Mumbai: Jan Janshen is managing partner at private equity (PE) fund Advent International Corp., which had $29 billion worth of assets under management by the end of 2015. In March, it completed raising $13 billion for its latest fund.
Janshen co-heads Advent’s European operations and is one of the seniormost partners on the Asia Investment Committee, actively working on India deals. In an interview, he talks about Advent’s investments in India. Edited excerpts:
Advent has been a late entrant in India compared to its global peers. While you did your first investment back in 2007 from your London office, you opened an India office only in 2009.
I think our business evolves. We do global private equity and we do Asia out of our big flagship global fund. We are a true partnership; the consensus among the partners to set up an office here was evolving. One can debate if we are too early or late, I don’t know.
We don’t only see deal-making, but we also see most importantly that we invest in international if not global companies. The mandate for the Mumbai office is not only doing deals but also help the global portfolio. India is a very key market which they look for market access or a place to manufacture things, sourcing or from supply side. Some of our portfolio companies have also made add-on acquisitions in India.
You have only done four deals in the region while others such as TPG, KKR, Blackstone have raised Asia- or India-dedicated vehicles and have been extremely prolific. One would argue the capital allocation from Advent has been slow in the region and that India is not a key market for you.
I would turn it differently. We are a true partnership, consensus model, and we try to take that slowly and do it steadily. Clearly, if you raise dedicated funds for the region, then the local team is under huge pressure from day one to put money at work in that region.
Actually, what we have seen in our global fund, pre-crisis, post-crisis, and so on, that these regions and countries and sectors don’t go in sync. So if you see, what we call “dynamic capital allocation”, the various funds and which sectors the money goes in and which countries, that can vary from fund to fund.
Our model is that we have our own way to find businesses and build businesses. But then, we are agnostic where they are, which size they are; so that’s why we felt the advantage of having a Mumbai office as part of the global fund which gives us the benefits of building sustainable businesses without being under pressures.
But your capital allocation pattern suggests it’s pretty much spread across Europe, America taking chunk (40% each) and remaining, about 20%, coming to Asia?
We have 180 investment professionals globally, and we have five chosen sectors that we like globally for investments and all of the colleagues look globally for investments. We have no macro overlay. When our investors ask us the same question, what is your capital allocation—Europe, the US, Germany, Asia—we don’t have. But then, they ask us you must have sector allocation—healthcare, TMT, industrials—which also we don’t have.
We have a different way of doing what an Advent deal is. And when we find these deals, we do them irrespective of where they are.
So, there is no portfolio construction where we say X% has to go somewhere. What ends up happening is that somewhere 40 Europe, 40 West and 20 Asia, that more happens, but we are not being prescriptive or aiming for these.
Clearly in the healthcare space, we have invested in generics quite a bit. Of course, you have the Mumbai team on board, and if you take the global centre of excellence for generics it is in India.
How important is India as a market for you?
Clearly, very important because it’s a very big market and fast growing. It is relevant not only from a domestic perspective but also from an international perspective. When we started setting up a team here, building an office, we took a long term view. Currently, the outlook is great if you see various metrics: the stock markets, M&A volumes, the GDP, the wealth being created and so on.
On a relative basis, if you compare developed and developing market, India definitely stands out. Lot of the acronyms that emerged such as BRICS vanished but the shining spot globally is clearly India. There is a lot of progress both on the political side and the value being created in this economy.
Does that mean you will enhance your commitment here?
We are very committed to the region. We are fundamentally oriented and not financial engineers. We really look for companies which have a strong earnings profile. We invest at a sensible valuation with a sensible governance in place and I wouldn’t mind putting a billion at work in India. We have a global $13 billion fund, so there is no reason why we wouldn’t put a billion at work in Mumbai. We have a successful great team. Shweta (Shweta Jalan is the India head for Advent) is a global partner in the partnership.
I think we have all the right ingredients: so the team wouldn’t stop us, the capital wouldn’t stop us and like in any market, we need to find the right opportunities.
Deal-making has become very competitive, with almost every major global PE firm having an India presence now. What is your uniqueness?
We would do investments from 100 million to $1 billion which is a fairly unusual size. Because typically what you do is that you have a PE fund and you divide it by 20 which is the average size of the deal and you add and subtract a little and that range becomes your sweet spot. We are completely different as we don’t care whether its $100 million or a billion in equity or which country it is – we are attracted by the opportunity.
Also, what you see in a lot of private equity firms is that the dominating factor is the office. Where the company is headquartered, that office works on it. We are different. So, if you have a healthcare deal here, the healthcare team from London and Boston are in here. If you look at the cement deal, then clearly the building materials team is on board.
We are thrilled whenever we find an interesting deal and that’s what keeps us going. Also, we set up the investment committees closer to the region. Our structure doesn’t have a CEO, no CIO. We are a true partnership that works in consensus. We also have investment committees which are close to the region. So, you don’t have to go to NY Investment committee where nobody knows the local fundamentals, governance, the rule of law etc.
So, would we see Advent doing more deals in India?
Of course. If you look at the size of the funds, we have been fortunate and successful that our funds were bigger than the last funds and were heavily oversubscribed. As the funds grow, we all have to invest more. PE on the whole is a growth industry. When I joined Advent 17 years ago, we were investing out of a billion dollar fund or something like that.
We are now $30 billion assets under management and we raised our last fund at $13 billion in six months and couldn’t even talk to outside investors much because there was so much demand. Because our firm is growing strongly, we need to do more everywhere. The question is not if, but a question is how much more the teams can do.