LONDON Dec 10 Higher prices for companies in
North America and political and regulatory risks in China are
leading private equity investors to consider the emerging
markets of southeast Asia, a survey has found.
Private equity firms that raised money from pension funds,
insurers and endowments on the promise of delivering superior
returns, have unearthed few deals in China and have competed
fiercely for the businesses they can find, pushing up prices.
The trend to higher prices is echoed in private equity's
largest market, the United States, where the supply of cheap
financing from lenders has given buyout firms the firepower to
pay more for companies.
Nascent Asian economies such as Indonesia and Vietnam were
favoured by one fifth of investors over the region's more mature
markets including China and India, according to a survey
conducted by private equity firm Coller Capital.
Over half of the 131 investors questioned said the industry
had been too optimistic about China and 69 percent felt the same
about India citing issues around politics, corruption and
"It's partly a matter of people understanding the risks
better and partly a matter of increasing competition, as more
and more money, both domestic and international, chases deals in
China," Jeremy Coller, Chief Investment Officer at Coller
Capital told Reuters.
The Coller findings, based on a survey of investors in
private equity funds from North America, Europe and
Asia-Pacific, also reflect concerns over the long-term future of
investment in the United States.
Two thirds of North American investors said that the poor
performance of initial public offerings (IPOs) - when a company
is first floated on the stock exchange - was likely to last for
the foreseeable future.
"One of the universals is certainly the weight of
legislation and the extra cost. Becoming a public company is
more costly and more onerous in terms of regulation than it used
to be," Coller said.
Global IPO activity has been weak following the 2008
financial crisis although an improvement in new share issuance
towards the end of the third quarter could pave the way for a
rebound in 2013, bankers have said.
U.S. leveraged buyout deals were up 27 percent in the first
three quarters of 2012 compared with the previous year, and 96
percent higher in the third quarter at $28.9 billion, according
to Thomson Reuters data.
Private equity firm CVC last month hired banks to
sell a stake in Indonesian department store Matahari,
hoping to double the value of its investment within just two and
a half years.