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Private equity: EQT-Baring deal highlights global sponsors’ growing interest in Asia

The EUR 6.8bn acquisition of Hong Kong-based Baring Private Equity Asia (BPEA) by Sweden-based EQT AB [STO:EQT] shows Asia’s rising prominence in the increasingly global nature of private equity.

Out of 80 tie-ups between private equity firms globally in the last decade, Asia has landed 10 of them, according to Dealogic data. EQT’s purchase of  BPEA is the continent’s largest by far.

The Swedish investment group, which has EUR 73.4bn in assets under management (AUM), will expand by another EUR 17.7bn in AUM thanks to BPEA. That thrusts EQT into the company of the world’s biggest financial sponsors , which include The Blackstone Group, KKR, The Carlyle Group, CVC Capital Partners, Bain Capital, TPG Capital, and Warburg Pincus.

Also driving the deal is EQT’s expectation that Asian private markets will grow at almost twice the rate of global private markets. Indeed, private equity buyouts in Asia set a record 429 transactions totaling USD 197.9bn in 2021 – or 16% of the global total of USD 1.23trn, according to Dealogic data.

Beyond the buyout

Large private equity investors are increasingly exploring specific sectors and strategies adjacent to the classic leveraged buyout. That includes growth equity, real estate, infrastructure, and secondaries.

Even within the big eight PE shops there is considerable variety in terms of exposure and ambition. Blackstone is 10x larger than EQT by AUM, and it is a big player in hedge funds and credit, which are not in EQT’s wheelhouse. EQT has also been historically skewed towards Europe – though the firm has demonstrated a willingness to buy its way to scale and geographical diversification ever since it went public in 2019.

In January 2021, for example, EQT acquired Exeter Property Group to add North American exposure to a Europe-heavy real-estate business. Last November, it agreed to buy LSP to fill a gap in healthcare-focused venture capital. EQT then added Bear
Logi earlier this year to expand  into the Japanese and Korean logistics real estate market.

Bigger fish 

As one of Asia’s top three private equity managers, BPEA represents a prize catch for EQT.

BPEA, which ditched its own IPO plans when EQT came calling last fall, could have continued comfortably on its growth path. But CEO Jean Eric Salata recognized the merits of being part of a larger, truly global platform in an increasingly competitive market.

“We’ve been building scale, operating capability, sector capability, regional coverage capability. The next phase I see coming is the idea of PE becoming a more global industry,” he said.

Which other Asia-focused private equity groups could follow BPEA’s global outlook? Few other independently-owned managers in Asia can match BPEA’s scale. Two of them have explored monetization efforts this year.  MBK Partners, with USD 25.6bn in AUM, sold a minority stake to US-based Dyal Capital Partners. Meanwhile, Hong Kong-based PAG, with USD 50bn in AUM,  filed for an IPO on 25 March. Could another financial sponsor swoop in and convince it to sell instead?