstrates that corporates “have to
maintain efficiency at all times and take immediate and quick decisions. Funds
deployed must be done in order to maximise returns while timing is everything.
Delays can kill any deal.”
Issues of concern
What would you be wary of when buying from the PE industry and
conversely, what would give you comfort?
69%
Management skill
42%
57%
Client & supplier relationships
52%
45%
Financial controls
68%
43%
Governance
70%
40%
Gearing
70%
32%
Future capex, cashflow
74%
33%
Valuation
77%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Comfort Concern
The application of private equity management skills can be a key source of

comfort for many investors (69 percent) when buying from a financial investor.
This supports the evidence that attitudes are broadly positive and people are
appreciative of the skills that private equity management can bring.
59 percent of respondents responded that they would regard the target’s existing
client and supplier relationships as an encouraging factor supporting a deal.
On the other hand, the respondents had some reservations, with 77 percent
saying that a private equity valuation would cause some concern. Additionally,
the future capex and cashflow of a private equity-owned company would cause
concern for a further 74 percent of respondents.
This concern regarding private equity valuations perhaps reflects the fact that
buying and selling businesses well is core to the industry’s business model:
they need to be masters of this art. For a corporate, buying a business is not
often an every day activity. This imbalance of skills can of course be mitigated by
seeking appropriate M&A advice and carrying out due diligence on the financial,
commercial and operational aspects of the target.
Regulatory hurdles
Gaining regulatory approvals for an acquisition continues to be a critical

consideration for private equity firms. Two-thirds of respondents believed that
foreign private equity firms find it harder to gain regulatory approval for regional
M&A deals than their local counterparts or strategic buyers.
The majority of respondents comment that foreign private equity players are at
a disadvantage because “domestic private equity firms and corporates have a
better understanding of local regulations. In addition, local corporate and private
equity firms have local relationships which can be utilised at the right time.”
However, this perception is to some extent dependent on where the respondent

is located. One Hong Kong-based respondent said that “Hong Kong has the best
financial inspection system and we do not have such issues.”
Australian respondents are most in agreement with this sentiment, with some
81 percent believing that foreign private equity firms will find it more difficult to
obtain regulatory clearance than domestic funds when undertaking M&A. Some
88 percent of respondents in the energy, mining and utilities sectors echo this
sentiment, while on the other hand, just 52 percent of consumer sector-focused
respondents thought that foreign private equity firms will not find it harder to
obtain regulatory approval.
Do you believe foreign private equity funds find it harder than domestic
private equity or strategic buyers to gain regulatory clearance in M&A deals
in Asia/your market?
Yes
33% 67% No
The visibility of private equity
Private equity funds becoming more active
Compared to the past two years, how active do you find private equity
funds at present in your sector?
More prominent now in our space

21% The same
Less prominent now in our space
44%
35%
While deal flow has slowed during 2008, private equity firms are widening their
reach and becoming more visible in the marketplace. To some degree, this
increased visibility is the result of more intense activity in certain sectors, such as
non-financial services, consumer markets, pharmaceuticals and healthcare.1
However it also reflects the multitude of new funds that now exist and the
number of new people that are engaged in the market. It will be interesting to
see how many of these firms will pull back in response to the recent financial
turmoil, and if they do, how far.
44 percent of respondents believed that private equity funds are now more
active in their particular sector compared to two years ago. A minority (21
percent) believed that private equity firms have become less prominent, with
one respondent suggesting that “there is not enough money to undertake M&A
anymore because of private equity firms’ resistance to investing during a global
economic turndown.”
In East Asia, 69 percent believed that the asset class is now more prominent
compared to two years ago. The perception is somewhat different in more
mature markets. In Australia, only 20 percent of respondents believed that
private equity firms are more prominent in their space and by contrast, 60
percent believed that private equity firms are now less prominent.
1 Private Equity Sentiment Survey, published by KPMG China, September 2008
Encountering private equity competitors
In approximately how many deal situations do you find yourself coming up

against private equity buyers?
5% 0%
9%
1-24%
25-49%
50%-74%
16% 46%
75%-100%
24%
Private equity firms may have become more visible, but they are still far
from being a pervasive force in the M&A marketplace. While the majority of
respondents stated that they had come across private equity competitors in
a deal situation, a significant minority (46 percent) stated that they have not.
Interestingly, 14 percent of respondents indicted that they have faced private
equity competitors in at least half of their transactions.
Use of private equity and SWF funding for growth capital
Has PE (or sovereign wealth fund) funding ever been used/considered as a

source of growth finance/strategic capital for your company?
Yes
67% 33% No
Although still in a minority, a sizable 33 percent of respondents have used, or

considered working with private equity and sovereign wealth funds to raise
capital. Of those respondents who had not considered or used private equity
SWF funding, a surprisingly large proportion (56 percent) would be open to a
private equity or SWF approach. One respondent states that “if it’s an approach
which is necessary and beneficial for the firm’s shareholders and the business,
it has to be considered.” Reflecting perhaps different levels of maturity in both
the markets and the private equity industry in the different types of market, just
58 percent of the respondents based in what would be considered ‘developing’
markets2 had received a private equity or SWF approach, as opposed to 74
percent of those in the more ‘mature’ ones.3
Hong Kong-based respondents are particularly amenable to private equity and

SWF approaches, with some 74 percent stating that they would be open to a bid
from either of these two parties. On the other hand, just 32 percent of Japanese
respondents were open. Again, comparing developing vs mature markets, there
is a clear distinction between respondents with 76 percent of those based in
growth markets being open to approaches as opposed to just 46 percent in
mature markets.
Significant differences were seen between sectors as well — in infrastructure,

construction and transportation sectors, some 73 percent of respondents said
they would welcome a private equity or SWF approach, contrasting with just 44
percent among consumer-focused respondents.
Similarly, 45 percent of respondents working in the Energy, Mining & Utilities

sector note that private equity or SWFs have been considered or approached
in order to secure growth financing, while just 17 percent of respondents in
healthcare leisure sectors have done so.
Overall this suggests there is now a reasonable amount of traction for private
equity and SWF funds in the region, although clearly certain markets and sectors
are at present far more amenable to working together with private equity and
SWFs. With capital markets drying up during the final quarter of 2008, it will be
interesting to see if private equity firms and SWFs take more of a role in equity
financing during 2009 and 2010.
2 Taiwan, Malaysia, Thailand, China, Indonesia and the Philippines — countries with a GDP per capita of less than USD 17,000 (IMF 2007 data)
3 Australia, Singapore, Japan, Hong Kong, South Korea — countries with a GDP per capital of greater than USD 17,000 (IMF 2007 data)
Over half of respondents would be amenable to private equity/SWF

approaches
If no, would you be open to an approach from a PE (or sovereign wealth)

fund?
Yes
44% 56% No
Consortium bids with private equity/SWF funds welcomed
Would you consider working together with a PE (or sovereign wealth) fund
on a joint M&A bid?
Yes
32% 68% No
In a further indication that the expertise of private equity firms is valued by

corporates — as long as their interests are aligned — 68 percent of respondents
stated that they would consider working together with the asset class on a joint
bid for a third-party target. However, a number of respondents added a caveat for
such a venture. One respondent said that “we would consider but it’s unlikely.
Our preference is for a controlling stake of the company.”
Again, the large majority of Southeast Asian and Hong Kong respondents (some
78 percent apiece) stated that they would consider working together with private
equity firms and SWFs on a joint M&A bid. Reflecting industry perceptions
of how open the markets are to foreign investment models, Korea and Japan
emerged as the least favourable to working with private equity and SWFs to fund
a joint M&A bid.
Appendix: Dynamics of the

Asia Pacific private equity market
Private equity investment trends in Asia Pacific
40 6,000
Value of deals (USD million)

30 4,500
Volume of deals
20 3,000
10 1,500
0 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008
Volume of deals Value of deals (USD million)
Asian private equity flows in the first half of 2008 show that while activity in
the asset class has definitely fallen (by around 24 percent in terms of value and
14 percent volume-wise) since Q4 2007, deal flows have remained over USD 3
billion and 20 transactions per quarter. Indeed, quarterly deal value ticked up from
USD 3.8 billion to USD 3.9 billion between Q1 and Q2 2008.
Over the period 2005 to H1 2008, Asian private equity volumes grew three
fold from 7 transactions to 21 in Q2 2008. At the same time, quarterly values
expanded by 3.2 times over the same period.
Private equity exit trends in Asia Pacific
15 2,500
12 2,000
Value of deals (USD million)
Volume of deals
9 1,500
6 1,000
3 500
0 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008
Volume of deals Value of deals (USD million)
Asian private equity exits showed a significant expansion between Q1 and Q2

2008, albeit from a very low base, with volumes more than doubling and exit
values growing more than seven times. However, recent divestments are still
overshadowed by the 19 sales, worth USD 3 billion, that were undertaken in the
same period in 2007. In comparison, only 11 exits worth USD 1.8 billion were
completed in H1 2008.
Asian private equity sector split by volume, 2008 YTD
2%
3% Industrials Construction
6% 14%
TMT Leisure
6%
Consumer Real Estate
6% 14%
Financial Services Pharma, Medical & Biotech
6%
Energy, Mining & Utilities Transportation
Business Services Agriculture

8%
14%
9%
12%
Industrials, telecoms and technology, and consumer private equity transactions

have dominated the Asian private equity landscape to date during 2008,
accounting for 42 percent of all private equity deals in the region and equally
divided out at 14 percent apiece.
Asian private equity sector split by value (USD million), 2008 YTD
1%
4% 2%
Consumer Real Estate
17%
4%
TMT Business Services
5%
Energy, Mining & Utilities Leisure
6%
Financial Services Construction
14%
9% Industrials Transportation
Pharma, Medical & Agriculture

Biotech
12% 13%
13%
Consumer, TMT, Energy, Mining & Utilities and Financial Services transactions
by value have made up 57 percent of overall private equity valuations this year —
worth some USD 4.7 billion, with consumer buyouts accounting for 17 percent,
telecoms and technology 14 percent and energy, mining and utilities and financial
services, 13 percent.
Asian private equity target country split by volume, 2008 YTD
2% 2%
2% India Malaysia
3%
5% 24% Australia New Zealand
6% Japan Philippines
China Taiwan
8%
Singapore
South Korea
12% 21%
Hong Kong
15%
India, Australia and Japan were the most favoured Asian countries for private
equity investment, comprising 60 percent of total private equity activity into the
region so far this year (40 transactions in total). Indian targets were the most
popular, making up 24 percent, while Australian deals made up 21 percent and
Japan, 15 percent.
Asian private equity target country split by value (USD million), 2008 YTD
2% 1%
1% India Malaysia
5%
5% 23% Australia Philippines
6% Japan New Zealand
China Taiwan
9%
Singapore
19% Hong Kong

14% South Korea
15%
So far in 2008, private equity firms invested the most capital in India where
acquisitions totalled USD 2.5 billion, investments in Australia and Japan
amounted to USD 3 billion and USD 1.6 billion respectively.
Asian private equity bidder country split by volume, 2008 YTD
2% 2%
2% Australia Malaysia
4%
6% 25% Japan New Zealand
Singapore Taiwan
13% Hong Kong
India
China
18%
13%
South Korea
15%
Australian private equity firms have been the most acquisitive in terms of deal
volumes so far in 2008, making up 25 percent of total private equity transactions
on the back of 14 transactions. Japan makes up a further 18 percent of deal
volume, while Singapore accounted for 15 percent.
Asian private equity bidder country split by value (USD million), 2008 YTD
1% 1%
1% Australia Malaysia
5%
6% 23% Singapore New Zealand
Japan Taiwan
11%
Hong Kong
India
12% 23% China
South Korea
17%
In terms of value, Australian and Singaporean financial investors top the chart
with USD 2.6 billion worth of investments each having taken place in 2008 YTD.
Japanese private equity funds made USD 1.8 billion worth of acquisitions over
the course of the year (17 percent of the total), while Hong Kong-based investors
managed USD 1.2 billion.
Top ten Asian mid-market private equity transactions, H1 2008
Announced date Status Target company Target dominant sector Target dominant country
07/06/2008 P Unisteel Technology Ltd Industrials Singapore
(79.46% stake)
30/04/2008 C Oak Pacific Interactive TMT China
(35% stake)
20/06/2008 P Indophil Resources NL Energy, Mining & Utilities Australia
02/05/2008 C Amdel Ltd Business Services Australia
03/03/2008 C Aozora Bank Ltd (8% stake) Financial Services Japan
04/02/2008 C EON Capital Berhad Financial Services Malaysia
(20.2% stake)
04/04/2008 C Daesun Distilling Co, Ltd Consumer South Korea
(98.97% stake)
01/04/2008 P Showa Yakuhin Kako Co Pharma, Medical & Biotech Japan
23/01/2008 P Akruti City Ltd Real Estate India

(16.05% stake)
17/05/2008 P IL&FS Investsmart Ltd Financial Services India

(93.21% stake)
Source: mergermarket, October 2008
Bidder company Seller company Deal type Deal value USD (million)
Kohlberg Kravis Roberts & Co IBO 445
Softbank Corporation IBI 430
Consortium for Indophil Resources NL Lion Selection Group Ltd MBO 427
Bureau Veritas Australia Pty Ltd CHAMP Ventures Exit 416
Cerberus NCB Acquisition LP IBI 416
Primus Pacific Partners 1 LP Hicom Holdings Berhad IBI 412
Cornerstone Equity Partners IBI 397
AIG Japan Partners Inc; Polaris CVC Asia Pacific Ltd; JAFCO Co Ltd SBO 392
Principal Finance Co Ltd; Tokio Marine
Capital Co Ltd
AIG Global Real Estate Investment IBI 325
Corp; CVCIGP II Client Rosehill Ltd;
CVCIGP II Employee Rosehill Ltd
HSBC Securities and Capital Markets ETrade Mauritius Ltd; Infrastructure Exit 306
(India) Pvt Ltd Leasing & Financial Services;
Softbank Asia Infrastructure Fund
Contact us
For more information on KPMG’s Private Equity Group in Asia Pacific,

contact:
Asia Pacific PE Group Head Asia Pacific Regional Executive

David Nott Robert Stoneley
Tel: +61 (2) 9335 8265 Tel: +852 3121 9850
dnott@kpmg.com.au robert.stoneley@kpmg.com.hk
Australia New Zealand

Andrew Thompson Ian Thursfield
Tel: +61 (2) 9335 7643 Tel: +64 (9) 367 5858
atthompson@kpmg.com.au ithursfield@kpmg.co.nz
China Philippines
Honson To Vicente J. Sarza
Tel: +86 (21) 2212 2708 Tel: +63 (2) 885 7000
honson.to@kpmg.com.cn vsarza@kpmg.com
India Singapore
Vikram Utamsingh Diana Koh
Tel: +91 (22) 3983 6405 Tel: +65 6213 2519
vutamsingh@kpmg.com dianakoh@kpmg.com.sg
Indonesia Taiwan
David East Jay Cheng
Tel: +62 (21) 574 0877 Tel: +886 (2) 8101 6666
david.east@kpmg.co.id jaycheng@kpmg.com.tw
Japan Thailand
Masami Hashimoto Bob Ellis
Tel: +81 (3) 5218 6704 Tel: +66 (2) 677 2118
masami.hashimoto@jp.kpmg.com bellis1@kpmg.co.th
Korea Vietnam
Edward Kim Rupert Chamberlain
Tel: +82 (2) 2112 0770 Tel: +84 (4) 3946 1600
edwardkim@kr.kpmg.com rupertchamberlain@kpmg.com.vn
Malaysia
Siew Mei Chan
Tel: +60 (3) 7721 7063
siewmeichan@kpmg.com.my
The information contained herein is of a general nature and is not intended to address the © 2008 KPMG International. KPMG
circumstances of any particular individual or entity. Although we endeavour to provide accurate International is a Swiss cooperative. Member
and timely information, there can be no guarantee that such information is accurate as of the date firms of the KPMG network of independent
it is received or that it will continue to be accurate in the future. No one should act upon such firms are affiliated with KPMG International.
information without appropriate professional advice after a thorough examination of the particular KPMG International provides no client
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firm. All rights reserved. Printed in Hong
Kong.
KPMG and the KPMG logo are registered
trademarks of KPMG International, a Swiss
cooperative.
Publication date: November 2008
kpmg.com
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Corporate Perceptions of Private Equity - Asia-Pacific Nov-2008 - KPMG

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ASI A PAC I F I C ’ S N E W C O R P O R AT E L A N D S C A P E

2 About the survey

10 Private equity and the role of management

14 The visibility of private equity

18 Appendix: Dynamics of the Asia Pacific private equity market

About the survey

This report is based on research conducted by Remark, the research and

What country or region are you headquartered in?

What industry sector do you operate in?

Energy, Mining & Utilities

18% Pharma, Medical & Biotech

14% Transportation & Logistics

Moreover, perceptions in the corporate sector are becoming more nuanced.

However, a substantial minority (35 percent) thought otherwise. Many saw

Drilling down into the responses, a difference in perception seems to emerge

Majority of respondents believe private equity is a force for good

35% 65% Disagree

They improve financing structures

They make the management more commercial

Financing skills seen as the key strength of private equity

What do you consider to be the strengths of private equity?

Ability to optimise financing structure 54%

Ability to structure deals 43%

Networks of leading industry executives who are able

Ability to make quick decisions 40%

Some 54 percent of respondents considered that the private equity industry’s

Short-term profit motive seen as a weakness

What do you consider to be the weaknesses of private equity?

Short-term profit motive 42%

Lack of transparency 21%

Lack of strategic relationship 20%

Debt-financing model 19%

Aggressive management style 13%

Lack of past credibility/stability 8%

Lack of general management knowledge/sector­

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

on assessment” one respondent noted, while another said “private equity

themselves.” Another respondent added “they disturb the daily operations of a

company. Their management style is too aggressive.”

Corporates see they have some advantages over private equity

In what areas would you consider corporates like yourself have an

Industry knowledge 50%

Management expertise 48%

Can achieve synergies 35%

Industry contacts 31%

Can cross-secure debt against rest of operations 22%

50 percent of respondents believed that one of their main advantages over

Private equity and the role of

The alignment of the interests of shareholders and management through equity

The majority of respondents — some 64 percent — considered that the

In this respect, it seems performance incentives do not necessarily need to be

Equity-based incentives are certainly welcomed more strongly in some sectors.

A quarter of respondents stated that in order to overcome the effectiveness

Role of management equity models

This sort of incentive model does not work in Asia Pacific

This sort of incentive model will have an immediate and

Alternatives to management equity incentives

Offer other performance incentives 25%

No incentive required 20%

Not sure 17%

Offer stable/long-term relationship 14%

By being reputable/credible 12%

Offer competitive salaries 11%

Provide a good work environment 5%

Lack of general management knowledge/sector