Leading offshore law firm Walkers expects interest in emerging markets such as India, China, and the Middle East to fuel the continuing growth of the global private equity market, along wi
Leading offshore law firm Walkers expects interest in emerging markets such as India, China, and the Middle East to fuel the continuing growth of the global private equity market, along with the desire of US firms to engage in more international deals and a greater focus on mid-market as opposed to solely high-end mega deals.
‘As US private equity firms look internationally for deals, and investors in Europe continue to expand their portfolios, the global picture for private equity continues to be strong,’ says the law firm’s investment funds partner Iain McMurdo.
‘Markets such as Dubai, India, and China continue to mature, opening to outside investors, and local companies are partnering with US and European managers to use offshore structures to increase their opportunities for foreign investment.
‘These changes are good for offshore financial centres such as the Cayman Islands, Jersey, Dubai and the British Virgin Islands, which can offer neutral jurisdictions for complex deals involving parties from multiple countries.’
Globally, private equity investment in the emerging markets of Asia, Eastern Europe, Latin America, the Middle East and Africa, rose by 29 per cent in 2006 to a total of USD33.2bn, according to the Emerging Markets Private Equity Association.
Asia attracted the greatest amount of capital at USD19.4bn, with 35 per cent of those funds in China and India alone. The Middle East saw a 54 per cent increase in private equity investment.
Leading private equity houses such as Blackstone, Oaktree Capital and Providence Equity Partners have all announced plans to increase their activities in Asia, Walkers notes, while Baird Private Equity, Darby Overseas Investments, and D.E. Shaw have also announced a focus on Asia, including India and China.
There has also been cross-border interest among emerging markets. In March Al Salam Bank-Bahrain announced plans to invest in private equity and real estate in the Asia-Pacific region, with an initial focus on China.
Gulf Finance House, an Islamic investment bank, also recently announced the creation of a European private equity division to offer Middle Eastern investors opportunities in the European private equity market.
India, too, continues to attract great attention, garnering USD2.21bn of private equity investment in 2006, according to Thomson Financial, admittedly boosted by huge deals such as the USD960m Idea Cellular pre-IPO placement and the USD725m buyout of the Indian software unit of Flextronics International by Kohlberg Kravis Roberts.
Other factors, such as companies looking to private equity investments instead of IPOs, also contributed to the growth. Some Indian leaders are also suggesting that core infrastructure projects be open to funding from private equity and venture capital groups.
‘Another change we are seeing is that while huge buyout deals continue to make headlines, many of the US private equity groups are looking at mid-market investments,’ says Walkers investment funds partner Caroline Williams. ‘This adjustment is good for the long-term health of the market and will also relieve market fears around some of the mega-deals that have closed in the past year.’
Goldman Sachs, TPG, and Silver Lake Partners have all announced recent strategies to invest in mid-market deals. Goldman has pledged USD1bn of its own money for investments ranging in size from USD50m to USD100m.
In addition, the growth of multi-disciplinary firms continues with hedge funds such as Cerberus and Fortress making private equity investments and private equity funds such as Blackstone and Carlyle sponsoring hedge funds.
‘We welcome the challenges presented by this convergence of hedge funds and private equity funds,’ says Walkers partner Deborah Poole. ‘It offers further opportunities for our global team to leverage its expertise in the hedge funds industry and develop practical solutions for clients in the constantly evolving investment funds market.’
Walkers has promoted several of its associates, with Philip Paschalides and Sonia Starvis coming partners in the finance and property groups respectively, while Williams has just been named a partner in the investment funds group, specialising in private equity.
As part of its private equity work, Walkers offers multi-jurisdictional and multi-disciplinary services. The firm advises on offshore fund formation and is instructed on portfolio acquisitions undertaken by its private equity clients.
Walkers is one of the leading law firms in the firm’s home base of the Cayman Islands and also has offices in the BVI, Dubai, Hong Kong, Jersey, London and Tokyo, from which the group provides legal and management services to leading global corporations and financial institutions, capital markets participants, investment fund managers, and growth- and middle-market companies. Apart from the law firm, the group consists of fund services provider Walkers Fund Services and three SPV and corporate services providers, Walkers SPV, Walkers (Jersey), and Walkers (BVI).
