CIMB Group in Malaysia intends to raise a private equity fund targeting $200 million and focused on small and medium size businesses in Southeast Asia, according to Kenny Kim, group chief financial officer and head of group strategy and strategic investments in Kuala Lumpur.
The fund, which is expected to launch in the coming months, will target established small-cap businesses in Southeast Asia with an enterprise value of up to $100 million that want to expand, Kim said.
“This is the sweet spot that is not being attacked by big the PE funds, which typically look for bigger deals.”
CIMB’s work with SMEs in the region gives it an edge in deal sourcing, he believes. The bank maintains a database with information such as credit history, entrepreneur profiles and other business data going back ten years.
“Invariably the companies in the region will have some kind of banking relationship with us. We can therefore access and create these proprietary opportunities relatively easily and at low cost.”
Invariably the companies in the region will have some kind of banking relationship with us. We can therefore access and create these proprietary opportunities relatively easily and at low cost
Kenny Kim, CFO, CIMB Group
The timing for such a fund is right because several factors have come together. Southeast Asia is much more than just Indonesia, he said, citing increasing opportunities in Thailand, Vietnam and Myanmar.
In addition, the ASEAN free trade agreement, which is expected to eliminate tariffs between member countries in 2015, is already encouraging SME expansion across the 10-member region, he said.
The region is also attracting Japanese corporate strategics, which have an eye on acquisitions.
“We are seeing keen interest from the Japanese, who are increasingly looking to diversify away from China. Their next destination is ASEAN.”
“ASEAN has been talked about a long time. Now there is clearly some traction.”
Through its private equity arm, CIMB has previously managed infrastructure and real estate funds, as well as private equity funds that had a developmental angle.
Its last fund was CIMB Private Equity Fund I, an MYR 100 million (€25.6 million; $33 million) vehicle with a 2005 vintage. Kim describes it as a small legacy fund that mixed commercial and development strategies and was restricted to Malaysian investments only.
The planned regional fund will be purely commercial, he said.
A dominant firm in Southeast Asia is Kuala Lumpur-based Navis Capital Partners, which has made about 60 control investments in SMEs in the region since 1998. Navis has offices in Singapore and Thailand, with plans to open in Vietnam and Indonesia this year. The firm is reportedly planning to raise a new fund in 2014.
CIMB has previously been an investor in Navis funds, according to PEI’s Research & Analytics division.
Headquartered in Kuala Lumpur, CIMB Group is a leading ASEAN universal bank, the largest Asia Pacific (ex-Japan) investment bank and one of the world's largest Islamic banks.