What's your take on the explosion of private equity investment in Asia?
Clearly Asia, at the moment, is the major emerging markets destination. Over $20 billion has been raised for emerging markets private equity in the last 15 months, and the lion's share has gone to Asia. So much so, that some people are beginning to worry – and they're probably right to do so – that there's an Asian private equity bubble.
What about Africa?
It's actually strangely linked to Asia at the moment, in terms of the natural resources and commodities boom. There's a huge impact of Chinese demand on various African economies. Clearly, the South African economy is hugely sophisticated, and is one that is showing very exciting buyouts opportunities at the moment, and has a very sophisticated private equity market. And then you have the rest of Africa – you've got some large economies in Egypt and Nigeria. Then you have sub-Saharan Africa, which doesn't see very many large transactions, but, for example, we had [pan-African telecommunications firm] Celtel, where we and a number of investors sold a company for $3.5 billion to the Kuwaitis last year. So Africa, I think, obviously has a less-good image internationally as a private equity destination, but people are making very good money there, without a doubt.
In what areas are these investments concentrated?
A lot of it's in the banking sector. There's some in resources, but certainly not all of it. Throughout Africa, there's a telecom boom underway. Celtel had huge amounts of private equity backing, and we helped create the leading pan-African mobile telephone operator. The African story is not so widely appreciated as India and China, which is much more easily understood. And Latin America, similarly. You've got some global trends going on, with middle classes growing. They all need services and they all need products. You've got the impact of globalization. Crudely put, China is the workshop of the world, India is the back office of the world, and Latin America, now, is sort of the farm of the world, supplying all the agricultural products. And those trends are set for a very long run.
We have 90 investment professionals in 16 offices globally, and two of our offices are in Latin America – Mexico and Brazil. There's much less competition, there's much less capital, and consequently, deal pricing is much less intense. One of the worries is that Asian deal pricing has reached very, very high levels, and there's been some undermining of investment discipline under the weight of capital.
What do see as the most promising trends in international private equity investment?
From where we sit, there are some headlines going on here. One is that institutional investors are discovering Asia big-time. It's becoming a very crowded market. The demand for capital is also growing, but the demand on supply balance is probably no longer as healthy as it used to be. There's probably too much capital that's been going to Asia in the last 18 months. Meanwhile, you've got bigger deal sizes – the average deal size in India and China has grown. You've got the emergence of buyouts in India, which you haven't seen in China, and I think that is a very important trend. And you're also seeing more and more buyouts in Southeast Asia. In Africa, you've got a very strong buyout market in South Africa, and you've got development capital in the rest of Africa. In Latin America, you're seeing very few people remaining active in private equity, while there's a very strong demand for capital. The demand-supply balance has become out of kilter in Asia, it's about in balance in Africa, and it's woefully undersupplied in Latin America. That supplies different opportunities for risks. People want Asia exposure; they don't want Latin America at the moment.