Aberdeen looks to create global PE platform with Flag buy

Aberdeen Asset Management has acquired real assets and private equity-focused Flag Capital. Aberdeen's PE head says he sees Asia opportunities with the combined firms, including regional co-investments.
Aberdeen looks to create global PE platform with Flag buy

Aberdeen Asset Management has continued its push to create a global private equity platform with the acquisition of Flag Capital.

The purchase of the $6.3 billion AUM PE firm comes soon after Aberdeen acquired full control of the joint venture it had operated with SVG.

And Aberdeen’s global head of private equity says he sees more opportunities for consolidation in the Asia PE fund of funds business, with co-investments a particular focus for the combined firm going forward.

Aberdeen’s acquisition of Flag – announced on May 27 – “helps us establish a global platform,” head of private equity Graham McDonald told AsianInvestor.

Flag has an Asia hub in Hong Kong and two offices in New England. Flag is focused on private equity in Asia Pacific, and venture capital, small- to mid-cap private equity, and real assets in the US.

The deal comes two months after Aberdeen’s March 27 announcement that it would acquire SVG Capital’s stake in Aberdeen SVG – a strategic alliance between the two firms with around $6.1 billion in AUM.

Combined, the two deals – which are both subject to regulatory approval – will take Aberdeen’s PE AUM to $15 billion and give the asset manager “real scale to operate effectively and develop a global proposition,” said McDonald.

McDonald sees further opportunities for consolidation within the fund of PE funds business, which was cited as a driver of Flag’s 2012 acquisition of Hong Kong-based Squadron Capital, which had some $1.5 billion in Asia AUM at the time.

Flag’s Asia AUM is still around that level, McDonald said. He added that secondary deals and co-investments have been growth areas in Asia recently. “Co-investments will be an area of focus going forward,” he said, noting that Flag has just completed two co-investment deals in Asia.

Access to Flag’s clients may also help Aberdeen attract investors to its European funds, which have been Aberdeen’s focus. “A lot of Asian investors are casting an eye to Europe,” said McDonald, “and US investors are also looking to Europe as well as asking for global products.”

“The compelling reason to do the deal was our complementary cultures,” he said, highlighting a common focus on independent research, niche assets including energy, agriculture and forestry assets and experience in selecting small and mid-cap PE fund managers.

Building a common culture may be key to the deal’s success given the amalgamation of personnel that Aberdeen’s PE business has seen. McDonald joined last year, following the completion of Aberdeen’s acquisition of Scottish Widows Investment Partnership from Lloyds Banking Group.

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