US-based private equity firm Baird Capital is focusing on its investment efforts in Asia encouraged by the growing middle class that has led to an increased demand in consumer products and services. This comes even as Baird admits that deal-making market in the region “will remain challenging” this year.
Baird Capital, the direct private investment arm of Robert W.Baird & Co has invested in about 12 companies in China across sectors that it categorizes as Technology and Services, Healthcare and Industrial solutions. It is currently actively scouting for more deals in China.
“For PE, we are particularly interested in healthcare, consumer services, and higher-end industrial manufacturing and services…We will focus on minority growth capital opportunities, primarily teaming up with entrepreneurs supported by strong management team, who aspire to become national champion, or even regional/global champion in their respective sectors,” Baird Capital’s newly appointed Partner Andy Tse told DEALSTREETASIA recently.
Andy who will be based in Shanghai was put on the role last month, and will help lead the firm’s investment efforts in Asia. He is a member of Baird Capital’s global team working to identify and pursue investments in the technology and services sector.
2016 ended on a happy note for Baird – the firm has said it was an active year for the firm, and claimed that this had allowed it to enter 2017 with significant momentum. Last year, the firm selectively deployed $72.1 million in new and add-on investments and returned roughly $256 million to investors, and according to information on its website, the firm said it had been “one of its strongest years of distributions in its history.”
In China, the firm made additional undisclosed investments in three firms in the industrial solutions segment that includes Boston Plastics and Bing Xiong.
An opportunity named “Asia”
Asia will be account for the largest middle-class population in coming five years, and also create more and more regional champions in their respective sectors, Andy noted, adding that learning from the experience in the developed countries like the US and EU, people in this continent were fast adopting appropriate modifications to adjust for local elements.
“Hence, growth demands in consumer products and services, shifting of manufacturing, as well as replication of developed markets’ practices will provide sufficient opportunities for our investment,” he said.
Explaining the rationale for Asia to be an opportunity for investment, Andy said that some key trends in Asia provide an optimal conditions for the firm’s investments: increase regional trades among Asia which is 50 per cent of trades are within Asia now; sustainable economic growth despite a slowdown in some countries; a relatively young population, especially in Southeast Asia with medium age less than 30 and a huge population with domestic consumption a major focus.
Moreover, given the strength of the US dollar as well as the challenging market conditions in Asia, we would expect some correction in the valuation, he said.
“The relatively weak capital markets, as well as the tightening of bank lending, and the expected hike in interest rate, will also provide favorable market conditions for PE investments…I expect the market will remain challenging, but the favorable conditions mentioned earlier will somewhat help to increase activities.” he added.
Baird’s strategy for growth
Baird intends to support companies’ growth with its global platform, together with the prior experience in selected sectors like consumer services, healthcare, industrial.
“We are looking for around 10-30 per cent stake in the company for Asia investments, so that sufficient influence can be exerted, while at the same time the investment size will also justify our time and efforts,” Andy told this portal.
The investment firm will have board representations who will participate in all major decisions and management of the company, while different levels of the team will try to maintain close contact and relationship with different people in the firm to ensure our knowledge about the operations.
Baird Capital makes venture capital, growth equity and private equity investments in strategically targeted sectors globally. It has raised and managed more than $3.1 billion and invested in nearly 300 portfolio companies since it was founded.
“Our global venture and private equity team is actively reviewing a number of investment opportunities in our target sub-sectors while at the same time maintaining our focus on maximizing our existing portfolio value,” Andy said.
The experience of Baird’s global platform will provide experience and guidelines to the emerging entrepreneurs together with financial support, disciplines, and connections in the region, he added.