TPG-backed Northstar to start prepping for over $800m fifth fund by year-end

Northstar Group managing director Bert Kwan speaks at DealStreetAsia's Asia PE-VC Summit 2016

Singapore-headquartered private equity firm Northstar Group will start preparing by the end of this year to raise its fifth vehicle that will target to raise a little over $800 million, about the same size as its fourth fund closed in 2015, a top executive said.

“Based on our current investment pace, we anticipate being in the market for our fifth fund in the first half of 2019,” Northstar Group managing director Bert Kwan told DEALSTREETASIA.

The PE firm is currently spending out of its fourth fund, Northstar Equity Partners IV, and is expecting to deploy “a significant” amount from it this year, Kwan said. The growth equity and control transactions in Northstar’s pipeline are spread across Indonesia, Vietnam, Singapore, Philippines and Thailand.

Founded by former Goldman Sachs banker Patrick Walujo and former PricewaterhouseCoopers executive Glenn Sugita in 2003, Northstar started investing in 2006 and has since managed capital worth over $3 billion. The firm, which counts US private equity giant TPG Capital as a shareholder, currently claims to be managing assets worth over $2 billion. It primarily focuses on investments in Indonesia, with a secondary focus on other Southeast Asian markets.

With the fifth fund expected to be in the $800-million range, the firm seems to be staying consistent with its fund sizes, unlike its peers that are raising ever bigger vehicles. Northstar’s third fund had also raised around $820 million in 2011. At that time, it claimed to have mopped up commitments worth $1.5 billion, thrice the $500 million it had intended to raise.

The third fund, which invested largely in Indonesia, is now fully invested and is set to see at least four exits. The PE firm is also learnt to be considering disposals from its fourth fund. According to market rumours, there are exits collectively worth a billion dollars in the offing for Northstar. Kwan refused to comment on the exits in the pipeline. The lack of meaningful exits in Southeast Asia has often been lamented as a pain point by many investors in the region.

Northstar has invested in over 30 companies across the banking, insurance, consumer, retail, manufacturing, oil and gas, coal and mining services, technology, telecom, and agribusiness sectors. Its LPs include global sovereign wealth funds, pension funds, endowments, family offices, and other institutional investors.

Its investments include PT BFI Finance Indonesia Tbkwhich has attracted interest from potential bidders, financial services company PT Delta Dunia Makmur, PT Trimegah Securities Tbk and PT Centrin Online Tbk, the listed parent company of PT Retower Asia, an independent telecommunications tower provider in Indonesia.

In other Southeast Asian countries, the firm has made investments in the Philippine Bank of Communications and Thai Credit Retail Bank that provides financial services to small and medium-sized enterprises. Among two of its well-known investments in Singapore include the $103-million management-led buyout of Singapore’s biggest property broker ERA Singapore Pte Ltd and the $238-million acquisition of Singapore-listed precision machine parts maker Innovalues Ltd.

With its current fund, the firm is evaluating deals from across the region and across sectors. However, a large part of its previous funds has been deployed in Indonesia and in sectors like consumer, retail and banking.

In fact, perhaps its most notable call in Indonesia was becoming an early investor in ride-hailing leader Go-Jek. The Indonesian unicorn recently raised a $1.5-billion round from the likes of Google, Temasek, BlackRock, Meituan-Dianping, JD and Allianz. The latest financing has reportedly pushed Go-Jek’s valuation to upwards of $4 billion.

Focus on the mid-market 

Northstar typically plays in the mid-market segment in Southeast Asia. The firm is open to investing in a minority growth equity deal as well as a control transaction.

“In terms of ticket size, we have historically invested from $20 million up to $150 million. That said, as a result of Northstar’s long and sustained track record and heritage in Southeast Asia in general, and in Indonesia in particular, we have led transactions that engender significantly larger equity checks with our limited partners and other long-standing co-investment partners. As such, the enterprise value of our investee companies can range very widely,” Kwan noted.

However, despite a large amount of dry powder in the market, there still exist gaps in funding.

“On a headline level, while there might be the proverbial ‘billions of dollars’ earmarked for private equity in Southeast Asia, we do not see the larger global and broader regional private equity players systematically looking to build a diversified mid-market, growth equity and control-driven Southeast Asia portfolio. Such an endeavour simply requires too many resources spread across too many discrete investments, each of which would not move the needle for a multi-billion dollar private equity fund with a 4-5 year investment period. On the other hand, our platform at Northstar has been developed since our founding in 2003 to accomplish exactly that,” Kwan said.

Other players in the mid-market space in the region are Dymon Asia, Everstone Capital and Swedish PE firm EQT Partners. In fact, EQT has said it is looking to expand its investment portfolio in the Asia-Pacific region by tapping opportunities in the mid-market and infrastructure spaces. The firm is said to be currently raising capital for its $800-million Asian mid-market fund.

In the small- to mid-market segment in the region, deals below $200 million are now starting to generate among local and regional private equity funds. “There are still a lot of small to mid-market deals that are there still under the radar that people do not think of. That is a segment where funds are starting to get interested,” Hsu Li Chuan, Senior Partner, Dentons Rodyk, had told the portal in an interaction earlier.

The numbers explain the interest as Asia Pacific mid-market M&A space grew its share of the world’s mid-market activity by 11 per cent over five years, from 28 per cent in 2011 to 39 per cent in 2015. According to a report from Baker Tilly International, in 2016, mid-market deals accounted for 58 per cent of APAC deal volume and 22 per cent of overall value.

Also Read:

Northstar unit NSI Ventures rebrands as Openspace, goes independent

Northstar’s impact investment vehicle backs Indonesian social enterprise Du’Anyam

Swedish EQT Partners eyes deeper Asia play with new mid-market fund

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.