By Asian Venture Capital Journal
The 57% increase in size on the previous vintage – Affinity closed its fourth fund at $3.8 billion – is in line with other recent pan-regional fundraising activity. KKR raised $9.3 billion for its third Asia vehicle last year, up from $6 billion for Fund II. Meanwhile, The Carlyle Group is said to have set a hard cap of $6.5 billion for its fifth regional buyout fund, having raised $3.9 billion last time around. It reached a first close of $4.5 billion in October.
The speed of Affinity’s fundraising process says everything about the level of LP demand for certain managers. The firm took 15 months to close Fund IV in early 2014. Similarly, KKR took approximately seven months to get from launch to final close on Fund III, compared to 14 months for the previous vehicle.
As of June 2017, Affinity’s fourth fund had generated a multiple of 1.6x and a net IRR of 28.83%, according to Washington State Investment Board. This compares to 1.5x and 10.92% for Fund III, which is six years older.
A sizeable early exit for Fund IV came in January 2016 when Kakao Corporation paid KRW1.87 trillion ($1.55 billion) for a 76.4% interest in Loen Entertainment, which operates a hybrid of iTunes and Spotify in Korea. The acquisition took out Affinity’s 61.4% position – bought in mid-2013 for KRW265.9 billion – with the private equity firm receiving cash and Kakao stock that translated into a more than 6x return.
Affinity targets buyout deals in Greater China, Korea, Southeast Asia, and Australia and New Zealand. Recent acquisitions include Laureate Education’s Malaysia-based assets for $180 million, South Korean food container manufacturer Lock & Lock for KRW629.3 billion, and a 24% stake in Hyundai Card, General Electric’s Korean credit card joint venture, for KRW376.6 billion.
The private equity firm also assumed control of the Burger King master franchise for Japan. This is Affinity’s first direct investment in Japan, but the deal represents an extension of the work the firm is already doing as the owner of Burger King in South Korea.
In addition to Affinity and Carlyle, TPG Capital is currently in the market seeking up to $4.5 billion for its seventh pan-regional vehicle, while The Blackstone Group and Permira are targeting $3 billion and $1.5 billion, respectively, for their debut Asia funds. Baring Private Equity Asia is expected to launch its latest fund in the first half of 2018.
Credit Suisse was placement agent for Affinity Asia Pacific Fund V with Simpson Thacher serving as fund formation counsel.