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LVMH-backed private equity firm hires ex-TPG veteran in Asia
[SHANGHAI] L Catterton, the US$20 billion consumer-focused private equity firm co-founded by luxury retailer LVMH, has hired former TPG Capital Asia partner Scott Chen to help lead its operations in the region and strike new deals as consumption recovers from Covid-19.
Mr Chen is a 19-year veteran of TPG who co-led its Greater China investment opportunities from Beijing. L Catterton Asia, which has about US$3 billion in assets under management, has invested in restaurants, bars and retailers from China to Australia.
L Catterton co-Chief Executive Officer Michael Chu said the hiring of Mr Chen and other internal promotions demonstrate the firm's view that there's still growth to be found in the space. Its portfolio companies in some categories are reporting dramatic rebounds in sales and foot traffic as markets re-open from the virus, and the firm plans to raise more money to do deals worldwide.
"Many of our businesses in Asia are returning back to activity levels of pre-shutdown and we're seeing really, really encouraging green-shoots in Europe," Mr Chu said in an interview. "Even in the US, which is very early in its re-opening, some of our businesses are seeing really surprisingly strong numbers."
Mr Chen's appointment comes amid extensive management changes at L Catterton Asia. He will run the team with fellow managing partner Chinta Bhagat, who joined in August, with more portfolio managers set to be hired by the end of this year.
However, several executives, partners and a strategic advisory board have departed over the past year. Mr Chu said long-time managing partner Ravi Thakran will become chairman emeritus, with a focus on several legacy investments, though the firm is also looking to potentially work with him on other funds.
Mr Chu's relative bullishness comes despite negative industry forecasts. Offline, non-grocery retail is expected to drop 20% this year, according to Forrester Research, with JC Penney Co, Neiman Marcus Group Inc, J Crew Group Inc. and Pier 1 Imports Inc. are among those to file for bankruptcy. The global personal luxury goods market could contract as much as 35% in 2020, Bain & Co estimated.
Data from L Catterton's portfolio companies in Asia, which is the first region to start re-opening economies after enduring a wave of lock downs, have shown that some retail sectors are capable of rapid rebounds once restrictions are lifted.
While categories like food, beverage and fashion remain slow, Owndays - a Japanese glasses chain - saw its same-store sales rise 22% last month in Thailand from a year earlier, and 17% in Japan, compared with a 57% drop in locked-down Singapore.
Customers are also keen to hit the gym once lockdowns end. In China, its service businesses in the health and wellness space saw cash income go from 9% of the prior year's levels in mid-March to 70% in mid-April.
Mr Chen's home base has yet to be decided and his responsibility will cover the entire region. But given his experience working in China, Mr Bhagat said it's expected that he'll have a natural focus there.
Mr Bhagat said his immediate priorities are to monitor the existing portfolio and help companies get the help they need to weather the recession while completing deals that were started before the pandemic began. Last month it bought a stake in Japanese cosmetics maker Etvos Co.
While L Catterton Asia is encouraging some of its portfolio companies to consolidate to cope with the downturn, it's still interested in striking new deals in areas like beauty and personal care, health and wellness and tech. Online health services is an especially key area of interest, albeit one where valuations have leapt.
"That's probably been the one area where there's been a kind of tectonic shift overnight. Every metric has gone through the roof both in Asia and every part of the world," he said. "But overall I think we'll be quite cautious."