New York-headquartered Aleutian Capital Partners Llc., a mid-sized leveraged buyouts and investment banking firm, set up its second worldwide office in New Delhi this July and is likely to follow with a Mumbai office next year. Led by Rishav Gupta, senior vice-president, the firm will invest from its first fund of $250 million (Rs1,025 crore), with no set defined limit for India. Gupta spoke to Mint about the firm’s business model and why India is ready for it now. Excerpts:
Why are you coming to India now?
We have seen the middle market sustain growth in the last few years. Most of the businesses have, or are reaching, a level of maturity that is causing promoters to look for exit alternatives. They may want liquidity, lack succession alternatives or are looking for financial muscle to grow.
What is your model?
We do not have a clear divide between the two sides of the business. We help companies search for acquisition opportunities and provide funding if needed. That is what we call the advisory side. Some deals in certain sectors have no advisory role. But we rarely do only advisory. We are looking to back up a (advisory) deal with capital.
Rishav Gupta, senior vice-president, Aleutian
What kind of companies and deals are you keen on here?
We are looking at the higher end of mid-market or larger companies that have a growth plan, particularly those involving cross-border mergers and acquisitions. We are eager to work with these companies to help them find such targets in the US and Western Europe and provide funding as and when they need it. We are also looking for growth and buyout deals.
What sectors would you target?
We are industry agnostic to a large extent, but in India we are interested in technology, energy, pharmaceuticals and anything related to infrastructure. We don’t have a cap, but the minimum size company would be Rs4 crore in pre-tax earnings. As for acquisitions, it will be much higher.
Have your done deals here before?
In one way or another we have been working with Indian companies for more than two years. Part of the idea was to get closer to our clients. But the idea of putting money to work in India was first discussed a year ago — to help Indian companies find opportunities in the US. And we have been actively evaluating acquisitions for the past few months.
Is India yet ripe for buyouts?
It is early (for buyouts), but not as early as people would like to think. Middle-market business owners and promoters are up with the scene — businesses don’t really need to be passed on to the next generation. I think they don’t have to be educated. Someone else has done that job or it has happened over time.
Given that buyouts are new in India, how will you hire a team with the right skills?
I am not that concerned. We don’t need anyone heavily experienced in buyouts. We have teams from New York with that experience and traveling to India isn’t a big deal anymore.
Will buyouts in India be done differently?
Obviously there are legal and accounting differences. And culturally there is a difference in the way you work with portfolio companies and how you talk to potential targets. Due diligence is also less open.
Many funds are coming to India with interests in buyouts. Will there be enough deals?
Competition just validates that the opportunity. I think there are plenty of targets in the market — especially for funds such as ours, which is a middle market player.