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BigPhone store in Cambodia
Mekong Capital describes its investment in Mobile World as one of its best deals ever. The Vietnamese company is now expanding its Big Phone chain of stores in Cambodia. (Photo by Masayori Ishikawa)
Cover Story

Southeast Asia's private equity firms have a secret weapon

Local funds rely on insight, not size, to find deals that bigger rivals may miss

BANGKOK -- While the giants of private equity -- including KKR, Blackstone, and Carlyle -- are just starting to make waves in Southeast Asia, smaller local funds have long recognized the region's potential, particularly in times of crisis. And they have proved themselves adept at filling niches larger players have so far overlooked.

Navis Capital Group was founded in Kuala Lumpur in 1998, the year after the Asian currency crisis struck. The firm's founders -- Richard Foyston, Nicholas Bloy and Rodney Muse -- all previously worked with The Boston Consulting Group and put their know-how to good use.

Today, the firm manages private and public equity funds totaling $5 billion, and employs more than 60 people across eight offices across Asia.

One of the firm's biggest success stories is King's Safetywear, a Singaporean maker of safety footwear that Navis acquired for approximately 97 million Singapore dollars in 2008.

After taking the company private, Navis advised King's Safetywear to expand into Australia, India and South Korea. The firm was also instrumental in negotiating the company's acquisition of Oliver Footwear, Australia's biggest safety footwear manufacturer.

In 2011, Navis sold its stake in King's Safetywear to Honeywell International for S$430 million, a return of nearly 350% on its initial investment.

Bangkok-based Lakeshore Capital, established in 2009, also saw opportunity in adversity.

In the wake of the global financial crisis, banks around the world lost their appetite for risk. Thailand was no exception, leaving local industries starved for growth capital. (In Thailand as elsewhere in Southeast Asia, commercial banks -- not capital markets -- remain the main source of funding for companies.)

Lakeshore's three co-founders -- Anotai Adulbhan, Panaikorn Chartikavanij and Supawat Likittanawong -- noted the unmet need and decided to focus on providing capital mainly to small and midsize companies.

Lakeshore keeps a low-profile strategy and does not disclose its investment portfolio, but the company reportedly prefers to invest in high-growth sectors such as consumer goods, education and health care. 

Brahmal Vasudevan founded Creador in Kuala Lumpur, Malaysia in 2011, after spending 11 years as a general partner and managing director of ChrysCapital, a private equity firm in India. Creador focuses on growth capital investment in South and Southeast Asia, primarily Indonesia, Malaysia, the Philippines, Singapore, India and Sri Lanka. The firm is reportedly raising its fourth fund with a target of $500 million.

"We are not the turnaround investor but a growth accelerator," Vasudevan said, adding that he intends to push a pan-Asian strategy for invested companies.

An example of this is OldTown White Coffee, a restaurant chain in Malaysia. Creador invested $15 million in the company and advised it to expand into frontier markets outside its home country.

In February this year, Creador made its first investment in Vietnam, buying shares of Mobile World, the country's leading mobile device and consumer electronics retailer.

Creador bought a portion of those shares from Mekong Capital, which was looking to sell its entire stake in the company.

Mekong Capital has focused on Vietnam since its incorporation in 2001. Its funds have completed 33 private equity investments and exited 24 of them. 

Chad Ovel, a partner in the firm, described Mekong Capital's investment in Mobile World as one of the best deals ever. It bought 35% of Mobile World's shares for $3.5 million in 2007, and over the 10 years that followed, its number of mobile stores increased from 7 to more than 1,500, while profit rose from 6 billion dong ($260,000) to 2.3 trillion dong.

Mekong Capital claims credit for much of that growth. The Ho Chi Minh City-based firm emphasizes the importance of corporate governance and says it always asks the companies it invests in to appoint independent directors. At Mekong Capital's suggestion, Mobile World named Bob Willett, former CEO of Best Buy International, to its board. Willet brought with him a "customer first" way of thinking that Ovel credits with re-energizing Mobile World.

"The key for success was to change the business culture," Ovel said.

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