PENM Partners, a spinout from Scandinavian financial institution BankInvest, is set to officially join the handful of private equity houses in Vietnam as it completes the formalities to operate independently.
Earlier this year, PENM (Private Equity New Markets) was formed as an independent entity through a management buyout of the private equity arm of Denmark-based asset management firm BankInvest, said Hans Christian Jacobsen, managing partner.
“We were a part of BankInvest and managing private equity money with a 10-year horizon,” he said. “We couldn’t survive inside the bank, where anything above a week was longterm. We couldn’t go to LPs raising longterm funding and not knowing if BankInvest would be behind us that long.”
Of the eight Vietnam investments in PENM I, five have been exited, with three returning 4x after two years.
Hans Christian Jacobsen
PENM has been in Vietnam since 2006 and has raised three funds. Fund III, its latest vehicle, closed on $150 million in April 2012. Nearly all Fund I LPs – mainly Danish, Dutch and German pension funds – have re-upped in the subsequent vehicles, he added.
The firm is led by Jacobsen, who previously worked for 15 years with the European Bank of Reconstruction and Development in London and deputy managing partner Lars Kjaer, former managing director of Carlsberg Denmark.
PENM prefers investments in branded consumer companies such as those specialising in food, drinks or personal care products and gets involved with value creation work at portfolio companies, Jacobsen said.
“Governance is an issue here and you have to stay really close to companies all the time. But we rely on local management. We don’t believe a couple of Danes can run a Vietnamese company because of the complexity of running a business in the context of Vietnam.”
Of the eight Vietnam investments in PENM I, five have been exited. Three of those exits Jacobsen says returned 4x after two years: Cholimex, a chili mix company and Vinh Hao, a mineral water company, which were sold to local buyers, and Asia Fan, an electrical fan manufacturer, which was sold to a French corporation.
“It’s a lot of hard work to get in and to create value, and getting out can be tough. You have to find strategics buyers yourself,” he said.
The firm intends to raise its first fund as an independent shop in 2014, with the target of $150 million, Jacobsen said.
It’s not that we look for smaller deals, it’s just that there aren’t many deals around $20 million
Hans Christian Jacobsen
Vietnam received a record $400 million in disclosed private equity investment in the first half of the year, according to Mergermarket data. A $200 top-up investment by Kohlberg Kravis Roberts in Masan Consumer and a $200 million buyout of real estate group Vincom Retail by a Warburg Pincus-led group accounted for the outsized figure.
Nonetheless, Jacobsen said this year the investment climate has tangibly improved. Vietnam’s interest rates have come down from 20-plus percent to below 10 percent and inflation has been reined in to around 6 percent. He expects a pickup in deals.
“There will be many deals coming to market in 2013 and 2014, but we’ll have to be very careful when picking them because they will be dressed up. Owners may be trying to get out or desperately need money to continue the business.”
Vietnam, however, has few deals of the size the global firms have completed. PENM’s average deal size is $10 million – $15 million. “It’s not that we look for smaller deals, it’s just that there aren’t many deals around $20 million.”