NEW YORK – In a sign of growing confidence in the Asian markets, two American investment firms have formed a partnership to provide the region with financial advice.
In early June, The Blackstone Group and AIA Capital Corp., the Asian investment and advisory branch of American International Group Inc.(AIG), formed a partnership that will focus on advising companies throughout Asia about various financial situations. The two firms have an exclusive collaboration agreement in five countries – Indonesia, Thailand, Malaysia, Singapore and Hong Kong – and will operate on a non-exclusive basis in other Asian markets.
“There are very few pure restructuring assignments in Asia,” said Tim Coleman, a senior managing director at New York-based Blackstone. “Almost every large enterprise that needs our restructuring advice ultimately needs to raise capital.”
The partnership will focus on advisory assignments that entail restructurings, mergers and acquisitions and related situations that might call for a capital infusion. As opposed to domestic restructuring assignments, Asian companies are currently so cash-starved that the first step is to bring in new capital, followed by the evaluation of business practices that might then lead to a merger or sale of some assets.
New capital likely will come from the private market for the time being, and most investors will desire majority, or at least control, stakes for their participation, said a source familiar with the market. Despite the anticipated desire on the part of investors to control these companies, the source said the time is ripe for venture-type interest.
“The investors could be strategic partners or opportunity funds, and some private investors have been looking around,” the source said.
To be sure, the Asian market remains a difficult shell to crack for private investors. The need for connections to open doors in the region certainly continues to pervade the market (see story page 48). Blackstone’s Mr. Coleman said AIG and AIA have long-term relationships throughout Asia. In fact, receptivity of companies in need of the services of this type of partnership will depend heavily upon the Westernization of the respective management teams.
“They are now learning how to use advisers after having done underwritings,” the source said.
Blackstone and AIA chose to work together in five Asian countries where neither group had previously worked. Blackstone has entered the relationship with only its advisory services, but the private equity group at the New York firm has begun more actively pursuing investment opportunities in the region. The firm can allocate as much as 20% of its current $3.8 billion fund in all international markets.
Mr. Coleman would not comment on the likelihood of a forthcoming Asian fund, but if the firm should choose, the path has been laid by its buyout brethren as Chase Capital Partners, GE Equity, The Carlyle Group, Newbridge Asia, H&Q Asia and Unison Capital are all currently marketing Asia-focused funds.