Mekong Capital is a management fund company which specializes in investing to small non-state companies in Vietnam. On the occasion of its launch Enterprise Fund II, VIB Forum has interview with Mr. Chris Freud, Managing Director of Mekong Capital.
Why Mekong Capital decides to launch MekongEnterprise Fund II?
We made 10 investments in our first fund and didn’t have any money available for more investments so we decided to launch a second fund.
For how long time, the Fund II will invest its all 50 millions US$?
We believe it will take us about 3 years to invest $50 million. The average size of the Fund’s investments is expected to be $3-4 million.
Why the Fund only focus on small investment, around 20 – 30%, in total value of companies?
We can also do buyouts in which we acquire more than 50% but for now more companies are interested to have an investor who will hold 20-30%. Also, when we invest in companies in which we hold 20-30%, we’re looking for companies with excellent management because we don’t manage those companies ourselves.
Why the Fund limits to only 4 – 5 investments per year?
We prefer to be very selective so that we only make successful investments. By limiting ourselves to the best 4-5 companies we can find each year, we will be more selective. Also, we spend a lot of time and effort to appraise each company in which we consider an investment, so we can’t consider too many.
Stock exchange market, especially OTC shares, is attracting many foreign investors, why MEF II ignores this opportunity? Is this true that MEF II is not able to compete with other Funds?
We are a private equity fund which means that we get actively involved in working closely with the companies in which we invest to make improvements. This only makes sense if we own more than 20% of the companies that we are helping. If we invest through the OTC market, we would have much less influence and less ability to add value to the companies in which we invest. Also, we’re usually more interested in private companies than equitized companies but few private companies have shares which trade on the OTC market.
As informed, the average annual revenue/ profit growth rate of invested companies are increasing remarkably. So, these profits are audited? Who are the auditors? Tell us the revenue/ profit growth rate before the Fund invested?
Yes, we require that all of our investee companies are audited by either KPMG, E&Y or PwC. We don’t accept any other auditing firms at the present time. We don’t have the data on their growth rates before we invested but I would estimate that on average revenue growth was about 30% per year for those companies.
As known, MEF I is going to finish its capital and working very well, so the MEF I will be listed on VNese stock exchanges? If yes, when?
The companies in which MEF I has invested will start to be listed in 2007 and we expect that most of them will be listed by the end of 2008. We have worked closely with these companies to prepare for a successful listing, including developing a “listing plan” with each of the companies.
What companies benefit from the investments?
We hope that all of our companies benefit from our investment. In general we look for companies with General Directors and senior managers who have the strongest management and leadership skill because we believe that companies with excellent management will be the most successful investments, regardless of what industry they are in. However, we have a lot of expertise relating to investing in companies involved in manufacturing and distribution so we tend to focus on those sectors.
Reported by Kim Phuong
Vietnamese
