Tài liệu Vietnam Investment Funds Review of Private Equity exits ppt

Vietnam Investment Funds Review of Private Equity exits Grant Thornton Vietnam January 2011 Introduction There is a perception by many in the market that Vietnam’s private equity focu

Vietnam Investment Funds

Review of Private Equity exits

Grant Thornton Vietnam January 2011

Introduction

There is a perception by many in the market that

Vietnam’s private equity focussed investment funds

have difficulties in achieving exits from their

investments With the tightening of capital markets

following the global financial crisis it is through exits

that fund managers have been able continue to make

new investments without raising additional capital As a

result, the level of exits that have been actually achieved

by the fund managers is of significant importance to the

industry

Grant Thornton Vietnam sought to bring clarity to

the true level of exit activity being achieved by

surveying the leading fund managers Although

participation in the survey was voluntary, the fund

managers that participated provide a representative

sample of the leading managers, most with a well

established track record

The survey was conducted in December 2010, and

includes data up to 30 November 2010 Questions

covered investments made, exits achieved, method of

exits and the length of time that investments were held

For the purposes of the survey, a “private equity”

transaction has been defined as an investment in the

equity of a company in Vietnam, which is not listed or

in the process of listing, and where a minority

ownership position exists This will often include

minority protection for investors and board positions,

however this will depend on each individual

investment

Summary

Survey results show that the participating fund managers have invested more than USD1.8 billion in private equity investments in Vietnam since 2003, in almost 200 companies 2007 saw the largest number of investments made, both in value and in number, with a substantial decrease seen in the following years

During 2003 - 2010, the period covered by the survey, 150 full and partial exits have been achieved by participating fund managers in Vietnam The average holding period was approximately three years for each full and partial exit achieved The average holding period has been trending upwards over the survey period, with exits in 2010 taking, on average, between four and five years

Stock exchange listings have continued to be the predominant method used by fund managers for exiting from their investments, accounting for over 60% of all exits

Fund Manager First year

established

Active investment funds

Funds managed (USD millions)

Participating Fund Managers

0 100 200 300 400 500 600 700 800

2003 &

prior

2004 2005 2006 2007 2008 2009 2010

YTD

0 10 20 30 40 50 60

Total value of PE investments made ($millions)

No of PE investments made

Vietnam Investment Funds – Review of private equity exits

Value and number of private equity Investments

The value of private equity investments made by the

survey participants between 2003 and 2010 exceeded

USD1.8 billion, accounting for almost 200 individual

investments

The peak year for investments was in 2007, where

more than USD750 million was placed into private

equity investments, 2.5 times the value than in any

other year in the survey period Following the 2007

peak, we have seen a dramatic drop-off in the value and

volume in private equity investments made This is a

reflection of the constraints in the capital markets in

raising funds following the global financial crisis and

domestic market issues that arose in Vietnam following

the global slowdown

With recoveries in global markets and the continued

strong domestic growth in Vietnam, fund managers

have been actively promoting their new investment

funds to global investors They appear poised to have

fresh capital to underpin an upswing in private equity

investments in the near term

Exits

Fund managers have achieved an equal spread between

the number of full and partial exits since 2003 2007

was the largest year for exits, with USD292 million in

value and 40 exits achieved

The number of exits, when compared with the

number of investments made, show that there is a build

up of private equity investments that are still seeking an

exit opportunity, and particularly those requiring a full

exit, in Vietnam

Private equity investments made in 2007, the peak year, are only now being readied for exits by many fund managers The survey shows an average holding period

of approximately three years Current trends show this

is moving towards an average holding period of four to five years Therefore we would expect that 2011 and

2012 will result in larger values and volumes of exits by fund managers

Year No of investments

made

Total value of investments ($millions)

Year

No of

full exits

achieved

No of partial exits achieved

Total value of exits achieved ($millions)

Total value vs number of PE investments

Value and number of PE investments made

Value and number of PE exits Total value vs number of PE exits

0 50 100 150 200 250 300 350

2003 &

prior

2004 2005 2006 2007 2008 2009 2010

YTD

0 5 10 15 20 25

Total v alue of ex its achiev ed ($millions)

No of full ex its achiev ed

No of partial ex its achiev ed

20%

40%

60%

80%

100%

2003 2004 2005 2006 2007 2008 2009 2010

YTD

Listing Trade Sale Secondary Sale Sell back to Sponsors Wind dow n / liquidation Other

0 10 20 30 40 50 60 70 80

2003 &

prior

YTD

Average length of time invested (months) for each partial ex it Average length of time invested (months) for each full exit

Exit methods

Stock exchange listings are certainly the most favoured

method of achieving an exit for fund managers in

Vietnam They account for almost twice the number of

exits compared to all other methods since 2003 Each

of the other methods of achieving exists have generally

remained relatively insignificant, other than for a few

spikes in 2005 and 2006

In 2010 we saw an increase in the number of

secondary sales (sales to other fund managers)

Especially as new entrants sought to take a cautious

path and invest in targets that had already been vetted

and invested in by experienced fund managers We also

saw trade sales drop off completely in 2010 This

presents fund managers with a challenge, as trade

buyers traditionally make up a large portion of buyers

for private equity exits in a global context

Listings will likely continue to be the preferred exit

method for private equity investments in Vietnam This

is due to the relatively lower barriers to list and the less

onerous compliance requirements for listed companies

in Vietnam

Length of time invested for each exit

Survey data shows that the average length of time that

the investment funds remain invested in a company

prior to an exit (full or partial) has been trending

upwards in Vietnam The 2010 data indicates an

average holding period of around four to five years

Over the full survey period the average length of time

that investments have been held is three years

The data suggests that the length of time an

investment is held is not significantly different between

partial and full exits

It is often argued that investments take time to

mature in Vietnam, supporting the relatively equal

number of partial to full exits recorded Partial exits, in

this context, appear to be used to free up investment

capital whilst the investment is still maturing

Based upon the large number of investments made

in 2007, the next two years should result in a large

number of investment exits by the fund managers

Year

Average length of time invested (months) for each partial exit

Average length of time invested (months) for each full exit

Exit methods

Average length of time invested

Average length of time invested

Vietnam Investment Funds – Review of private equity exits

Case studies – successful exits from

participating fund managers

Mekong Enterprise Fund invested

in Saigon Gas in November 2005,

the first consumer-focused

investment by Mekong At the time,

one of the attractions was that

Saigon Gas’ business model, LPG distribution and

branding, was a model which had an extensive track

record of M&A and industry consolidation in most

Asian countries Typically the industry begins highly

fragmented, but eventually through M&A 2-3 leaders

consolidate the industry and enjoy the scale

advantages of doing so Mekong achieved a gross

return multiple of 2.0x and a gross IRR of 25.9% on

the investment

Mekong Enterprise Fund II invested in Golden Gate in April

2008, at a time that the company operated around five restaurants under the Ashima brand Mekong Capital worked closely with the company to align around a five-year vision, develop a

plan for achieving that vision, and implement the plan

Within two years, Golden Gate had scaled up to around

30 restaurants under the Ashima and Kichi Kichi brands,

while maintaining attractive net profit margins

Golden Gate hired a local advisory firm, TNK Capital, to

find potential buyers for a secondary transaction for a

minority stake The deal was completed in October 2010,

resulting in a gross return of 3.7x and gross IRR of

72.7%

Vinamilk is the country’s flagship corporate and its leading dairy-products manufacturer Dragon Capital was involved very early in the equitisation process, having advised on the

roadmap for privatisation and listing when the

company was still an SOE Dragon was the first

foreign investor in the company, and joined the

Vinamilk Board after the IPO It has been an active

Board member since Recently, Dragon Capital

decided to make a partial exit from Vinamilk via an

open auction to foreign investors The exit tranche

was about 1% of the company and 12% of its stake

The $19m deal resulted in an exit multiple of 5.1x

and an IRR of 39% over six years

In March 2010, Dragon Capital sold its VP Bank stake

at a 30% premium to its carrying value Dragon Capital acquired 10% of VP Bank as a strategic investment in 1996 A partial exit occurred in

2007 when bank valuations soared, and VP Bank shares hit 10x book The balance of Dragon Capital’s stake was sold in March 2010 at a valuation of approximately 2.5x book In total, the investment achieved a 2.7x multiple and an IRR of 21% VP Bank is typical of an investment where Dragon Capital applied hands-on intervention to preserve shareholder value

In July 2006, VinaCapital purchased a 17.5% stake in the Hilton Hanoi, a five-star, 271-room hotel located across from the Hanoi Opera House in the centre of Vietnam’s capital city Together with a 52.5% stake owned by VinaLand Limited, the two VinaCapital-managed funds held a controlling 70 percent stake in the hotel

The sale of the equity stake resulted in an IRR of 26% over the three years the stake was held

VinaCapital sold its position in Masan Group, a diversified food products company that owns well-known fish, chilli and soy sauce brands such as Chinsu

The sale of the equity stake was at a price 81% above the book value of the position in the VOF portfolio

The sale achieved an IRR of 83% and multiple of 2.8x

VOF had held Masan for 33 months

Grant Thornton Vietnam is a full service Auditing and Advisory firm, originally established in Vietnam in 1993

We provide a wide range of services to the fund management sector, including:

• Audit and Assurance

• Taxation and structuring advice

• Transaction advice (including buy-side and sell-side M&A support)

• Independent Due Diligence reviews and reports

• Strategic and Corporate Governance reviews

• Diagnostic and performance reviews

• Feasibility studies

• Valuations

• Internal audits and control reviews

For further information or assistance, please contact:

Ken Atkinson

Managing Partner

T +84 8 3910 9100

E ken.atkinson@gt.com.vn

Matthew Lourey

Advisory Services Director

T +84 8 3910 9149

E matthew.lourey@gt.com.vn

Alan Dy

Audit Partner

T +84 8 3910 9191

E alan.dy@gt.com.vn

Grant Thornton (Vietnam) Ltd offices:

Hanoi

8th Floor Vinaplast-Domus Building

39A Ngo Quyen Street

Hoan Kiem District

T +84 4 2220 2600

F +84 4 2220 6449

Ho Chi Minh City

28th Floor Saigon Trade Center

37 Ton Duc Thang Street District 1

T +84 8 3910 9100

F +84 8 3914 3748

www.gt.com.vn

© 2010 Grant Thronton (Vietnam) Ltd All rights reserved

Grant Thornton Vietnam is a member firm within Grant Thornton International Ltd

(“Grant Thornton International”) Grant Thornton International and the member firms are

not a worldwide partnership Services are delivered by the member firms

independently This publication is general in nature and should not be construed as

providing advice No responsibility is taken for any party acting on the contents of this

document