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Private-Equity Managers Aim for Emerging Markets as Deals Shrink

TPG Capital Co-Founder David Bonderman
David Bonderman, co-founder of TPG Capital. Photographer: Jonathan Alcorn/Bloomberg

The world’s biggest private-equity firms are increasingly looking to India, Brazil and Africa for investments as the leveraged-buyout industry resets itself in a post-crisis economy.

“Emerging markets are the hot ticket,” David Bonderman, co-founder of TPG Capital, said late yesterday during a panel discussion at the Milken Institute Global Conference in Beverly Hills, California. Providence Equity Partners’ Jonathan Nelson, Apollo Global Management LLC’s Leon Black and Carlyle Group’s David Rubenstein also spoke on the panel.

Buyout managers who pursued deals valued at tens of billions each during the LBO boom that crested in 2007 are seeking to take advantage of growing populations outside the U.S., many of which have increasing disposable income for consumer products. Wealth created in natural resource-rich countries will drive behavior in regions such as Africa, Rubenstein said.

“That part of the world will become much wealthier,” Rubenstein said. “You’ll have more and more of a middle class.”

Investments in banks, telecommunications companies and airlines all have done well in emerging markets historically, Bonderman told the audience.

Nelson, whose firm has made investments in China and other emerging markets during the past decade, cautioned that those deals aren’t without risk.

“It’s very expensive to prosecute deals around the world,” he said, adding that it was wise to target large, growing markets including Brazil.

Health Care

Deals still are available in the developed world, the managers said. Black, co-founder of New York-based Apollo, said his firm is buying debt from European banks forced to sell securities by regulators. The generation reaching retirement age in the U.S. makes health-care investments attractive, Rubenstein said.

“Baby boomers as they age will spare no expense,” he said.

Bonderman and Nelson both said a new Internet bubble was inflating. When the subject of Facebook Inc. came up, Rubenstein recalled telling his now son-in-law that he had no interest in meeting Mark Zuckerberg about a potential investment in the then-tiny company, now the world’s most popular social-networking service.

“Now I have to keep working for a living,” Rubenstein said.

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