This article was downloaded by: [Duke University Libraries] On: 02 September 2013, At: 21:01 Publisher: Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK The Pacific Review Publication details, including instructions for authors and subscription information: http://www.tandfonline.com/loi/rpre20 New capitalist processes, interdependence and the Asia–US private equity relationship Justin Lee Robertson a a Department of Politics and International Studies, City University of Hong Kong Published online: 14 Dec 2012. To cite this article: Justin Lee Robertson (2012) New capitalist processes, interdependence and the Asia–US private equity relationship, The Pacific Review, 25:5, 637-659, DOI: 10.1080/09512748.2012.742922 To link to this article: http://dx.doi.org/10.1080/09512748.2012.742922 PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon and should be independently verified with primary sources of information. Taylor and Francis shall not be liable for any losses, actions, claims, proceedings, demands, costs, expenses, damages, and other liabilities whatsoever or howsoever caused arising directly or indirectly in connection with, in relation to or arising out of the use of the Content. This article may be used for research, teaching, and private study purposes. Any substantial or systematic reproduction, redistribution, reselling, loan, sub- licensing, systematic supply, or distribution in any form to anyone is expressly
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This article was downloaded by: [Duke University Libraries]On: 02 September 2013, At: 21:01Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH,UK
The Pacific ReviewPublication details, including instructions for authorsand subscription information:http://www.tandfonline.com/loi/rpre20
New capitalist processes,interdependence and theAsia–US private equityrelationshipJustin Lee Robertson aa Department of Politics and International Studies, CityUniversity of Hong KongPublished online: 14 Dec 2012.
To cite this article: Justin Lee Robertson (2012) New capitalist processes,interdependence and the Asia–US private equity relationship, The Pacific Review, 25:5,637-659, DOI: 10.1080/09512748.2012.742922
To link to this article: http://dx.doi.org/10.1080/09512748.2012.742922
PLEASE SCROLL DOWN FOR ARTICLE
Taylor & Francis makes every effort to ensure the accuracy of all theinformation (the “Content”) contained in the publications on our platform.However, Taylor & Francis, our agents, and our licensors make norepresentations or warranties whatsoever as to the accuracy, completeness, orsuitability for any purpose of the Content. Any opinions and views expressedin this publication are the opinions and views of the authors, and are not theviews of or endorsed by Taylor & Francis. The accuracy of the Content shouldnot be relied upon and should be independently verified with primary sourcesof information. Taylor and Francis shall not be liable for any losses, actions,claims, proceedings, demands, costs, expenses, damages, and other liabilitieswhatsoever or howsoever caused arising directly or indirectly in connectionwith, in relation to or arising out of the use of the Content.
This article may be used for research, teaching, and private study purposes.Any substantial or systematic reproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in any form to anyone is expressly
The Pacific Review, 2012Vol. 25, No. 5, 637–659, http://dx.doi.org/10.1080/09512748.2012.742922
New capitalist processes,interdependence and the Asia–USprivate equity relationship
Justin Lee Robertson
Abstract Private equity has had a short but eventful history in East Asia, charac-terized first by US firm dominance and then by a nationalistic backlash. This articlecharts these earlier patterns, but argues that significant developments have takenplace since the early 2000s, which have strengthened the position of private equitycapital in the Asian political economy. As private equity deal-making has returnedto Asia, new linkages have been formed between US private equity funds and lo-cal private equity players. Of particular importance have been US–Asian joint ven-tures, Asian nationals returning to domestic firms from US private equity housesand supportive local elites in the banking and pension fund sectors. The significanceis two-fold. First, the spread of private equity has been founded on interdepen-dent relationships between US actors and local actors, which have more successfullygrounded the private equity industry in national political economies than its originsin the Asian crisis period. Second, despite the relative localization of Asian privateequity, industry practices are still largely shaped by the US model of private equityand the merger and acquisition activity that it entails, rather than a distinct Asianprivate equity model. The findings of the article contribute to calls that have beenmade for research on the changing global economy that comprehensively integratesdomestic and international levels of analysis.
Keywords private equity funds; Asia–US economic interdependence; domestic re-sistance to foreign business; adaptation of US capital; financial returnees.
In the last 15 years, there has been an attempt to transplant business struc-tures that originated in Western markets, such as hedge funds, privateequity and investment banking, to other parts of the world. Two maininterpretations normally come to the fore in examining how foreign
Justin Robertson is an Associate Professor in the Department of Politics and InternationalStudies at the City University of Hong Kong and an Associate of the Southeast Asia ResearchCentre. He is the author of US-Asia Economic Relations: A Political Economy of Crisis andthe Rise of New Business Actors and has had articles published in Asian Survey, New PoliticalEconomy and Review of International Political Economy.
City University of Hong Kong, Asian and International Studies, Tat Chee Avenue KowloonTong, Hong Kong, Hong Kong.
economic processes fare in Asian countries. In the first perspective, inter-national firms dictate outcomes through control of business concepts andcapital, whereas in the second perspective, foreign business models founderdue to concerted resistance from a range of domestic constituencies. Eco-nomic patterns in the Asian region starting from the late 1990s are oftendescribed according to a two-part story that alternates between these twoperspectives. Foreign interests set the regional economic agenda followingthe 1997–98 Asian financial crisis (Wade 1998), after which domestic resis-tance coalesced in opposition to foreign intervention and earlier domesticpolitical economy formations re-emerged (Higgott 1998).
The article reconsiders this commonly understood recent history of Asiathrough a case study of private equity funds. Positioned at the intersectionof the real and financial economies, private equity funds are business actorsthat typically acquire positions in national companies outside of the stockmarket. Otherwise outstanding assessments of the Asian political economyone decade after the 1997–98 crisis (MacIntyre et al. 2008; Carney 2009)make no reference to the private equity sector. This is an omission. The pri-vate equity sector has established a deeper footing in Asian countries andits presence is an important illustration of patterns of economic interdepen-dence in the region.
The purpose of this article is to explain the nature and trajectory of pri-vate equity fund investment in Asia. The findings demonstrate that a dis-tinctive US model of private equity was implemented in Asia during theregion’s downturn during the late 1990s and early 2000s. After generat-ing a nationalist backlash, US private equity firms subsequently struggled.However, private equity as a business type has not been entirely shunned.Rather, hybrid forms of private equity have emerged in Asian markets,driven by US firms and local advocates of private equity. The resultingprivate equity alliances point to how Asian business and finance are stilldeeply connected to global economic processes and to how US capital-ist forms are still important drivers in some areas of the Asian politicaleconomy.
The argument is developed in the following manner. The first section in-troduces private equity as a form of capital in the global political economyand describes its dominant American characteristics before the second sec-tion outlines the conventional narratives of foreign control and local re-sistance. The third section sets out Asia’s initial private equity experience,starting with foreign dominance during the Asian crisis and followed bya dramatic slowdown in private equity buyouts, prompted by forceful do-mestic reactions to the Asian crisis buyouts. The fourth section illustratesthe growth of domestic–foreign coalitions that allowed private equity deal-making to return in the mid-2000s and offers two explanations for thischange: the adjustments made by US private equity firms and the facili-tating roles played by the domestic elites. The final section emphasizes the
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continuing importance of economic interdependence in studying the Asianpolitical economy.
Private equity as a form of capital in the global economy
This article presents some of the first empirical work on private equity fundsin Asia. Private equity funds are deserving of close attention because oftheir rapid growth and the reverberations they have caused in national mar-kets. Private equity funds are businesses that draw upon capital and debtin the international financial system to acquire stakes in firms that are in-tended to be sold for profit after a period of three–seven years. There aremore than 4,000 private equity firms worldwide, although the private eq-uity universe is significantly larger since each private equity firm operatesmultiple private equity funds. One of the largest US private equity firms,the Carlyle Group, runs nearly 90 private equity funds with a total value ofmore than $150 billion (Carlyle Group 2011).
Private equity is one type of capital in the global economy. Its invest-ment horizon places it in the middle of a spectrum relative to the short-term trading approaches of large numbers of players in financial markets,such as hedge funds, and the longer-term capital of many multinationalcorporations (MNCs). Even if private equity investments may be held forshorter periods than MNCs, these vehicles assume ownership and manage-ment control of corporations and, for this reason, their investments are partof foreign direct investment (FDI) in host markets. Most US private equitydeals involve a larger than 10% stake in a foreign business enterprise, thethreshold at which transactions are counted as FDI. Private equity funds fallinto two largely separate categories: in buyout funds, private equity groupsacquire controlling stakes of a company, whereas in growth and venturecapital funds, minority positions are taken in companies that are at an ear-lier stage of development. While US firms have been at the forefront ofboth of these markets, US private equity firms are particularly associatedwith their buyout activities.
Buyouts have been the dominant component of American private equityover the last 20 years, representing 72% of the value of all private equitydeals struck by US firms from 1990 to 2007 (Lerner and Gurung 2009: 75).Debt has made the scale of the private equity business possible and US buy-out funds have borrowed more than two times their own capital, on average,to purchase other firms. In the industry, debt financing is called leveragedfinance. At the level of the real economy, US buyouts focus heavily on re-structuring the balance-sheets and workforces of the firms that are acquired.When reference is made to the US model of private equity, I am referring todeal-making that is concentrated on takeovers, draws on leveraged financeand entails restructuring of the acquired firms, all of which are consistentwith the so-called Anglo-American business model.
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Table 1 The top 10 US private equity firms
Rank Name of firmCapital raised during
2005–09 ($ billion)
1 Goldman Sachs 54.52 Carlyle Group 47.83 KKR 47.04 TPG Capital 45.05 Apollo Capital Management 34.76 Blackstone Group 31.17 Bain Capital 29.28 Warburg Pincus 23.09 First Reserve Corporation 19.010 Advent International 18.1Total Top 10 US firms 349.4
Source: PEI (2010).
While the US economy is in relative international decline, there are partsof the global political economy in which American capital and businessprinciples still appear to be in command. Private equity is one such sec-tor. Judged by location of headquarters, private equity is a decidedly trans-Atlantic-centric space in the world economy with all 50 of the largest pri-vate equity firms located in either North America or Europe (PEI 2010).There are significantly more partners at private equity firms based in the US(38,500) than all other countries combined (30,600).1 From 2005 to 2010, thelargest ten US private equity firms raised $350 billion for deals (Table 1),which represents an even larger sized pool of capital when combined withdebt. Tett (2006) accurately captures how the private equity industry hasbeen American in its ideological orientation and human resources base:‘[B]uy-out players generally operate in a milieu where the American wayof capitalism is considered self-evidently right . . . these American men . . .usually assume that the rest of the world should become capitalist too.’
At first, private equity was an Anglo-American phenomenon with morethan 90% of buyouts during the late 1970s and 1980s carried out in NorthAmerica and the UK (Kaplan and Stromberg 2008). More recently, privateequity has extended beyond these founding markets and more than half ofbuyouts during the 2000s took place outside of the US, especially in Europe(Lerner and Gurung 2008: 16). The private equity industry is now of a scalethat matters in the global economy and, in the last decade, private equityfirms have aggressively targeted the Asian region with more than two-thirdsof the money raised by private equity funds for emerging markets in recentyears dedicated to Asia (EMPEA 2010a). According to my calculations,there are currently more than 10 US funds with over $1 billion available forinvestments in Asia (data from EMPEA 2010a).
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The world of private equity has leapt into public consciousness in recentyears and US private equity funds have been a focal point of controversy.There have been conflicts over the foreign investments of US private eq-uity firms in countries ranging from Denmark to Korea to Japan and theprivate equity concept has most recently been assailed by American andEuropean regulators. Labour retrenchment, unsustainable debt, disregardfor company values, excessive compensation and low rates of taxation havebeen among the criticisms levelled at private equity firms.
Moving beyond the domestic–foreign divide
The extent of US private equity fund penetration in Asia is an importantempirical test. In one theoretical school, foreign firms hold leverage, de-rived from their market experience, technological and financial assets andthe political support of their home governments (Gilpin 1975; Hu 1992;Wade 2003). This leads to the expectation that US private equity firms willbe dominant in Asia. In an opposing perspective, domestic forces stand inthe way of extensive foreign investment as a result of the strength of theanti-reform elements among the business and political elite (Whitley 1999;Robison et al. 2000; Hewison and Robison 2006). Sales of local assets toforeign buyers, such as private equity funds, are obstructed because rulingparties are closely connected to domestic business groups and because largesections of the capitalist class are hesitant to permit a further opening to for-eign capital (Walter 2008). Foreign investors, including private equity firms,are also likely to be marginalized as government-linked companies expandin emerging markets (Bremmer 2010). Consistent with the view that domes-tic actors are pitted against foreign private equity firms in a zero-sum game,a US lawyer warned that the Chinese government was ‘trying to build up astrong domestic private equity sector to counter the influence of the foreignprivate equity players’ (McLeod 2009).
Some recent IPE literature wisely calls for a more refined integrationof domestic and foreign levels of analysis (Phillips 2005; Walter and Sen2008) and the research in this article strives to meet these calls. Most Asianeconomies do not operate based on a stark distinction between the domes-tic and the international spheres. New hybrid modes of foreign investment,such as the form private equity has taken in Asia, are examples of the inter-mediate area that exists in many economies. The argument of Sklair (2001)that there are globalizers and there are localizers and the interests of the lo-cal elites generally run contrary to global business misses many of the com-plexities of the global political economy. Some useful attempts at bridgingdomestic and international analysis (Keohane and Milner 1996) are dimin-ished by the excessive weight that they place on the domestic level ‘block-ing’ internationalization.
Without moving fully towards a Marxist framework, the earlier insights ofEvans (1979) are relevant. Evans rejected clear-cut divisions between local
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and foreign capital. It was untenable, he argued, to maintain that local cap-ital was pitted against foreign capital. Instead, local industrial capital wasdivided and some factions chose to work closely with foreign capital. Theglobal economy, therefore, advances furthest when foreign penetration isfacilitated through alliances with domestic capitalists. In the case of privateequity, many local actors have determined that their interests are served bycollaborating with foreign private equity actors, as the work of Evans leadsus to expect. The article charts out the interdependencies between Asia andthe US in private equity and highlights the growing leverage of Asian actorsbut also the ideological convergence that now binds domestic and interna-tional actors together.
Private equity following the Asian financial crisis
The next two sections examine the history of private equity funds in Asia,which unfolds in three phases: 1) foreign private equity funds took advan-tage of the Asian crisis to acquire Asian companies, but then 2) US buy-outs stalled after this period of heightened activity before 3) a new phaseemerged in which US firms made only non-controlling investments on theirown or controlling investments through joint ventures (JVs) with local part-ners. This three-stage history holds as a larger regional pattern, even thoughthere may be certain national variations. The key explanatory variables aremass-based local opposition, US firm adaptability and domestic elite con-version to private equity.
US firms’ success and failure
While some observers expected ‘Main Street’ to enter the Asian region af-ter the 1997–98 financial crisis (Johnson 2000), the real story of this pe-riod was the corporate strategies of relatively unknown US private equityfirms. Private equity funds were responsible for a large proportion of USFDI flows in the wake of the Asian crisis and buyout deals were struck in across-section of Asian markets, including Indonesia, Japan, Korea, Taiwanand Thailand. There were unprecedented takeovers of Asian financial insti-tutions. Ripplewood took over a faltering Japanese bank, Farallon acquiredBank Central Asia in Indonesia and three US funds sealed major Koreanbanking deals: the Carlyle Group acquired KorAm Bank, Lone Star ac-quired Korea Exchange Bank and Newbridge Capital acquired Korea FirstBank. Lone Star, on its own, invested more than $5 billion in Asian compa-nies after the Asian crisis. In Thailand, GE Capital and Goldman Sachs wona large proportion of the assets tendered through government-organizedauctions, spending more than 20 billion baht each. These crisis-time invest-ments were highly profitable for US funds, particularly since they were reg-istered via tax havens. The most extreme was Ripplewood’s profit of ten
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times its investment in Shinsei Bank in Japan. Newbridge Capital bookeda profit of $1.2 billion on its $500 million Korean investment, the CaryleGroup nearly tripled its investment in KorAm Bank in less than four yearsand Lone Star, despite its legal disputes, exited its investment in Korea Ex-change Bank with a $4 billion profit.
US private equity funds gained leverage in crisis-time Asia because ofIMF pressure that distressed domestic banks be sold and because few lo-cal financial institutions were interested in expanding their banking opera-tions during the crisis.2 US private equity companies also drew on a form ofpolitical power by hiring former politicians as lobbyists. Ex-US PresidentGeorge H. W. Bush led a Carlyle Group investment mission to Thailandand Ripplewood recruited former US politician James Baker to open doorsin Japan’s finance ministry. Private equity firms are risk-taking actors and,in these crisis conditions, they possessed investment capital, while their lo-cal competitors were mired in economic difficulties. As a key US player inIndonesia stated of the buyouts in Indonesian banking and consumer prod-uct firms, ‘[I]t was the right time and there are not many unhappy investorsin the post-crisis period’ (Alexander 2007).
It appeared that the Asian crisis represented the stepping stone neededfor US private equity funds to establish the buyout model in Asian markets.However, starting in the early 2000s, US-style buyouts suffered setbacksacross the region. Following the controversy over the Asian crisis deals,buyouts by foreign private equity funds have virtually ceased in Korea. Theperennial hope among foreign private equity firms has been that Japaneseconglomerates will sell off divisions. This expectation has been largely unre-alized. A case in point is the US private equity fund, KKR. It entered Japanin 2006 and, six years later, it has only managed to complete one Japanesebuyout transaction. In 2010, foreign private equity funds were responsi-ble for only 18% of all deals in Japan’s private equity market (McKinsey2011: 12). In China, the Carlyle Group’s buyout of an equipment makingcompany failed when the Chinese government reversed course and ruledthat the firm was in a strategic industry. Blackstone’s investment in an In-dian media company, which would have been the largest ever in the mediasector, collapsed after struggling to gain government approval. Domesticvoices raised objections to Advanced Semiconductor Engineering, a largeTaiwanese company, being taken over by the Carlyle Group.
The shortage of US buyouts can also be measured according to staff levelsand capital raised and invested. Between 2002 and 2003, 16 foreign privateequity firms closed their Asian operations and 115 senior managers from USfirms in Asia resigned (APER 2009: 3). Then, only $10 billion was raised forAsian private equity in 2003–04 – for comparison’s sake, $129 billion wasraised in the 2005–08 period (APER 2008: 10). The new capital raised inthe mid-2000s has not been invested in buyouts of Asian companies. Tak-ing 2008 and 2009 together, only 15% of private equity deals in the Asian
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emerging markets were buyouts (EMPEA 2009). China and India are nowthe two largest private equity markets in Asia, yet US buyouts are smallparts of private equity activity in these countries. For the last available yearof data, buyouts of local firms were valued at only 10% of the value of allprivate equity deals in these two markets (EMPEA 2010b). US buyouts arenow taking place in Australia, which is included in and tops lists of Asianbuyout activity.3
Depth of domestic resistance to US buyouts
There is unease about foreign takeovers among the general public in manysocieties. In the Chinese case, Hickey (2008) writes: ‘[A]t the elite level, re-lations between the United States and China are at their best in decades. Atthe popular level, however, there is a strong suspicion that America wantsto keep China backward, poor and divided.’ Males and lower income in-dividuals are most likely to hold negative views on globalization and re-cent survey research has confirmed this trend for China (Lee et al. 2009).In Japan, the general public purchased 150,000 copies of Za Gaishi in itsfirst month of publication; Za Gaishi is a 2002 novel in which a US pri-vate equity-style group is accused of unfair and immoral behaviour. Anxi-ety about the global economy underpins many flashpoints of economic na-tionalism. Private equity funds attract particular attention because of theconcern that these are short-term investors, which will drastically restruc-ture domestically-owned firms and because the largest actors are American-owned.
After buying troubled companies in the aftermath of the Asian crisis,US private equity firms reaped windfall profits when they sold their stakes.They then suffered attacks within these countries for the profit margins,use of offshore tax structures and the short-term nature of the investments.This domestic resistance was sufficiently robust to foreclose any repeat ofhigh levels of US private equity buyouts. Nationalistic media and parlia-mentarians popularized an image of foreign firms ‘stealing’ valuable Asianassets.4 Thais cast US finance companies as irresponsible Western vulturesthroughout the crisis, placing particular emphasis on the alleged conflict ofinterest of Lehman Brothers in the government-led auctions of bankruptfinance companies. In Korea, the public referred to US private equity fundsas Muck Tui capital, which means literally ‘to eat and to run away’. Thenegative reaction to US private equity took place largely in the court ofpublic opinion, but some authorities acted on the public discontent. Koreanprosecutors raided the offices of several US private equity firms, generat-ing significant international media coverage, while Japan imposed a tax topenalize foreign private equity funds using tax haven structures.
Part of the explanation for the backlash against US buyouts lies in thestrategies of US firms. US firms struck crisis-time deals in sensitive and
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regulated industries, such as financial services and telecommunications inAsia. While these deals were rational in the short-term, not surprisingly,they touched a nerve in many national quarters. As one of the executives ofthe US firm, TPG Capital, noted, the heightened political sensitivities nowmean that ‘if you’re going after a large bank, a large semiconductor com-pany or a large telecom company, domestic regulators are going to stand up’(Carroll 2007). Moreover, US private equity firms often focus on acquiringthe best-known assets in foreign markets, which can spark domestic misgiv-ings. As an interviewee noted, ‘[I]t’s easier to explain to your investors ifyou’re going after the biggest pork producer in China.’5 The ‘crown jewel’investment mind-set of foreign private equity firms also contributed to thedecline of US buyouts in the mid-2000s.
By strategically incorporating their investments in low tax jurisdictions,US firms avoided capital gains taxation. Lone Star routed its investment inKorea Exchange Bank through subsidiaries in three different tax havens,Belgium, Bermuda and Luxembourg. Similar structures were put in placefor private equity deals in other Asian countries, including the highly prof-itable Shinsei Bank deal in Japan. These are telling examples of global busi-ness taking advantage of global finance. Asian governments are also respon-sible for this outcome. In need of capital during the crisis, they accepted theterms presented by foreign private equity funds. Perhaps unaware of the taxstructures designed by the American funds, global finance clearly ‘won’ thisround based on the tax-free nature of their substantial investment gains.Nonetheless, global finance ‘lost’ the next round as Asian domestic politicsrestricted the range of private equity investment in these markets. While fi-nancial crises often provide business opportunities for private equity firms,local sentiment turned against US private equity houses in the wake of thecontroversial buyouts of the Asian crisis era and their buyout deal-makingslowed markedly.
Private equity since the Asian financial crisis
While more negative stances on foreign buyouts are evident since the Asiancrisis, private equity deal-making has continued in the region and Asia’sshare of all global private equity investments has actually doubled in recentyears to nearly 25% (Bain 2010: 35). This business activity, however, hasbeen undertaken in a revised form – what I call hybrid modes of investment.Private equity takeovers have only been feasible for JVs or for new inde-pendent Asian funds – not for wholly-owned US private equity funds. Localprivate equity firms have emerged in Asian countries and these groups areattempting to strike deals both on their own and in conjunction with foreignprivate equity houses.
US firms have shifted resources away from buyouts into what are termedgrowth capital funds. In a growth capital deal, a private equity fund takes
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a minority stake in an established company that requires capital for expan-sion. The private equity fund seeks to have its voice heard on the direc-tion of the company, but ultimately recognizes that it lacks any control-ling position. Well over half of the private equity transactions in emergingmarkets are minority investments in companies (EMPEA 2010a). Foreigninvestment via the route of growth capital, as one interviewee notes, canreduce nationalistic responses: ‘[M]inority deals by foreign players in In-dia are written up in the press in a very positive way.’6 Growth capitalbusiness strategies may be prudent because local businesses see stronggrowth prospects and question the point of selling their controlling stakes tooutsiders.
Growth capital was by far the largest component of private equity flowsto China and India during the 2000s, representing 44% and 51%, respec-tively, of the private equity transactions in these two countries (CambridgeAssociates 2010). The Carlyle Group has managed four Asian growth cap-ital funds from which investments have been made, such as a $650 mil-lion minority investment in the Housing Development Finance Corpora-tion (HDFC) of India. The firm possesses more than $1 billion of capital inits latest fund for such investments in the Asian region. Carlyle’s competi-tor, KKR, has raised $800 million for growth capital deals in China alone.It recently paid $150 million for a 20% stake in a major Chinese milk sup-plier. One of the most profitable growth capital deals in recent years wasWarburg Pincus’ $300 million investment in an Indian telecommunicationscompany, which generated a return of 600%.
Adaptation of US private equity capital
Private equity’s origins in Asia trace back to US power, but a domesticrebuff then followed. Influenced by important readings that captured thegathering resistance to foreign interventions (Higgott 1998), the story ofthe Asian crisis usually ends at this point. Weiss (2000), for example, re-treated from arguing American opportunism in Asia and returned to hercentral claim that states are capable of introducing effective industrial pol-icy. The claim, therefore, is that US power achieved only short-term resultsbefore the Asian crisis culminated in a return to the domestic business sta-tus quo. Applying this logic to private equity, the argument is that US firmssought to continue their buyout practices in the post-crisis period, but facedobjections and were forced to retreat, leaving Asia once again with lim-ited private equity markets. Contrary to this view, the perceived crisis-timetransgressions of US private equity funds have not led to their outright ex-clusion from the Asian political economies.
US private equity funds have learned through market failures that newaccess channels are needed if they are going to invest substantial capital inAsia. One means for these firms to deploy capital in Asia is to partner withlocal private equity funds. Working with local capitalists defuses nationalist
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tension over foreign investments and, in some cases, enables deals to pass asdomestic transactions and avoid unwanted public attention and scrutiny byregulators. TPG has chosen to enter into a formal arrangement with a localprivate equity firm in one of the largest emerging markets, Indonesia. It hasformalized a relationship with Northstar Pacific, an Indonesian private eq-uity group. TPG contributes a significant proportion of Northstar Pacific’sfunds and has the right to invest additional capital in deals that NorthstarPacific makes. Northstar Pacific is a domestically registered firm in Indone-sia led by what I call a ‘financial returnee’, an Indonesian who was based inglobal finance with Goldman Sachs and other firms in London, New Yorkand Tokyo before returning to domestic finance and launching NorthstarPacific in 2006. Walujo is more than a member of the global financial elite –he is immersed in domestic networks as well, many of them related to hisfamily connections to a powerful Indonesian business family, the Bakries.This connection has facilitated several of Northstar Pacific’s investments.Northstar Pacific exemplifies a business model of combining commercialand political contacts domestically with global investment capital and theadoption of American private equity practices.
Building on ties established with Walujo while he was at Goldman Sachs,TPG agreed to be Northstar Pacific’s business partner and it has investedin each of Northstar Pacific’s two private equity funds. TPG will play a keyrole in Northstar Pacific’s third and largest private equity fund to date witha fundraising target of close to $1 billion. The case of a 2008 Indonesiantakeover is instructive. Northstar Pacific, with financial and technical sup-port from TPG, bought the Indonesian bank, PT Bank Tabungan. The In-donesian private equity firm had to navigate the domestic political level,including an intensive assessment from banking regulators. It also workedglobally, with TPG’s help, to bring in the foreign capital required to fi-nance the deal from sources including TPG, Singaporean sovereign wealthfunds and US pension funds. The deal is currently valued as one of North-star Pacific’s most successful. It is unlikely that TPG could have completedthis acquisition on its own, given how wary Asian countries have becomeof foreign takeovers in the financial sector. Northstar Pacific has also exe-cuted two buyouts worth more than $300 million each in the coal industry.Considering government sensitivities towards foreign ownership of natu-ral resource assets and with the presence of local mining constituencies, itis doubtful that any foreign private equity fund would have attempted tostrike these deals. Yet, TPG, through its JV with Northstar Pacific, is now alead investor in Indonesian banking and mining.
Turning to China, until recently, US-run firms held a dominant positionin the country’s private equity market. These foreign enterprises structuredtheir deals in China using an offshore financial vehicle, normally regis-tered in the Cayman Islands, which enabled them to buy and sell Chinesecompanies without paying any capital gains tax in China. Almost aloneamong emerging markets, China banned this practice in 2006. The trend
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in China is for US private equity firms to manage Chinese renminbi (RMB)funds made up entirely of capital contributed by Chinese investors; 70%of all private equity firms raised for China in 2009 and 2010 were RMB andnot US dollar denominated (APER 2010: 3). Nearly every major US privateequity firm is pursuing an RMB private equity fund strategy. TPG is aimingto run the largest set of RMB funds in China, worth more than 10 billionRMB ($1.5 billion). US firms are permitted to operate these funds undertheir own management, but some groups have chosen to partner with localinstitutions. The Carlyle Group manages one RMB fund with a private sec-tor partner, the Fosun Group, and one RMB fund in conjunction with theBeijing local government.
US firms in China have chosen an approach that excludes their tradi-tional base of Western investors. For example, investors in the 5 billionRMB fund of the US private equity firm, Blackstone, include the NationalSocial Security Fund, the Shanghai government and a major Chinese prop-erty developer. A key reason is that RMB private equity funds managedby foreigners are treated in line with domestic investors. Foreign currencyfunds, on the other hand, face more regulatory checks and are subject tosectoral limitations. For these reasons, US private equity funds are estab-lishing management teams in China and fundraising with Chinese investors.One private equity insider with a US firm acknowledges that in the globaleconomy, ‘increasingly you don’t want to be seen as a US company; youwant to be seen more generically as a manager of capital’.7
US private equity funds have altered their strategies in Asian marketsand turned more forcefully to making non-controlling investments and es-tablishing relationships with local private equity funds. TPG’s relationshipwith Northstar Pacific, which marries the domestic cover of a local operatorwith the greater financial resources and track record of a US private equityfirm, and the range of US JVs in China are characteristic examples. JVsby Blackstone, the Carlyle Group and JP Morgan in Brazil, and KKR andTPG in Korea are other examples.
Facilitating the domestic elites
US private equity funds struck some of the most profitable deals in the his-tory of private equity after the Asian crisis and well-known internationalpolitical economy (IPE) texts (O’Brien and Williams 2004) assumed thatthese US acquisitions were a significant development in the global econ-omy. By its conclusion, however, the Asian crisis resulted in a more difficultenvironment for US private equity funds. Importantly, though, the crisis in-troduced private equity to the region and the model has been exploited do-mestically since then. Private equity’s advancement in Asia, through bothdomestic and foreign firm channels, is puzzling for perspectives foundedon widespread domestic resistance to global economic processes. National
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actors have proven that they have the capacity to change the structure offoreign capital and yet their interventions have not solely been about con-straining private equity. Some entry points have been closed to foreign pri-vate equity funds, whereas other opportunities have arisen.
This brings us back to Hickey (2008) and pro-globalization elites. An in-consistency has emerged in numerous Asian states between outward dis-plays of economic nationalism and the underlying economic collaboration,facilitated especially by business elites. Some domestic actors have con-sented to new investment vehicles first produced in Anglo-American cap-italist systems. The most obvious are the senior-level Asian officials whohave been hired by US private equity firms. Examples include the formerHong Kong Finance Minister Anthony Leung, who joined Blackstone; Xi-ang Li, who worked for both the Chinese government and Goldman Sachsbefore joining KKR; D. S. Brar, a director of the Reserve Bank of Indiawho was hired by KKR; and Takeshi Isayana, a former senior official atboth Nissan and the Japanese Ministry of International Trade and Industrywho joined the Carlyle Group.
Looking beyond the staff of US firms, Marxists such as Evans (1979) haveconsistently pointed out that comprador elites enable capitalism to oper-ate on a global scale. The closest we find to comprador elites today arewhat I call financial returnees. I define financial returnees as individualswho have returned to domestic finance after spending significant time in aglobal financial city or working for a major foreign financial institution inan Asian capital. Nearly all top positions in domestic funds are filled by in-dividuals with extensive experience abroad in investment banking and pri-vate equity. Key members of the Asian private equity elite have undertakengraduate studies in the US, worked for a US investment bank and possiblyalso a US private equity firm, before shifting to a locally-operated Asianprivate equity fund. Fang Fenglei of Hopu Fund (China), Ashish Dhawanof ChrysCapital (India), Patrick Wulajo of Northstar Pacific (Indonesia),Michael Kim of MBK Partners (Korea) and David Do of Vietnam Invest-ments Group (Vietnam) are representative examples. The presence of fi-nancial returnees is an important part of the explanation for the third phaseof Asian private equity.
These individuals are local intermediaries for foreign capital and their ac-tions are consistent with Anglo-American capitalism, but they are not un-derlings of global capitalists. In comparison to the comprador elite model,financial returnees are more sophisticated and influential actors. These fi-nancial returnees are better conceived of as like-minded neoliberal partnerswho have privileged access to domestic markets. Financial returnees haveinternalized the norms of globalization (Soederberg et al. 2005) and believethat their local transplant firms can adopt the buyout-based model privateequity model and make it more palatable domestically after the severe re-action against foreign private equity funds. Thus, the norms of key agents
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in Asian private equity are similar to those found in the US private equityindustry and are in many cases derived from direct ties to US firms.
The Economist (2010) recently reported that Chinese officials believethat ‘foreign investors need China more than it needs them’. This statementis accurate in so far as foreign private equity firms have conceded that todo business in the BRIC (Brazil, Russia, India and China) countries, strate-gies other than US-style buyouts must be pursued. Where the statement ismisleading is that even China, arguably the BRIC country with the mostleverage because of its domestic surpluses, is supportive of foreign privateequity funds. China is not a capital deficient economy like some of its Asiancounterparts. However, lack of management expertise in the private equitybusiness leads Chinese actors to be open to JVs with foreign firms and tohave financial returnees lead many domestic private equity firms. Returneesbridge the domestic and foreign levels by attracting foreign financial capitaland carrying out foreign models of private equity, even though they are byno means directly under the control of foreign firms.
In Korea, foreign private equity firms have made few inroads since theearly 2000s with limited numbers of transactions on their own or JVs withdomestic parties. Korean private equity firms in 2010 carried out 85% ofprivate equity investments in the country (McKinsey 2011: 8). Yet, foreignfactors are still inextricably linked to Korea’s private equity industry. Eachof the four top locally-controlled firms is led by a financial returnee. ScottHahn and Jason Shin both left the senior ranks of Morgan Stanley in Seoulto start Hahn & Company and Vogo Capital. Michael Kim founded MBKPartners after leaving the Carlyle Group and Peter Ko spent significant timein US investment banking before starting H&Q Asia Pacific. All four areproducts of US business schools, three of them having studied at HarvardBusiness School. Such pedigrees enable these new corporate leaders in Ko-rea to interact easily with international investors and to pursue buyout dealslocally.
In China, private equity has been welcomed by many domestic politicaland economic elites and a range of Chinese investors, including nationalpension funds, local governments, banks, insurance companies and privatefirms, have begun to allocate capital to Chinese and foreign private equityfunds. These financial commitments signal that Chinese investors accept theprivate equity model. As part of this process, foreign private equity fundshave been actively encouraged to enter the Chinese market through var-ious government entities. Chinese jurisdictions, including Shanghai, haveoffered US private equity firms generous incentives to launch RMB funds.Two recent private equity examples are agreements signed between theCarlyle Group and Morgan Stanley with the Shandong provincial govern-ment and the Hangzhou local government. Domestic authorities, banksand pension funds in China, Korea and elsewhere in Asia are now chas-ing higher financial returns by sanctioning private equity partnerships andby extending leveraged finance and equity to private equity deals.
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The growth of private equity vehicles in Asian economies could be in-terpreted as following closed principles that entrench the dominant elites.Rather, the guiding principles, business influences and capital for localprivate equity actors are more in line with the American private equitymodel than they are nationalist and protectionist. Before the Asian finan-cial crisis, financial returnees were a group of elites with no presence in theas yet undeveloped private equity sector. The Asian crisis opened up Asianmarkets to private equity for the first time and, after a domestic challenge,the business model has re-emerged through mixed local–internationalcoalitions. The private equity experience can be seen to represent thespread of another originally Anglo-American practice to a wider set ofmarkets. Over the longer term, Pempel’s (1999: 237) observation is to somedegree accurate in the case of private equity: ‘The Asian economic crisishas restored the US to economic superpower status in the Asian region atleast in terms of being the country that sets the prevailing economic andfinancial norms.’ While US firm control has deteriorated since the peakof private equity deal-making in Asia, the normative role of US businesspractices is paramount. The framework of ideas surrounding private equityis derived from the Anglo-American business model and, in the nearly15 years since the Asian crisis, a gradual process of convergence in Asianprivate equity has ensued, led by Asian themselves, who draw on globalfinancial experiences.
Economic interdependence and private equity in Asia
The deals of US private equity firms in Asia since the early 2000s donot conform exactly to the American model of private equity. Throughstrategies including taking minority stakes in companies, forming allianceswith local business actors and sourcing capital domestically in China, theUS private equity industry has adapted to the changed domestic businesssettings. In the process, an important cross-section of domestic elites hasproven surprisingly open to the private equity business. The significanceof this new phase of private equity in Asia is that a form of complex in-terdependence has taken shape. The common narratives of either interna-tional business control or the closing of emerging markets to outside capitalare of limited utility in understanding the political economy of private eq-uity. The story of the private equity sector in Asia is not simply one offoreigners trying to gain access and domestic forces objecting and resist-ing. Foreign capital still needs to be incorporated in the study of emerg-ing markets, as opposed to state capitalism models. Nor is it a story offoreign behemoths overwhelming local competitors. The Asian private eq-uity experience can only be understood with reference to the linkages be-tween elites, institutions and capital based at the domestic and internationallevels.
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Distinctions matter in the study of the Asian political economy. Positionslike those of Wade (1998, 2003) on coherent US power exerted on emerg-ing markets or Bremmer’s (2010) focus on state capitalists assuming con-trol of emerging market economies are too categorical. Existing models ofinterdependence provide a starting point with the proposition that inter-dependence constitutes mutual dependence among actors that can fall ona spectrum between equal and unequal (Keohane and Nye 2000). Thesemodels suffer, as Cerny (2010: 29) accurately points out, because they areoverly state-centric. Interdependence of capital across borders deserves at-tention in its own right as well. The focus in Asia has been squarely on theUS–China relationship, and especially the interdependence of Chinese sav-ings and production matched with American borrowing and consumptionstarting in the mid-1990s (Ferguson and Schularick 2007). The concept ofinterdependence can also be applied to private equity and other new globaleconomic processes. In particular, the domestic demand for the financial re-sources and know-how of foreign private equity funds binds domestic elitesin relationships with foreign actors, which seek business opportunities inemerging markets.
In Evans’ model, interdependence existed, but in a clear power relation-ship where Brazilian industrialists were the subordinate class. To exploit lo-cal markets, foreign investors required domestic intermediaries, but theseintermediaries were noticeably weaker as seen in their unequal share ofthe exchange. The balance of power is different today. Foreign business re-mains dependent on local gatekeepers, particularly with tensions over for-eign investment, while the domestic capitalist class in developing countriesseeks out global financial capital and the market knowledge of Westernfirms in order to import new financial processes.
The leverage of foreign business in its relationship with domestic actors,while still important, has declined since the 1970s. Asian actors, recognizingthat access to their domestic market is sought by global firms, hold lever-age in negotiations with foreign investors. In these conditions, JVs betweenforeign and local capital have been a frequent market response. A recentfront page business section story in The Financial Times (Sender 2011) istelling for the changing balance of power in the private equity sector. TheTPG-Northstar Pacific relationship has been expanded, but, in this case, theemerging market firm (Northstar of Indonesia) has actually been granted anownership stake in the American firm (TPG Capital). With US ownership,Chinese capital and a preponderance of Chinese private equity executives,the RMB funds that US private equity firms have launched in China alsoexemplify complex interdependent relationships.
Interdependence is conditional on US firm behaviour. For interdepen-dence to emerge in Asian markets, US investors had to relinquish some oftheir primary corporate strategies. Encarnation (1992) has written exten-sively on the preferences American firms exhibit for full control in theirforeign investments and, in Gilpin’s (2001: 34) perspective, the nationality
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of a firm is significant because the culture and policies of its home countryshape its approach to international markets. During the economic turbu-lence of the late 1990s, these propositions held up well as the foreign buy-outs of this era in Asia matched the character of American private equityat home. However, moving to more normal economic times, US firms havehad to break from the American model of private equity to complete Asiandeals. If US firms were as steadfast in their commitment to full ownershipcontrol as Encarnation implies, they would find little traction in the privateequity markets of Asia, where foreign buyouts are legally permitted, butpractically difficult due to public opposition.
To understand how US private equity funds have shifted towards hybridmodes of FDI, research on foreign investment behaviour is relevant.Walter (1998) correctly argues that foreign capital has exhibited a willing-ness to invest in countries with illiberal foreign investment practices so longas there are growth prospects. Given these tendencies, US private equityfirms are unable to collectively demand Anglo-American terms in Asianmarkets. Enticed by growth prospects, some US firms have, therefore,moved forward with JVs and minority ownership investments. Thesefirms have accepted that their home market practices – US-style buyoutswith heavy levels of borrowed money – cannot be exported to Asia inthe foreseeable future. Given their reputation as one-dimensional agentsof American capitalism, US private equity houses have demonstrated adegree of flexibility in adapting to local conditions.8
US firms carry advantages from their long history in the private equityindustry. With investment experiences ranging in 20–30 years, these firmspossess knowledge of global finance, deal-making and restructuring far be-yond new private equity entrants. Financial resources also favour US pri-vate equity funds and Western financial institutions more generally. AsTable 1 illustrates, the largest ten US private equity firms have raised $350billion in the last five years alone. In spite of America’s uncertain economicprospects, pension funds based in the US manage abundant pools of capital,capital that is both demanded in Asian markets and that willingly crossesborders to reach there. Pension funds are responsible for 47% of all capi-tal that has been allocated globally to private equity funds (Prequin 2010:67). North America-based pension funds are an understudied feature ofAsia–US economic relations.
The transnational linkages that Evans highlighted are still important. Lo-cal private equity funds in Asia have emerged through links with the globalfinancial system, which is most apparent when data indicate that foreigncapital is the source of 75% of the financing for Asian private equity funds(PEI Asia 2010). If Asia is generating increased domestic savings, why arethese foreign linkages still so strong? A structural explanation based oncapital flows helps explain these patterns. Not all Asian economies are ina capital surplus position. In fact, Asia can be divided roughly into two:one part is in capital surplus and one part is in capital deficit. The first part
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includes those economies which have been exporters of capital historicallyand those which have rapidly accumulated capital in recent decades(Australia, China, Korea, Japan, Singapore and Taiwan). The secondpart includes countries which have required capital from overseas in theirdevelopment process (this includes the remainder of East Asia and India).India, for example, is still a capital deficit country and cannot fully financeits infrastructure needs domestically. The Indian private equity industry,therefore, sources most of its capital from international investors. Typetwo economies are more predisposed to be drawn into interdependentrelationships with global capital. This is borne out in recent data showingthat only in Korea, Japan and Taiwan do fully-owned local private equityfunds carry out a strong majority of national deal-making (McKinsey 2011).
Alliances with foreign financial actors facilitate the flow of foreign capitalinto the domestic economy. For example, according to a senior executive ofTPG interviewed in Hong Kong during 2010, the Indonesian private equityfund, Northstar Pacific, is satisfied with its business partnership with TPG.It has direct access to TPG’s investor base for its fundraising, an oppor-tunity unavailable to other domestic private equity funds. Without TPG’sbacking, Northstar Pacific would have found it difficult to raise foreign cap-ital. Even in countries with smaller numbers of JVs, domestic private equityfunds in Asia are linked to global capital through American and Europeanfundraising. The largest Korean private equity firm, for instance, is ownedindependently by Korean nationals, but the interests of MBK Partners mustalso be aligned with the global financial investors that provide a significantproportion of its equity. The domestic private equity industry in Asia wouldstruggle to exist without the resources that flow from US financial investors.
To conclude this section, American capital continues to be reliant on do-mestic level intermediaries to penetrate growing Asian private equity mar-kets. JVs have been politically and commercially attractive for both parties.Foreign institutions foster new networks and gain access to markets, whiledomestic institutions secure capital and absorb the market intelligence ofUS market leaders. These interdependent relationships suggest that theconfrontational nature of domestic–foreign relations is, in many instances,a fallacy in the study of the Asian political economy.
Conclusion
Few analysts of the Asian financial crisis period would have expected multi-billion dollar private equity sectors centred on a mixture of domestic andforeign firms to have emerged. Either US private sector gains or the re-jection of this foreign model by local industries, families and governmentswould have been anticipated. In practice, the form that private equity hastaken in Asia has undergone three distinct phases over the last 15 years.US private equity firms capitalized on the Asian crisis and carried out thefirst private equity buyouts in the region during the late 1990s and early
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2000s. Afterwards, the reactions to US private equity deals were severeenough that the environment became unwelcoming to foreign buyouts be-fore domestic–foreign JVs and Asian financial returnee-led funds revivedprivate equity activity in Asia in the third and current stage of Asian pri-vate equity. This trajectory represents just a minor victory for US capitalin terms of Wade’s model of internationally dominant US corporate actorssince US firms stood in a position of dominance only temporarily. By thesame token, the politics of Asian resentment against foreign economic pro-cesses that Higgott and others captured represented only one point in timeas well, rather than a complete resistance to trends in the neoliberal globalpolitical economy.
According to the analysis in this article, the defining characteristics ofprivate equity in Asia are domestic–foreign interdependence and local con-vergence to the foreign private equity model. Three factors help to explainthis outcome: the level of domestic opposition to US buyouts, the adapt-ability of US capital and the emergence of local converts to private equity.Evans’ comprador elite model remains relevant in so far as it draws atten-tion to domestic capital’s incorporation into global capitalism even thoughthe earlier compradors have been replaced by more multifaceted financialreturnees that continue to work closely with the outside business world.The Asian private equity sector has emerged through direct partnershipswith US private equity houses and through senior executives who have leftUS operations to start domestically-registered firms.
Numerous Asian countries intent on developing a private equity industryfind they have insufficient capital and domestic expertise. Russia is the lat-est BRIC country where the state is offering preferential treatment to USprivate equity funds (Belton 2011). Ironically, the two state capitalism caseshighlighted by Bremmer (2010), China and Russia, are both engaging heav-ily with US private equity. In areas of the global political economy wheredomestic and foreign constituencies overlap – the domestic–foreign frontierin Rosenau’s (1997) helpful framework – engagement by domestic capitaland adaptation by foreign capital are facilitating the spread of neoliberalbusiness practices. The public anger at US buyouts during the first phaseof Asian private equity was sufficiently high profile to prevent future UStakeovers in Asia. This resistance, however, was not deep enough to stopprivate equity capital formation altogether. Led by the Carlyle Group andTPG Capital, US private equity funds have moved substantial capital intoemerging Asia by establishing closer links with domestic actors.
The scale of the private equity industry continues to grow. The most re-cent data illustrate that private equity firms possess $964 billion of availablecapital as of the end of 2010 (Bain 2011). The industry’s future trajectorywill be informative for the Asia–US relationship and the place of neoliber-alism in the global economy. Should the analytical framework presentedhere be sound, the following patterns would be expected in the future:continued ties between neoliberal actors in North America and Asia,
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financial returnees as lead domestic actors and relatively limited stateinvolvement restricted to monitoring and promotion efforts. On the otherhand, this article’s research approach would be undermined by any of thefollowing developments: the closure of foreign private equity JVs, stifferdomestic regulations governing local private equity funds and state-run pri-vate equity funds pushing aside returnee-led private equity houses.
US firm behaviour in Asian private equity markets is consistent withKeohane and Katzenstein’s (2007: 304) contention that firms threatened byanti-Americanism may come up with mitigation strategies. Yet, whether UScompanies can shelter in hybrid modes for the long term will bear watchingand the Chinese case could be telling. One possible scenario is that Chi-nese state and non-state partners will learn the private equity model andcut ties with their foreign business counterparts and financiers. Undeniably,the private equity industry in China is more state-influenced than in otherAsian economies, as measured by the number of private equity funds thatare linked to state-owned enterprises and the role of princelings, the off-spring of current and past senior political figures. Nonetheless, the threelargest domestic private equity players in China, CDH Investments, HonyCapital and Hopu Investment Fund, are all privately owned, staffed at se-nior levels by financial returnees, pursuing business transactions with otherprivately-owned firms and drawing on the international financial system. Asthese three firms target further acquisitions in China using US private eq-uity methods and other firms follow their deal-making, it seems likely thatChinese private equity will not veer too far in the direction of the state cap-italism model.
In sum, private equity has migrated from its origins in the US to emergingmarkets. US private equity funds in Asia have had to scale back the aggres-sive and leveraged buy-out model that they deploy in the US and Europebecause of nationalist sentiments among the public in Asian countries. Atthe same time, the investment resources and business expertise of US pri-vate equity firms are sufficiently desired by governing and business elites inAsia to enable these firms to take cover in new hybrid business modes. Theresulting relationships between American capital and Asian elites portendpatterns of interdependence in the Asian political economy that look set tocontinue for the foreseeable future.
Acknowledgements
William Case, Sanjay Ruparelia and Jared Wright provided helpful com-ments on a draft of this article.
Notes
1 Data drawn from Prequin (2010).2 Most interviewees in this article are cited without attribution. In this case, attri-
bution is possible: Interview with Paul Gruenwald, Resident Representative forthe IMF, Seoul, Korea, 12 March 2002.
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3 During 2000–09, two of the three largest Asian buyouts were actually Australiantakeovers (PBL Media and Seven Media Group) and then, in 2010, the twolargest Asian buyouts were Australian (Healthscope and Port of Brisbane). Datafrom APER 2009 and APER 2010.
4 Thai newspapers even went so far as to use the language of ‘white power’ at thepeak of the crisis (Hamilton-Hart 2000: 26).
5 Interview with a Partner of one of the five top US private equity firms, HongKong, September 2010.
6 Interview with the Managing Director of a large Delhi-based private equity firm,December 2010.
7 Interview with a Partner of one of the five top US private equity firms, HongKong, September 2010.
8 Or as Tett (2006) phrases it, ‘[Y]our average American buyout practitioner tendsto have about as much cross-cultural empathy as a bullfrog.’
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