Cross-Border Investing in Private Equity – August 2015

by Allison Polchinski

  • 07 Aug 2015
  • PE

Cross-border investments are becoming increasingly prominent in the private equity space, in terms of both the number of deals and amount of funds raised specifically for this type of transaction. Several factors have led to an increased appetite for cross-border activity, particularly a desire to expand beyond a firm’s domestic market to capture attractive opportunities abroad. As a result, there has been an increase in the number of firms considering this type of investment. Preqin currently tracks 185 private equity fund managers seeking to make cross-border investments, which are defined as investments in assets or firms beyond the fund manager’s national borders. An additional 1,906 firms that consider investments in companies with international growth potential are also tracked on Preqin’s Fund Manager Profiles database.

Aside from the most developed private equity markets in the US and UK, interest in cross-border investments has been particularly prevalent in Asian countries. Three of the top five countries ranked by number of firms considering cross-border investments are headquartered in Asia. Asia-based managers also make up 22% of all private equity managers considering this type of investment. GSR Ventures, a China-based venture capital firm, recently announced its intentions to raise a $5bn fund to invest on a global scale in companies for which accessing China is a key to growth. GSR Ventures is one of many Asia-based managers raising large funds with the target of investing across several countries. Baring Asia Private Equity Fund VI, which recently closed at just under $4bn, is the most recent in a series of funds targeting investments in Asia as well as in companies based abroad which are looking to expand into Asia.

A large number of cross-border firms are particularly interested in US-Asia cross-border relations. The US continues to lead in terms of the number of firms considering cross-border deals, with 74 firms seeking these investments. Most of the well-known private equity firms including Blackstone Group, Carlyle Group and Oaktree Capital Management consider cross-border investments spanning various geographies as part of their broad investment strategies. However, several firms have a more specific focus for their cross-border deals, such as Vivo Capital, which raises funds to invest in healthcare companies to help create strategic alliances between the US and China. Vivo’s eighth fund closed in 2014, raising a total of $750mn to invest across China and the US.

Despite the complexities of handling cross-border transactions, which demand solid understanding of local laws to ensure that transaction structures are legally valid and consistent with local practice, private equity fund managers across the world show a keen interest in this strategy. Considering the evolution of the private equity universe and the increasing scale of funds entering fundraising with a focus on cross-border investments, this looks set to be a prominent trend going forward.

Continue browsing industry reports, publications, conferences, blogs and more on Preqin Insights