It is not the easiest of environments for raising private-equity capital at present, but PE veteran Edward Sippel says TA Associates has two big advantages over many of its rivals -- it does a lot of minority-stake investing and runs an internal debt fund.
Sippel had run the Asian operations of Quadrangle Group, which were set up in Hong Kong in 2008, but left earlier this year after the $3 billion company shelved a fund. After weighing his options, he accepted a similar role running $16 billion Boston-based TA Associates’ new regional office in Hong Kong.
The office will open in June with an initial staff of three in addition to Sippel: Jason Tan, who has joined as director for China from US-based PE firm Summit Partners; a transfer from TA’s Boston office; and another local hire. The firm also plans to make further hires, but Sippel declined to give details.
Neither Quadrangle nor Summit Partners responded to queries by press time about whether Sippel or Tan had been or would be replaced.
“In Asia, there is a lot of growth and minority investing,” says Sippel, “and a lot of firms come here that don’t have that skill-set and have to change their approach.” TA, by contrast, is very comfortable taking non-controlling stakes, he says. “It’s in their DNA.”
He adds that 65-70% of his own deal flow in Asia in recent years has been in non-controlled transactions.
Whereas US-based Quadrangle was a media-focused PE firm, TA has made a lot of non-controlling investments in sectors highly correlated to discretionary spending and growth in Asia, says Sippel. These include technology, healthcare, financial services, business services and consumer.
Another major plus point for TA is its internal subordinated debt fund, he says. Not many PE firms can offer debt as well as equity capital and make loans and the like, adds Sippel, noting that this is a very useful tool to offer fast-growing companies.
TA already has an office in Mumbai and recently closed its fourth deal in India, but is now looking to expand its reach elsewhere in the region. The firm has already invested $2.5 billion outside the US since 2002, and over 30% of its deal flow in recent years has been outside its home market.
China is an obvious target market, notes Sippel – hence Tan’s hire – and Indonesia, Korea and Australia are other countries TA plans to tap, following an “opportunistic and pan-regional strategy”.
TA will fold these investments into its existing global funds – the current flagship being the TA11 fund – and does not presently plan to launch an Asia-specific fund.
“We will not be restricted by capital resources,” says Sippel, “but finding great deals might be a constraint, at least to start with.”
Moreover, while TA focuses substantially on growth assets, it also executes buy-out deals and invests across the board from private small-caps to large state-owned entities.
Prior to joining Quadrangle in 2007, Sippel was a partner at TVG Capital Partners, a Hong Kong-based venture-capital firm specialising in deals in the telecoms, media and technology sectors.