Southeast Asia’s private equity landscape is becoming more competitive, but the range of deal opportunities is continuing to grow, says Nicholas Bloy, co-founder and managing partner of Navis Capital Partners.
“We’re very much believers in the value that’s going to come out of the Asean Free Trade Area, which is now effectively a common market of 600 million people,” says Bloy.
He co-founded Navis in Kuala Lumpur in 1998 with fellow former Boston Consulting management consultants Richard Foyston and Rodney Muse. It now stands as the largest PE firm focusing on Southeast Asia, with $3 billion in assets.
Navis, which has 60 staff across seven offices in Asia, plans to launch operations in Ho Chi Minh City and Jakarta in the next 24 months.
Primarily the expansion will be aimed at helping Navis to expand the brand footprint of its portfolio companies into Vietnam and Indonesia, which both have a young population and growing middle class, making them appealing as consumer markets.
Taking the leading brand of one country and extending its reach into neighbouring markets has proven to be a profitable strategy for Navis, says Bloy.
“We need Vietnamese and Indonesian professionals to help our [portfolio] companies, wherever they are in the region, enter those markets. Taking a national [brand] champion and turning it into a regional champion is very powerful.”
He adds that Navis will keep an eye out for buyout opportunities in the two countries. In September, Navis took a controlling stake in OPV Pharmaceutical, a major Vietnamese branded manufacturer of over-the-counter generic drugs.
“We have invested in both Vietnam and Indonesia very profitably and will continue to do that,” says Bloy.
The firm is investing from Navis Asia Fund VI, which closed in 2010 at $1.2 billion, of which about half has been deployed in buyout deals. There are tentative plans to launch Fund VII in the second half of 2013, with a target of $1.25 billion.
“We’re not interested in spending months and months fundraising around the world trying to raise $2 billion. That’s not in our interest and it’s not in our [limited partners’] interests,” says Bloy. “Our philosophy on Navis VII can be simply encapsulated in the phrase, ‘speed not greed’.”
At the same time, Southeast Asia – particularly Indonesia – has become a private equity hotspot, with more firms entering the market. “I do anticipate more competition going forward because investors around the world have started to set their sights on Southeast Asia,” says Bloy.
The China market is becoming crowded with a growing number of domestic PE firms raising renminbi-denominated funds, while India’s PE sector has been mired by a depreciating rupee, onerous regulation and lack of exit opportunities.
“In the 90s, before the Asian financial crisis nobody was interested in China or India [private equity], but a lot of people were interested in Southeast Asia,” says Bloy.
“From the Asian financial crisis onwards, it fell out of favour and the bigger population centres of China and India started to look quite attractive. Now Asean has come back into the sun. The interest level has now gone full circle.”