There is no doubt Asia has felt the force of the global economic crisis. As credit conditions have tightened, deal flow across the region has ground to a virtual halt. At the same time, those initial public offering windows that were previously available have been firmly shut, meaning private equity investors looking for an exit will have to rely on strategic buyers, themselves in equally short supply.

Given the still nascent state of the Asian leveraged buyout (LBO) market, this has left some observers to wonder whether the Asian LBO story could be over before it has properly begun. However, as leveraged buyout players in the West are beginning to count the corpses in their portfolios, it is becoming clear that the Asian buyout market is emerging from the crisis in far better shape than its European and US counterparts.

That has drawn the attention to a number of significant differences between the Asian leveraged buyout model and its Western cousin. First of all, Asian buyouts are characterised by a significantly lower level of leverage, and by extension, lower valuations. In particular, the high yield investors that flooded Western subordinated debt markets were remarkably absent from the Asian growth story in the years preceding the crisis. “Asia lacks the deep investor pool for subordinated debt seen in the US and European markets,” explains Ming Lu, managing director at KKR in Hong Kong...

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