The fund will adopt the same strategy as its eight earlier funds — buyouts, corporate carve-out, public-to-private, and growth equity transactions, especially in Europe and North America, and selectively in Latin America and Asia. Historically, in the subcontinent, Advent has been cautious with its investments, sometimes only making an investment per fund. But, the number of transactions has increased in the past three years.
Fund VI, for example, was small. There was only one investment — $110 million in Care Hospitals. Fund VII resulted in a carve-out in Crompton Greaves and Quest. Fund VIII accelerated investments in Manjushree Technopack ($190 million), ASK ($130 million), and Dixcy Scott ($125 million).
Advent India Managing Director Shweta Jalan did not share how much of the global fund will be allocated to India, but she said the company was “opportunistic”.
“With every passing fund, deal sizes have increased, along with allocation,” said Jalan who joined in 2009.
One private equity analyst who did not want to be named said the allocations for global funds were typically between 5 per cent and 7 per cent, but varied based on market dynamics.
Jalan said it was difficult to find $100-million deals earlier, and the firm had reduced investments to $50 million. Now, the minimum investment is for $100 million, and can be scaled up to $500 million per transaction.
Globally, Advent’s speciality areas are financial services, health care, technology, telecom, media, industry, and retail. In India, the focus has been narrower.
Common themes for all of Advent’s deals have been backed by consumption-driven stories in which the companies
are market leaders — Manjushree Technopak makes packaging for consumer items, Dixcy Scott makes innerwear, and Crompton Greaves are makers of electrical products such as fans, pumps and light bulbs.
There’s another common thread. Most of Advent’s India punts — which total $1 billion — have been in companies
run by promoters. This means decision making in these firms is highly centralised and transition to professional management can be challenging.
Jalan said two things have to be done in synchronicity for deals. “We bring in a CEO and CFO and set up a strong board,” she added.
In the case of Manjushree, the promoter and his brother both had sons, which meant filling the shoes of four directors as soon as the deal was done.
Helping Advent make all that happen are 10 investing partners and an advisory board whose chairperson is former HSBC banker Naina Lal Kidwai.
Senior advisors include former PepsiCo boss Manu Anand and other operating partners who include former Wipro executive Girish Paranjape, Bhaskar Iyer ex-Abbott, Shantanu Mitra, former CEO of non-bank lender Fullerton-India, Whirlpool’s Arvind Uppal and others. Care Hospitals, in which Advent invested $110 million, was sold in 2012 at a value of 2.2 times. This is the sole exit of Advent under Jalan till now.
Are there transactions Advent won’t consider? Jalan said Advent would not chase distressed assets and deals.
PE deals have seen a surge in value, with several transactions ranging between a half-billion and a billion dollars (Brookfield-Leela Hotels; Blackstone-Mphasis; Brookfield-RIL East West Pipeline; KKR-Ramky Enviro Engineers) but typically like Advent, most American firms such as General Atlantic, TA Associates invest between $100 million and $400 million. Advent's India advisory board chairperson Naina Lal kidwai notes that one shift over the years has also been the opportunity to do larger deals, especially in areas like pharma.
“There will be more such deals in the future. Another area where deal sizes will be large is the financial services space where Advent is underinvested presently, and is interested in investing,” she said. “Advent has both the interest and the ability to do a range of both smaller and large deals across industries.”
Is that something Advent will buck the trend on? Jalan said, “I would like to invest at least $500 million if not a billion but the opportunity has to be right, and there’s lots happening in financial services.”