Asia’s Private Equity News Source avcj.com July 08 2014 Volume 27 Number 25

EDITOR’S VIEWPOINT Local angles still the lynchpin in SE Asia’s integrating markets Page 3

NEWS ADB, Carlyle, Cathay Capital, CITIC Capital, Equis, Fidelity, GIC, Goldman, Greenwoods, Haitong Capital, IFC, MSPEA, Multiples, NewQuest, NSSF, Olympus, Rakuten, TPG, Warburg Pincus Page 5

INDUSTRY Q&A Steve Leonard of IDA on Aggressive buyers fostering innovation, and VC, in M&A-hungry corporates redraw ’s trade sale landscape Page 8 Page 13

FOCUS ANALYSIS

Great expectations Untapped potential Big ambitions for Singapore start-ups Page 11 Opportunities in ’s mid-market Page 14

PRE-CONFERENCE ISSUE AVCJ PRIVATE EQUITY AND VENTURE CAPITAL FORUM SINGAPORE 2014 Anything is possible if you work with the right partner

Unlocking liquidity for private equity investors www.collercapital.com London, New York, Hong Kong EDITOR’S VIEWPOINT [email protected]

Managing Editor Tim Burroughs (852) 3411 4909 Staff Writers Andrew Woodman (852) 3411 4852 Winnie Liu (852) 3411 4907 The ASEAN angle Creative Director Dicky Tang Designers Catherine Chau, Edith Leung, Mansfield Hor, Tony Chow

Senior Research Manager Helen Lee Research Associates Herbert Yum, Isas Chu, AMBITIONS OF BUILDING SCALE Aman Lakhaney highlighted Crossland Logistics, Jason Chong, Kaho Mak underpin many private equity investments a -based transportation player and a Circulation Manager in Southeast Asia. It is remarkable – although portfolio company since 2012. Crossland was in Sally Yip perhaps unsurprising – how few have succeeded. the process of completing bolt-on acquisitions Circulation Administrator Prudence Lau So far, at least. that will take it into Malaysia, Singapore and Subscription Sales Executive If we were to consider the Association of – no doubt riding the wave of intra- Jade Chan ASEAN trade – but each market requires a Southeast Asian Nations (ASEAN) as glue being Manager, Delegate Sales used to bind the region together, it has yet to different approach, based on local partners, Pauline Chen harden. And while many are happy to endorse the regulations and language. Director, Business Development benefits of a unified trading bloc incorporating For Navis Capital Partners, the challenge in Darryl Mag over 600 million people and $2.5 trillion in GDP, creating an Indonesian presence for Malaysia- Manager, Business Development others are equally willing to identify the potential based Alliance Cosmetics was more esoteric. First, Anil Nathani, Samuel Lau flaws. This is a 10-strong group of economic it had to establish whether a consumer brand Sales Coordinator extremes – running all the way from Singapore, indigenous to one country could be rolled out in Debbie Koo one of the world’s richest economies, to Myanmar, another. Similarities in skin tone and dress sense one of the poorest – and sometimes profound between the target demographics in Malaysia Conference Managers Jonathon Cohen, Sarah Doyle, cultural and political differences. and and the likely appeal of the Conference Administrator ASEAN is a work in progress, as are a fair products’ halal ingredients to Indonesia’s Muslim Amelie Poon number of the private equity investments we are population were plus points. Second, Alliance Conference Coordinator Fiona Keung, Jovial Chung told will capitalize upon integration. The concept had to make a breakthrough in local branding has been around more than four decades but the and distribution. Brand ambassadors with cross- Publishing Director blueprint for an economy community dates back border appeal helped. Allen Lee to 2007. This community will start to be phased It is possible to pick holes in the ASEAN small Managing Director in from 2015. print, typically that policymaking hasn’t been Jonathon Whiteley Policy landmarks aside, the region is already matched by implementation in certain areas, considerably closer in economic terms than ever but private equity firms with regional expansion before. And short of a political black swan, there plans are probably more vulnerable to invisible Incisive Media is no turning back; it would mean trying to hold barriers. The very local wrinkles – a regulatory Unit 1401 Devon House, Taikoo Place off the forces driving globalization. ASEAN’s GDP quirk or a specific consumer preference – can 979 King’s Road, Quarry Bay, Hong Kong more than doubled in size between 2005 and be difficult to iron out without on-the-ground T. (852) 3411-4900 2012. Trade did double, reaching $2.47 trillion in expertise. F. (852) 3411-4999 E. [email protected] 2012, with one quarter of that intra-ASEAN trade. Another company to have achieved a degree URL. avcj.com Foreign direct investment (FDI) has nearly tripled of regional scale, and in double-quick time, is Beijing Representative Office in value over the same period and intra-ASEAN VC-backed taxi-booking app GrabTaxi. An idea No.1-2-(2)-B-A554, 1st Building, No.66 Nanshatan, FDI has risen nearly five-fold. that came out of Havard Business School’s Chaoyang District, Beijing, For private equity, it is a case of identifying 2011 business plan contest, it is now a very real People’s Republic of China T. (86) 10 5869 6203 and effectively targeting an addressable market. presence in 15 cities across Southeast Asia. Local F. (86) 10 5869 6205 A portfolio company will increase in value knowledge and local teams are required for each E. [email protected] through cross-border expansion but this doesn’t new rollout, but the company is helped by a necessarily involve a pan-ASEAN strategy; it is degree of continuity: Most of GrabTaxi’s senior quite possible that exposure to three or four of representatives in each market were recruited The Publisher reserves all rights herein. Reproduction in whole or in part is permitted only with the written consent of the big five – Indonesia, Malaysia, the , through the Harvard network. AVCJ Group Limited. Singapore and Thailand – will suffice. ISSN 1817-1648 Copyright © 2014 They key to success is appreciating the local nuances in each market, even while leveraging the economies of scale that might come from Tim Burroughs sourcing as a regional operator. Managing Editor Speaking to AVCJ last year, The Abraaj Group’s Asian Venture Capital Journal

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Asset Management Hedge Funds Private Equity NEWS

Morgan Stanley PE Asia Resources Development. Existing investors GSR ASIA PACIFIC Ventures, Mayfield Fund and Crescent HydePark closes Fund IV at $1.7b also participated. TPG invests in Hong Kong- Morgan Stanley Private Equity Asia (MSPEA) has closed its fourth Asian fund at approximately $1.7 Warburg Pincus re-ups in based hedge fund seeder billion. The vehicle launched in mid-2012 with a TPG Capital will take an ownership interest in HS target of $1.5 billion and reached a first close later China ANE Logistics Group, a Hong Kong-based investment company that year of around $750 million. Two deals have Warburg Pincus has re-upped in China ANE that provides seed capital to hedge funds, as already been completed from the fund - ’s Logistics, committing $50 million to the Chinese part of strategic partnership between the two Janalakshmi Financial Services and Korean tissue logistics and courier services provider. The PE firm firms. The size of TPG’s stake in HS has not been paper manufacturer Monalisa - and at least five invested an undisclosed sum in the company disclosed but the move should allow the PE more are contracted. These include take-private earlier this year. Prior to that, the business raised firm to diversify its product offering in Asia’s deals for US-listed Chinese companies Sino Gas $6.3 million in a Series A round funding from alternative assets space. Holdings and Noah Education. They are likely Sequoia Capital. to be MSPEA’s fourth and fifth NSSF sees 6.2% investment GREATER CHINA such deals. Chin Chou return for 2013 Partial PE exit as Luye (pictured), CEO China’s National Social Security Fund (NSSF) of MSPEA, sees reported a 6.2% investment return last year, Pharma raises $764m take-privates down from 7% in 2012. Investment income CDH Investments, CITIC Private Equity, New as the most came to RMB68.6 billion ($11 billion), compared Horizon Capital and GIC Private have made partial significant to RMB64.5 billion in 2012. About 30% of net exits from Luye Pharma Group as the Chinese development in income last year came from the stock market. drug maker raised HK$5.91 billion ($764 million) the firm’s China NSSF had RMB1.24 trillion in assets under through its Hong Kong IPO. The company sold business in the management by the end of last year, of which 999.6 million shares - of which 332.1 million were last 4-5 years. 53.95% were direct investments. existing shares - at HK$5.92 apiece, the high end While he expects growth capital deals to remain of the indicative range. dominant in the country, Chou sees take-privates Equis buys 47% stake in as part of a wider variety of opportunities. Control China’s Oriental Gas GIC, Olympus lead Series D transactions are part of this. “In the past a number of the control deals in the market have been for Energy and infrastructure investor Equis Funds in premium dairy play export-oriented businesses and our preference Group has taken a 47% stake in Chinese natural GIC Private and Olympus Capital Asia have led has been on businesses catering to the domestic gas developer and operator Oriental Gas as part a $106 million Series D round of investment market,” Chou told AVCJ. “Eighteen months ago of a $43 million equity financing package. Equis’ in China’s Huaxia Dairy in a bid to tap in the we acquired control of Hi-24, Beijing’s largest co-investor, Runfar Investment Company, will country’s fast-growing premium dairy segment. convenience store chain, and there will be more hold the remaining 53% of the business. GIC will contribute to $70 million to the round control-oriented deals in China in the new fund.” while Olympus is putting in $30 million. The MSPEA’s previous fund closed at $1.49 billion CMC commits $32m to remainder is coming from other existing in October 2007. A key difference between shareholders, including Grand River Capital. Funds III and IV is the level of participation from online movie ticket site Morgan Stanley and its employees following China Media Capital (CMC) has led a RMB200 CITIC Capital leads the introduction of the Volcker Rule. Having million ($32 million) Series C+ funding round for contributed approximately $400 million to Fund Gewara, a Chinese online movie ticket site. The purchase of US dental firm III, they are now subject to a 3% cap, limiting online platform secured $20 million in a Series C CITIC Capital Partners has acquired US-based participation in Fund IV to $50 million. Capital funding from existing investor CDH Investments dental business DDS LAB for an undisclosed from institutional third parties is therefore about in October. The Series C+ round bring the total sum. The Chinese PE firm has completed 50% higher in dollar terms compared to Fund III. capital raised to about RMB400 million, according approximately 15 deals in the US but this is its to a statement. first as lead investor. Florida-based PE firm Blue Sea Capital is participating as a minority partner. Dépôts, each contributed EUR100 million when VC-backed mobile game the fund was launched in March. The remainder platform files for US IPO Cathay Capital reaches first was raised from third-party investors. close on Sino-French fund IDreamSky Technology, a Chinese third-party China’s Lattice Power raises mobile game publisher backed by Legend Cathay Capital has reached a EUR460 million Capital and Redpoint Ventures, has filed for ($629 million) first close on its latest Sino-French $80m Series D round NASDAQ IPO. The company was founded in 2009 fund which has a final target of EUR500 million. Lattice Power Corp, a Chinese maker of light- and Legend and Redpoint invested two years China Development Bank (CDB) and Bpifrance, a emitting diode (LED) chips, has raised $80 million later, contributing $10 million between them. subsidiary of French state-owned bank Caisse des in a Series D round of funding led by Asia Pacific Legend holds a pre-listing stake of 20.4% while

Number 25 | Volume 27 | July 08 2014 | avcj.com 5 NEWS

Redpoint owns 16.6%. Tencent Holdings, with NewQuest closes Fund II, use the extra capital to fund its global network. 26.6%, is the largest shareholder in the firm. Gaming giant Sega Networks - which also took secures take-private part in the round - is expected to aid this strategy Haitong Capital leads $32m NewQuest Capital Partners has reached a final by marketing the start-up’s services in the US. round for finance portal close of $316 million on its second pan-Asia fund, exceeding the $300 million target. The VC-backed Japan lunch Haitong Capital, a private equity arm of Haitong announcement came one day before the Securities, has led a $200 million ($32 million) secondaries specialist won shareholder approval delivery site raises $27m round of funding for 91Jinrong, a Chinese to take private US-listed China Hydroelectric in a Japan’s Star Festival, the VC-backed start-up financial portal. Existing investors China deal worth approximately $190 million. The fund behind lunchbox delivery and catering site Broadband Capital (CBC) and Matrix Partners is expected to be Gochikuru.com has raised JPY2.8 billion ($27.4 also participated. This latest round values the 50% deployed by million) from office supply mail-order company company at about RMB1 billion. the end of July. Askul. The firm raised JPY205 million from Globis NewQuest and Gree Ventures in 2012 and then JPY1 billion Greenwoods leads $20m in was created from Jafco Ventures last year. three years parenting site ago through Greenwoods Asset Management has led a $20 the spin-out SOUTH ASIA million Series B round of funding for lmbang. of Bank of com, a Chinese parenting app focused on female America Merrill Investors commit $140m to community. Existing investors Morningside Lynch’s Asia Technologies, Chinese online retailer Vipshop, private equity ReNew Power Matrix Partners and China Renaissance K2 team. The firm Indian renewable energy producer ReNew Power Ventures also participated. reached a first close of $215 million on Fund II Ventures has received $140 million in funding last December with commitments from existing from Asian Development Bank (ADB), Global investors HarbourVest Partners, LGT Capital Environment Fund (GEF), and existing investor NORTH ASIA Partners, plus two new LPs. NewQuest sought Goldman Sachs. The company has now raised to broaden the investor base as it embarked on $390 million in equity from private investors. Goldman leads acquisition a more formal process in February to raise the rest of the fund. There are said to be fewer than Multiples in partial exit of Korean gas producer 10 additional LPs, including pension funds, family A Goldman Sachs-led consortium has acquired offices and sovereign wealth funds. from South Indian Bank a controlling stake in the industrial gas business “We are a pan-Asian fund but we will largely India’s Multiples Alternate Asset Management Daesung Group for $400 million. The South focus this fund on Greater China and India has made a partial exit from locally-listed South Korean conglomerate is offloading assets in because that is where we see the greatest need Indian Bank (SIB), selling one fifth of its stake for order to pay down debts. The consortium will for liquidity among PE asset owners,” said Darren around INR428 million ($8 million). The PE firm own approximately 68% of the gas business and Massara (pictured), NewQuest’s managing sold 14.5 million shares as part of a bulk trade. Daesung has the option to buy the stake back in partner. NewQuest targets single assets and Multiples picked up a 5.58% stake in SIB for 2018 at a predetermined valuation multiple. multi-asset portfolios held by family offices, INR1.65 billion in September 2012. corporations, banks and hedge funds, as well as Carlyle to acquire Japan’s private equity firms. GP sellers may be seeking IFC commits $25m to Au to change strategy, leave a particular market, SBI Mortgage return capital to LPs in order to support a new Financiers The Carlyle Group has made a tender offer to fundraising, or under pressure to liquidate a fund. International Finance Corporation (IFC) has acquire 100% of Japanese mortgage bank SBI As a take-private situation, China invested $25 million in Indian non-banking Mortgage in deal valued at about JPY43.2 billion Hydroelectric does not represent a normal financial company (NBFC) Au Financiers. The ($423 million). SBI Mortgage’s current parent SBI NewQuest deal, but it is still a secondary direct investment comes less than three months after Holdings will invest JPY2 billion and Tokio Marine transaction. The PE firm started out with a 25% IFC took part in a $21 million round alongside Mezzanine Partners I will provide JPY5 billion in stake in the hydropower operator but gradually previous backers Warburg Pincus, ChrysCapital the form of preferred shares. built up its holding to 54% by acquiring interests and Motilal Oswal Securities. from other investors. Rakuten launches $100m Fidelity leads Series C for global VC fund WiL leads $50m round for Milk Mantra Rakuten Ventures - the VC arm of Japanese gaming start-up Fidelity Growth Partners India has led an e-commerce giant Rakuten - has launched a INR800 million ($13.3 million) Series C round of $100 million fund targeting start-ups in Asia, Silicon-Valley based Japanese early-stage investor investment in Milk Mantra Dairy. Previous backer Israel and the US. The fund will focus on early- World Innovation Lab (WiL) has a led a JPY5 Aavishkaar also took part in the round. The deal stage investments in tech businesses with billion ($49 million) round of funding for Tokyo- paved an exit for around 25 angel investors and strategic relevance that deliver financial returns. based gaming company Gumi. The company will Aavishkaar India Micro Venture Capital Fund.

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www.lexingtonpartners.com COVER STORY [email protected] Expansion imperative Companies from within and outside Southeast Asia are scouring the region for M&A opportunities as they seek to capitalize on regional growth. It means a wider variety of trade sale options for PE investors

THE WORLD OF WALT DISNEY-OWNED but in a rapidly-integrating regional market, the committed across 38 deals. However, the country Marvel Entertainment is to enter a network of onus is on what you buy – and the price you pay is described as “sector-specifically acquisitive,” franchises that not only sustain the character arcs – and how you build it. Is it the missing domestic targeting assets that are perceived as bargains of Spider-Man, Iron Man, Hulk, the X-Men and the piece in a single, difficult-to-access nation or a or areas where there is domestic policy support. Fantastic Four, but also thoroughly commercialize ready-made regional vehicle? It bets big, but selectively. Buyers from Japan, them. Hugely popular comics and movies have “China and India were the flavor of the month Europe and the US, meanwhile, are active across given birth to toys, clothing lines, home décor for so long and Southeast Asia was relatively multiple sectors. and collectibles. overlooked because it involves a number of Japanese M&A in Southeast Asia peaked in What Marvel does not own the rights to countries and cultures,” says Andrew Thompson, 2013 at $9.7 billion and $3.5 billion has been is X-Men shampoo. The X-Men range of male head of private equity at KPMG Singapore. transacted so far this year. The country’s annual grooming products was launched in 2003 by “Circumstances have changed but it is still hard share of regional M&A has swung between 1.1% Vietnam-based ICP and the brand cache is for corporates and newer investors to the region. and 10.6% over the last 10 years, but generally integral to the company’s success. Mekong PE is good at doing things that are hard and grown as fast if not faster than the pace of Capital invested $6.25 million in ICP eight years ago and doubled its money on exit in 2011 when Indian consumer products player Marico Southeast Asia private equity exits by type acquired an 85% interest. 15,000 50 “X-Men is the market leader in men’s shampoo in Vietnam and very much part of 12,000 40 the value of the business,” says Chris Freund, managing partner at Mekong. “Marico has since 9,000 30

been rolling the brand out regionally. It is a good Exits 6,000 20 case study of successful M&A in Southeast Asia US$ million because profits have increased substantially since 3,000 10 we sold to them.” Through brands such as Parachute Advansed, 0 0 Nihar and Saffola, Marico claims to feature in 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD the daily lives of one in every three Indians. No. of exits Public market sale Trade sale Revenue and net profit for the year ended March Share buyback Secondary sale 2014 were INR47.4 billion and INR4.85 billion, Source: AVCJ Research respectively. While India turnover increased by 8%, the international business – which includes South Africa, Egypt, the Middle East and selling to corporates with less of an appetite for M&A expansion as a whole. And the number of Bangladesh as well as Southeast Asia – generated big challenges, so there is a real opportunity.”” transactions being completed has shot up: from top-line growth of 16%. ICP continues to be a key less than 60 per year for 2004-2009 to 96 in 2010 factor: revenue jumped from VND390.9 billion in Japan rising and 157 in 2013. 2010 to VND773.8 billion in 2012. M&A activity in Southeast Asia has reached $71.9 What does this mean for private equity exits? Indian corporations represent a fraction of billion so far this year, according to Thomson AVCJ Research’s records for Southeast Asia show the growing strategic interest in Southeast Asia’s Reuters. This compares to $91.8 billion in 2013 as that trade sales have delivered nearly three times emerging economies, which serve as both a a whole, which was down from $123.9 billion in as much in total proceeds as public market low-cost manufacturing center and a nascent 2012. Last year’s total was more than double the exits and twice as many transactions. Trade consumer market. Marico’s plans for X-Men – $39.3 billion posted in 2004, but the annual deal sales generated more than $3 billion in three establish a platform with a foothold in multiple count has changed little over the past decade, out of four years between 2010 and 2013, a feat markets – are similar to those of countless other with more transactions in 2004 than 2013. Rather, achieved only once in the six years before that. multinationals, from top tier to lower tier. the checks have increased substantially in size. As with M&A, big deals move the needle. For private equity firms, this situation is a The data include domestic transactions Malaysian investors have been responsible for mixed blessing: great if you have desirable assets executed by Southeast Asian nations, which most of the largest transactions, with nine of the ready for exit and frustratingly competitive if you have accounted for at least 60% of investment in top 20, although five involved Malaysia-based have dry powder to burn. There will be countless recent years. Of those from outside the region, assets. Japan claims four of the top 20, including more trade sale opportunities all along the scale, China holds top spot in 2014, with $6.6 billion Sumitomo Mitsui Banking Corporation’s

8 avcj.com | July 08 2014 | Volume 27 | Number 25 COVER STORY [email protected]

acquisition of a 40% stake in Indonesian lender respond positively to such arrangements, with a “I wouldn’t say interest from the US and Bank Tabungan Pensiunan Nasional (BTPN) view to potentially increasing their positions over Europe has diminished, it’s just there has been an for $1.52 billion, which was agreed last year. time. This can also be helpful to PE firms seeking increase in demand from Japan in particular and Northstar Group and TPG Capital are exiting the to exit minority stakes. to a certain extent Korea, and then from China. bulk of their holdings through the sale. “It is the long-term view,” says Tok-Hong Ling, It is additive rather than replacing,” says Nick It is one of numerous instances of Japanese co-head of M&A and private equity leader for Bloy, managing partner of Navis Capital Partners. investors pouring money into financial services PwC in Southeast Asia. “The Japanese investors “The nature of the buyers reflects the nature of in Southeast Asia, and while this sector receives have traditionally taken a 20-30 year view when the industry. A lot of what you see is the logical the most attention, it is not the only one in which making investments. A minority position allows consequence of industry definition and out of there is a lot of activity. them to get to know the company and they that come a logical set of buyers.” “Recently, much of the strategic interest don’t necessarily need active management This much is apparent from the Navis has been financial services-related. However, control. This contrasts with US and European portfolio. Two domestic-oriented businesses in the big Japanese trading companies have also firms, which tend to prefer control because they Thailand, the local franchises for Dunkin’ Donuts been acquisitive and I think that is only going to see themselves as being able to add value to the and Au Bon Pain and for the Wall Street Institute increase, especially in areas like natural resources companies they acquire.” English-teaching network, were sold to local and industrial products,” says Ashish Shastry, A regional PE fund manager adds that one buyers in the last two years. But then Thai rubber managing partner at Northstar. “And I think more of his investee companies, a restaurant chain in components manufacturer RPS Technologies Japanese consumer and technology companies Indonesia, recently entered into a joint venture went to an Italian buyer, Singapore-based supply have been scouting the region as well.” The consumer angle “The nature of the buyers reflects the nature of Interest also extends into the consumer sector, with several GPs highlighting the potential of the industry. A lot of what you see is the logical combining Japanese – and to a certain extent Korean – product and processes expertise in consequence of industry definition and out of everything from candy brands to restaurant that come a logical set of buyers” – Nick Bloy chains with local partners who offer distribution networks. Mekong is said to be in the process of exiting with a Japanese group that wants to enter the chain management specialist Mentor Media was its minority stake in Vietnamese restaurant chain market but has minimal understanding of how acquired by a Swedish firm, and US multinational Golden Gate, which has expanded from one it operates. He sees using Japanese expertise Honeywell International picked up safety concept and five outlets to 10 brands across or franchises to penetrate different parts of footwear producer King’s Safetywear. 64 outlets. This includes a Japanese-themed Southeast Asia as an attractive prospect. Bloy unwinds strategic interest in Southeast barbecue concept that has been compared to US The driving factors behind Japanese interest Asia into three threads: those seeking to create brand Hooters. The business is now large enough are well-known: a desire to broaden geographic platforms from which to enter emerging to appeal to regional private equity players, but exposure and tap high-growth emerging consumer markets, whether it is financial strategic investors are also keen. markets in the region to compensate for flat- services, healthcare or retail; those that want “There is a lot interest in the restaurant space lining growth back home; access to cheap exposure to industries in which certain countries from all over the region, including from Asian bank financing to support transactions, the are globally competitive; and those looking restaurant groups from Japan, Hong Kong and effects of which were enhanced for a while by a to take advantage of the region’s low-cost Korea,” Mekong’s Freund notes. comparatively undervalued yen; political tensions manufacturing base in commodity areas. He adds that large Korean companies in with Beijing making China a less appetizing On the higher-end manufacturing side, the particular have made inroads into Vietnam’s prospect; and, in the case of natural resources, a region has benefited from the supply chain consumer and retail space, with CJV Group strategic imperative to secure assets required to clustering in industries such as electronics, auto rolling out bakery chain Tous Les Jours to sustain economic expansion. parts and aerospace components. The role of great effect and Lotte Group prominent in Japan’s auto industry in Thailand, for example, is hypermarkets. They are following a well-trodden Regional agendas clear: the country produced 2.45 million autos path. Samsung manufacturers a large number of However, there are plenty of other prospective in 2012, of which 1 million were exported, with its handsets in Vietnam, while LG Group has also buyers with agendas of their own. Japan has Toyota, Isuzu and Honda among the leading committed substantial sums to expanding its supplanted the US as the biggest-spending domestic manufacturers. local supply chain. The implication is what works external M&A player in Southeast Asia in recent Capital has primarily come in the form of for manufacturers will inspire confidence among years, but American investors have still deployed foreign direct investment for greenfield facilities companies in other sectors. an annual average of $3.5 billion since 2010. because the local infrastructure didn’t exist 20 Golden Gate is also instructive in that only European companies have committed an years ago. Once the ecosystem was put in place, 40% of the company is expected to be sold. It is average of $3.6 billion over the same period. independent, entrepreneur-led domestic players as yet unknown which of the interested parties Anecdotal evidence suggests US and European emerged to serve the auto manufacturers. They will emerge triumphant from the process, but firms are still active pursuers of PE-owned assets now have sufficient scale, sophistication and they must be comfortable operating in a minority in Southeast Asia, in part because they represent supply networks that they might be attractive position alongside the founders. Japanese and a platform for addressing the region and tend to acquisition targets for US, European or Asian Korean strategic investors have been known to come with good processes and governance. carmakers or parts suppliers.

Number 25 | Volume 27 | July 08 2014 | avcj.com 9 COVER STORY [email protected]

This dynamic does not, however, guarantee together, forming a more cohesive block of company since 2010, the list of suitors will make investments and exits for private equity. 616 million people and $2.5 trillion in GDP. for interesting consumption. The cosmetics Thompson of KPMG notes that M&A is just one Comprehensive liberalization of trade in goods manufacturer has achieved the kind of expansion way in which strategic investors can access low- and services is scheduled for late 2015, as well that Merico is seeking with ICP. Building on a cost manufacturers in Southeast Asia, and many as freer flow of labor and capital. It will take dominant position in Malaysia, it established opt for outsourcing partnerships and long-term time, but ASEAN may follow the path of the a foothold in Singapore and Brunei before supply arrangements. European Community, with consolidation in any successfully making headway in the crowded “We do see manufacturing as a possible drive industry where scale is a competitive advantage. Indonesian market. Alliance is now considering for activity but I don’t think it generally competes Companies must branch out to survive. the Philippines and Vietnam. with the overall themes of accessing the rising “Indonesia and the Philippines have always All of Navis’ exits to date have been through middle class in Southeast Asia,” he says. “The been acquisitive within their borders and it trade or secondary sales and Alliance is unlikely world realizes this is an Asian century and they looks like in recent months they have become to stray from the norm. The question is from need to have good positions for their companies interested in cross-border expansion,” says which of the multiplying constituencies will the in Asia. Navis’ Bloy. “The same is true of Indonesian buyer emerge? CVC Capital Partners tapped the and Thai corporates. It is all part of the banner institutional and retail investor market to great The ASEAN effect of becoming an economic community and effect in making a partial exit from Indonesia’s If this will sustain strategic interest in Southeast establishing yourself as not just a national Matahari Department Store last year, but this Asia from Western multinationals, competition champion but a regional champion.” appears to be the exception rather than the rule is likely to intensify as corporates from emerging One of the concerns expressed about this for big assets in Southeast Asia. markets within the region engage in more cross- strategy is the ease with which companies can “We have listed several companies but we border M&A. Indonesia and the Philippines, for take businesses cross-border in Southeast Asia, tend to use the listing to create more visibility for example, are home to a number of very large particularly in the consumer space where – the company and ultimately attract a buyer who companies that, with one or two exceptions, despite the economic commonalities – strong is strategic is nature,” adds Shastry of Northstar. have so far focused on organic expansion with cultural differences remain. As KPMG’s Thompson “The best exits are still to strategic players who a smattering of domestic M&A. There is now asks, “Are they running regional synergies as see synergies or who want a platform for market greater cross-border competency within these opposed to owning different companies in entry. In some cases, a strategic might buy into a firms and a clear incentive to start spending. different countries?” company while we are still shareholders, we work The Association of Southeast Asian Nations In this context, when Navis considers its together to improve the company and then we (ASEAN) is driving these economies closer exit options for Alliance Cosmetics, a portfolio exit at a higher price a few years later.”

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Scan to find out more about the regional reports avcj.com FOCUS [email protected] Touching greatness At least four Singapore-headquartered start-ups have four years of operations behind them and are worth at least $100 million. Which businesses have the skill and scale to be the next big thing?

ONLINE HOME SEEKER PROPERTYGURU results at the ‘unicorn’ – or $1 billion levels yet the barriers facing online firms that want to is a source of inspiration for Singapore tech from Southeast Asia. If you want to see this penetrate into different countries and regions are start-ups. Eight years after its launch, the proven before investing, then you don’t invest in being broken down. Southeast Asia is becoming company is expected to become the first VC- Southeast Asia yet.” more interesting,” says Jixun Foo, managing backed business to go public in nearly a decade. But Ong is doing just that. Two months partner at GGV Capital. “But my question is: Hong Kong, Australia and the US are all being ago, he launched Monk’s Hill Ventures, which is Will Southeast Asia be able to attract talented considered as locations for the listing, which is raising a S$100 million ($80 million) Southeast individuals to launch new businesses here? It’s expected to value PropertyGuru at more than Asia-focused fund. It is estimated that $100-200 very important that entrepreneurs recognize the $500 million. million in seed funding has entered the start-up market opportunity. ” The site – now expanding into Malaysia, ecosystem across 1,000 deals in past few years. The Sino-US VC firm led a $15 million Series Thailand and Indonesia – has built a strong Ong reasons that some interesting ideas and B round for Malaysian-based cab-booking app presence in Singapore after receiving three capabilities should have emerged. GrabTaxi, which was set up by two Harvard rounds of funding between 2008 and 2012. There are at least four Singapore- Business School graduates in 2012. Existing The first two came from local angel investors. headquartered start-ups that are now four investors Temasek Holdings-owned Vertex PropertyGuru won international recognition in years old and valued $100 million or more. Ventures and Chinese online travel platform the Series C round as Germany-based property They include Redmart, an online grocery site Qunar also participated in the round. portal ImmobilienScout24, a subsidiary of The that operates purely in Singapore, online luxury Although the start-up is still at a nascent Blackstone Group’s Scout24, put in $47 million. retailer Reebonz, and PropertyGuru. stage, growth has been rapid. One year after “Southeast Asia is probably seven years Singapore has aspired to become a tech hub launching in – where it is known behind matured online markets such as Europe, for more than a decade. In the late 1990s, the as MyTeksi – GrabTaxi entered Manila. Twelve US or Australia. Close to $1billion is spent government created the Technopreneruship months on from that, it is present in 15 cities annually on property advertising in our markets Investment Fund (TIF), a $1 billion vehicle that across Southeast Asia with a staff of 200. GrabTaxi and this is moving online rapidly. So we’re just was intended to attract companies and venture is regarded as a young company with big things at the start of an exciting journey,” says Steve capital firms to Asia from the US. Unfortunately, ahead of it. Melhuish, co-founder and CEO of PropertyGuru. the timing wasn’t right. After the dotcom bubble “I’m not trying to bring GrabTaxi into China “In the next 2-3 years, there will be a handful of burst in 2001, the entrepreneur community but it has the potential to be a multi-billion-dollar tech IPOs coming from the region.” thinned out. Global investors shifted focus to company in Southeast Asia, which won’t be Two other, relatively recent exits in Singapore’s China and India, drawn by the market size . capped at $500 million,” Foo says. technology, media and telecom (TMT) space The Singapore government, however, came via trade sales: online job site Jobstreet continued to launch incentives – including a Fragmentation factor was acquired by Australian peer Seek for A$545 handful of incubator and accelerators programs Southeast Asia, including Singapore, usually million a few months ago; and last year Japanese- – to nurture local tech start-ups. Over the past sees a handful of sub-$100 million trade sale commerce giant Rakuten paid $200 million for five years, Infocomm Investments, a government- exits in the TMT space each year, in part because Viki, a video streaming site characterized by backed accelerator program, has pumped S$16 the lack of Series A and B funding prevents community-generated subtitling. billion into university and commercial research to companies from achieving greater scale and inspire business ideas. value. The gap is being filled by local VC firms. Burden of proof Gradually, a start-up ecosystem has emerged. Monk’s Hill is one of several firms to receive With PropertyGuru being primed for an This has brought in the likes of Google, Facebook capital from the government, which it must IPO within seven months, the questions for and LinkedIn from the US and Alibaba Group now match with private sector commitments. Singapore venture capitalists as follows: First, are from China. European incubation program The aim is to guide start-ups further down the we now being presented with proof that local Rocket Internet identified Southeast Asia as a development path, which will likely involve start-ups can achieve true scale? And second, region in which to invest. expansion across Asia. does this confirm Singapore’s status as a tech Economic structures are also changing, “The highly likely exit option for tech start- hub for Southeast Asia? making Southeast Asia a more viable proposition ups in this region would be trade sales rather “No, there is no complete proof, at least not for venture capitalists. According to AVCJ than IPOs as most would not be able to achieve yet,” says Peng T. Ong, a serial entrepreneur and Research, VC investment in Singapore reached sufficient scale and market valuation for an IPO, then turned a venture investor in Singapore. $743.4 million in 2013, roughly equal to the total particularly on NASDAQ where you probably “The definition of ‘proof’ is simple, it means for the previous nine years combined. Twice as need at least $500 million valuation before it you have shown you are able to generate a many deals were done in 2013 compared to makes sense there. It also does not help that huge return from significant exits. We have a 2011. the regional stock market here would not know number of nine-digit exits, but we haven’t got “With the evolution of mobile internet, to value technology start-ups,” says Leslie Loh,

Number 25 | Volume 27 | July 08 2014 | avcj.com 11 FOCUS [email protected]

founder of Red Dot Ventures. get to $1 billion in Singapore, then enter new from Sequoia China just three months after Scaling up regionally isn’t easy, given the markets – and not necessarily just Southeast Asia. launching in the country. “iCarsclub started out fragmented nature of the market with different PropertyGuru is also looking to consolidate by using Singapore as a test bed before moving languages and cultures. Tito Costa, managing its existing positon and explore international on to launch in China. It would not have been director for Southeast Asia in Rocket Internet, expansion. “If we look at where our business is possible to raise the significant if our target was says the firm responded by adopting a localized today, versus our global peers in US, Europe or in Southesat Asia,” Loh says. structure for its e-commerce site Zalora, Australia, there is no reason why we shouldn’t Unique and creative technology is another providing brands and styles that are relevant to be worth $2 billion in next five to six years,” means of achieving higher valuations without local markets. says Melhuish. “The leading property portal addressing the challenges of scale. A decade “Mobile technology has made a huge impact in Australia has close to a $6 billion market ago entrepreneurs would have to build on online consumption, but the market is still capitalisation today.” businesses to several hundred million dollars in fragmented so we need to adapt to it,” he says. revenue before the buyers came in. Now larger Fragmentation also means e-commerce is The next generation technology firms are more willing to snap up less competitive than in markets like China. This Once early-movers become entrenched in assets at an earlier stage in order to diversify leaves space for leaders to establish themselves certain categories, it becomes that much harder revenue streams, cutting years of the timeframe in different verticals. Redmart, for example, is the for other players to enter. Higher valuations will had they sought to enter new areas organically. most prominent player online grocery player therefore only come to start-ups in Southeast Pick the right segment and the strategics will in Singapore. Founder Roger Egan is trying to Asia with viable plans for achieving scale, come to you. carve out a meaningful online chunk of an offline whether it involves branching out into new “Given the significant investment in research market that is worth $6 billion, and is already untapped areas of demand or focusing on a by Singapore over the years, I believe it has an seeing average month-on-month revenue global customer base from the outset. advantage over others in Asia in incubating growth of 20-30% for his trouble. “It is only logical that tech start-ups in this start-ups that emerge as technology spin-offs Logistics is in itself an impediment to building region which target the smaller Asean market from our research institutes. The likes of medical scale. The infrastructure in much of Southeast will unlikely be able to raise significant funding technology and environmental technology Asia is underdeveloped so many e-commerce comparable to those target larger market like the will be our next growth drivers beyond the operators have to build their own warehouse and US and China,” says Red Dot’s Loh. Information and communications technology hire employees to deliver goods. Redmart itself One of Red Dot’s portfolio companies – (ICT) and interactive digital media (IDM) sectors, has built a 100,000-square-foot warehouse, with Singapore-based iCarsClub, a peer-to-peer car where we got the ball rolling despite our small 25 trucks and a staff of 200. Egan thinks he can lending site – raised $10 million last month market,” adds Loh.

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To subscribe, call Sally Yip at +(852) 3411 4921 or email [email protected] avcj.com STEVE LEONARD | INDUSTRY Q&A [email protected] Initiating innovation Singapore has introduced a slew of initiatives as part of efforts to become a technology hub. Steve Leonard, CEO of the government-backed Infocomm Development Authority (IDA), explains how and why

Q: Singapore created the huge potential for start-ups – Venture Fund (ESVF) initiative. A: Sometimes VCs misunderstand Technopreneurship businesses can be built in any of The government recently the position of Singapore. They Investment Fund (TIF) in early these areas. invested S$60 million, which look at it and think the market 2000s and other initiatives will be matched by capital isn’t big enough, but that’s followed, but in recent years Q: Has Singapore studied from six private investors to missing the real story. We don’t there seems to have been a how other governments create an investment pool for think of Singapore as the only concerted push to become a use incentives to develop early-stage companies before market. There are more than technology hub. Why? technology hubs? 600 million people within a A: We think the timing is good A: Singapore can’t just simply copy short flight of Singapore, and 4.3 and we have a very important other tech hubs like Silicon billion within 6-7 hours’ radius. agenda. The “smart nation” Valley, but we think we have We offer access to a lot of these agenda requires a huge amount many of the ingredients to build markets through our established of innovation. It’s not about us a real hub for tech product start- relationships. If you want to saying, “Start-ups are important ups. We don’t want to copy, we register a company and be sure to us, so please try,” but having want to learn. China, for instance, that your intellectual property an environment that is open is in a different situation in terms is safe, Singapore is the place. to new ideas. We don’t want to of market size and population, so I wouldn’t argue with VCs that just consume tech, but to build the approach towards nurturing say they want to go to China tech, such as integrating existing start-ups may be different. Silicon because it’s a big market, but technologies and creating Valley, meanwhile, took more from Singapore it is possible to something new. Eventually than 15 years to get where it is do business with San Francisco, we want other countries to now. What we are pursuing in London and China. And then talk about the technologies Singapore will also take time to “We think we we have our goal to become Singapore has developed and achieve. Furthermore, we need the world’s first smart nation. how they can be important to a strong combination of several have many of the International VCs should be them. ingredients. Silicon Valley has interested in this environment – good universities, lots of active ingredients to the research institutes, students, Q: The smart nation scheme has investors and it’s a great place build a real hub corporations and government identified key areas such as to live. It is also worth looking are making efforts to drive big data and analytics, the at the role of government. for tech product innovation. Internet of Things and wireless Back in the early days of networks. What does this Silicon Valley, the government start-ups” Q: How important are IPO exits to mean for local start-ups? played a very important role, Singapore start-ups? A: The smart nation vision building laboratories for US they raise Series B rounds. A A: That is an area we still have includes creating standards, military research, which led number of VC funds have also to work on. We have trade which will focus on developing to breakthroughs in areas been set up to focus on Series sale exits but we don’t have a communication tools, data such as radar technology. The A rounds. However, our concern long history of public floats on processing, information security government put in the initial is we need to make sure we’re NASDAQ or the Hong Kong and and wireless usage. This creates effort and then technologies building enough companies Singapore exchanges. Our first opportunites for start-ups to gained traction in the private that deserve Series A funding. goal is to make sure we work innovate, build new services and sector, but it took years for things Instead of putting more money on the things that we can do. enable new market possibilities. to finally work. into average companies, we are Public market exits are not our IDA will also work with research looking to improve quality and primary concern. We have to institutes to achieve this vision. Q: What has IDA been doing to build companies’ capabilities. make sure the companies we The Singapore government has help create an optimal start- Some steps have already been support are interesting, strong, already committed S$16.1 billion ups ecosystem, particularly in taken in this direction. and global enough that VCs ($12.8 billion) over five years terms of early-stage funding? want to be involved with them. from 2011-2015 for research and A: In addition to private VCs, there Q: Singapore-based start-ups The international venture capital development across biomedical is seed funding provided by the have to attract substantial firms can then offer advice on sciences, chemicals, energy and National Research Foundation interest from international VC the best exit routes for these electronics. Again, this creates (NRF) under the Early Stage investors. Why is this? companies.

Number 25 | Volume 27 | July 08 2014 | avcj.com 13 ANALYSIS [email protected] Unleashing Malaysia Malaysia’s underlying macroeconomic fundamentals suggest a strong appeal to private equity but deal flow remains modest. Can more opportunities be unlocked in the mid-market?

WHEN CREADOR LAUNCHED ITS SECOND decidedly heady – nearly $6 billion in 2011 – to On the other hand, some of economic factors fund in May of last year with a target of $250 the disappointing. Nearly $2 billion was invested work against Malaysian private equity. Firstly, the million, the Southeast Asia and India-focused in 2012 and $758 million in 2013. low interest rate environment means borrowing GP was realistic in its expectations of Malaysia. Needless to say, deal flow is lumpy. The 2011 costs are low, making private equity less Indonesia would get the lion’s share of the corpus peak can be traced back to a couple of large attractive compared to other source of capital, – 60% – with the rest divided between India and buyouts: a CVC Capital Partners-led consortium’s notably bank loans. According to the Central Malaysia. One year on and Brahmal Vasudevan, $1.6 billion acquisition of QSR Brands and KFC Bank of Malaysia, interest rates averaged 2.93% Creador’s CEO and founder, now expects the Holdings, and Aabar Investments’ $1.9 billion between 2004 until 2014, reaching an all-time country to surpass previous expectations. purchase of a 24.9% stake in financial services high of 3.5% in 2006 and a record low of 2% in “When we first started, our expectation was player RHB Capital. 2009. Indonesia’s interest rate is currently about that we would deploy about 20% of the fund in These transactions are not characteristic of 7.5%, with Vietnam and the Philippines on 6.5% Malaysia,” explains Vasudevan. “But it has actually a market that is largely dominated by growth and 3.5%, respectively. surprised us and in our current fund we are now capital investments in small and medium-sized “Malaysia is market that has been flush expecting as much of third to be invested in enterprises (SMEs). In fact, last year buyouts with liquidity, it has never been capital starved,” Malaysia.” accounted for less than a quarter of deals; explains Vasudevan. “Then you have large Creador has already completed three early-stage investments, PIPE deals and growth government funds and a number conglomerates investments in the country from its first two transactions commanded a handsome majority. with plenty of cash. They are active investors funds – with another deal yet to be announced – “The large control investment universe is in companies, in terms of minority stakes and and there is more in the pipeline. Vasudevan cites smaller compared to that of expansion capital,” control transactions.” the performance these investments as part of the says Lew Oon Yew, managing partner with reason for his optimism. mid-market GP Proventeus Capital. “The whole Double-edged sword Old Town White Coffee, the PE firm’s first Malaysian economy – around 80% of the GDP – is Government involvement in particular has partial exit, is chief among these. The GP took a driven by SMEs. There is a lot of opportunity for been something of a double-edged sword 10% stake in coffee house and restaurant chain for MYR45.7 million ($15 million) in April 2012 Malaysia private equity investment and sold just under half its position in May last year for $15 million, generating a quick-fire 2x 6,000 30 money multiple and IRR of 101%. Similar returns 5,000 25 are expected from fashion brand Bonia and payment solutions provider GHL. 4,000 20 At least from Vasudevan’s point of view, 3,000 15 Malaysia – where PE deal flow has historically Deals US$ million 2,000 10 been muted – is starting to show promise. 1,000 The question is whether broader investment 5 community is likely to benefit and, if so, where 0 0 deals can be found. 2008 2009 2010 2011 2012 2013 2014 No. of deals Amount (US$m) Unrealized potential Source: AVCJ Research Given the size of Malaysia’s economy compared to its neighbors, its proximity to one of Asia’s preeminent commercial hubs – Singapore – and consolidation and companies to grow market for Malaysian private equity. The two biggest the broader regional growth story, one would share, while family owners are a significant source state-linked players are strategic investment fund be forgiven for expecting the country to be flush of deal-flow.” Khazanah Nasional – which was established in with PE opportunities. However, the reality is Malaysia has demonstrated strong growth 1993 and has around $41.1 billion in asset under quite different. over the past decade. The Asian Development management – and private equity fund Ekuinas, According to AVCJ Research, just $44 million Bank put the country’s economic expansion established in 2009 with the remit of supporting has been invested across two deals so far in at 4.7% last year, the fourth-highest of the Bumiputera companies (firms run by ethnic 2014. This follows two consecutive years in Association of Southeast Asian Nation (ASEAN) Malays). which transaction volume was on the rise, with members, after the Philippines, Indonesia and Both engage in direct investment, but in 20 and 26 deals in 2012 and 2013, respectively. Vietnam. GDP growth is expected to come in at 2011 Ekuinas took on a developmental role by But the sums deployed have slipped from the 5.1% this year and 5% in 2015. establishing an outsourced program. So far it

14 avcj.com | July 08 2014 | Volume 27 | Number 25 ANALYSIS [email protected]

has backed seven GPs, committing MYR640 base, because people take time to open up,” “That is why they came to us instead of going million across two tranches. A third tranche says Vasudevan. “They want to deal with known to someone else, like a conglomerate.” will be allocated in 2015-2016, taking the total entities and known individuals. It is a difficult investment to MYR925 million. While Khazanah market to penetrate with fly-in, fly-out approach.” Regional play and Ekuinas have made a significant contribution He recalls a recent deal where he got a This deal illustrates that while a local presence to the industry as dealmakers and capital call from a founder on a Thursday, met him at might be desirable, a regional strategy could be providers – in a co-investment and outsource home the following Saturday evening and had essential. The future of Malaysia as an attractive capacity – some say this level of government a term sheet drawn up for Monday. This speed PE destination could pivot on the potential for involvement is counterproductive. of action would not have been possible without greater regional integration. ASEAN’s economic “Part of the reason the markets is small is an understanding of the market and with an community blueprint, which is expected to because a lot of the activity is internal and the investment committee in New York that must substantially reduce barriers to trade and vast majority of local funds raised are actually sign off on investments. facilitate the movement of people and capital, government-linked entities so they have the Proventeus’ Yew cites the family-owned should in theory make it easier for private equity lion’s share of the investment and not all of enterprises as a significant source of deal-flow. firms to take companies into new markets. them are made public,” says Nicholas Ashby, In particular, he sees succession planning Vasudevan sees Malaysia is ideal place as a founder and CEO of Celadon Capital. “So most opportunities as an area in which a private platform for regional expansion. “When you look non-government linked funds are doing the big equity firm can seize the initiative over other at Singapore compared to Malaysia, they share buyout deals or looking at very early stage.” potential investors. As is also increasingly the a very similar culture,” he says. “Indonesia is also a natural path for Malaysia, as it one of the only countries with which Indonesia shares a similar Southeast Asia GDP growth rates language.”

8 This is the kind of cross-fertilization that Headland Capital Partners was looking to 7 exploit when it took a significant minority stake 6 in Malaysian snack and beverage firm Mamee 5 Double Decker – makers of Mamee Monster 4 % brand of ramen noodle snacks – in February 3 last year. In addition to product extensions and 2 improving distribution, the plan was to maximize 1 the company’s value by trying to replicate its domestic success overseas. Manufacturing 0 2011 2012 2013 2014 2015 was set to be moved to Indonesia, there were Southeast Asia Indonesia Malaysia Singapore Thailand discussions of seeking marketing synergies with Source: AVCJ Research other neighboring countries, and the company was said to be looking at regional expansion through M&A. He adds that cheap borrowing and domestic case in other markets in Asia, company founders Proventeus’ Lew already claims to be competition are not only the issues facing find that members of the second generation in experiencing the positive effects of greater private equity investors looking for mid-market their families either have no interest in assuming integration. “We have not seen a lot of cross- opportunities. The capital markets also serve leadership or lack the capabilities to take the border labor movement as that is still restricted,” as attractive alternative for entrepreneurs. The business to the next level. says Proventeus’ Yew. “But our businesses have Securities Commission of Malaysia recently “In that case you need an institutional investor already benefited from increased exports reported that the capital markets swelled by like a private equity firm, who can come and within the region.” Five years ago, one of the 10.5% to MYR2.7 trillion in 2013 – with equities bring new resources and new talent to widen firm’s portfolio companies, medical equipment market capitalization reaching MYR1.7 trillion, your network,” says Yew. manufacturer Hospitech, used to ship 80% of its making it one of the top performers in Asia. Creador portfolio company GHL is identified goods to the Middle East; now Southeast Asia “It is relatively easy to list companies on the as another example in which only a private accounts for 70% of business. Malaysian stock exchange because the threshold equity investor would fit. The PE firm took a It will take years before the full impact of is quite low,” Ashby says. “The IPO route is also 20% stake in the payment services provider last ASEAN integration on Malaysian private equity more attractive, particularly because valuations October through a private placement of new becomes apparent. But irrespective of what the are higher.” shares. GHL required financing to support its future holds, Yew adds that the country still has Therefore, successful deal-sourcing in acquisition of Australian Securities Exchange- much to recommend itself based on existing Malaysia largely depends on GPs being able to listed e-pay Asia, and in addition Creador will advantages. build relationships with founders and educating help devise future expansion plans. “While it has never been a market to deliver the market on the benefit s of partnering with “One of the reasons they chose us was a 10-20x return, it has always been a lot more private equity firms. In that respect – with because they not only needed capital but also stable than others in the region,” he says. “So some notable exceptions – the most successful we were able to use our operational experience on average we see 2-3x from Malaysia and that investors are those with an on-ground-presence. to help them grow the business, reduce costs balance will not move very much. The market has “The market is relatively closed in a sense and expand into neighboring markets,” says matured and the overall macro environment is that you need to have a very deep relationship Vasudevan. strong.”

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