“It is time to start making new investment again”
The affirmation comes from Chris Freund - Managing Partner of Mekong Capital in an interview with Vietnam Business Forum. Huong Ly reports.
After years of continuous divestment, what are the reasons Mekong Capital has decided to expand investment in Vietnam market through III MEF?
We are in the business of managing private equity funds in Vietnam. In recent years we were focusing on adding value and exiting some of our previous investments but now it is time to start making new investment again.
Mekong Capital planned to raise US$150 million for MEF III, but final close only reached 75 per cent of the target, what’s the reason?
I think we didn’t put enough time and effort into visiting investors and fundraising as what some other Private Equity funds do. We generally waited for investors to come visit us in Vietnam rather than conducting roadshows overseas, and this slowed things down. We are passionate about adding value to our investee companies and prefer to be in Vietnam working closely with our investee companies, rather than traveling around the world to meet with investors.
Mekong Capital is one of the most successful PE fund managers in Vietnam, why Mekong Capital focuses only on business related to the field of consumer goods /retail?
All of our most successful investments have been the consumer driven sectors – companies like Masan Consumer, MobileWorld, Phu Nhuan Jewelry, Golden Gate, ICP, Vietnam Australia International School, Traphaco, etc. Meanwhile, we have developed a lot of in-house experience is areas such as marketing, distribution, sales and retail, and also have an extensive network of global experts in consumer industries. So as an investor, we add a lot more value when investing in a consumer sector than we do if we invest in other sectors like real estate, manufacturing or software. We would rather be really focused and very strong at doing one thing very well, rather than being generalists trying to do a little bit of everything.
With the experience of living and working in Vietnam for nearly 20 years, how do you evaluate the business environment in Vietnam today?
In the last 5 years, Vietnam has become more entrepreneurial, with more of a culture of young entrepreneurs starting up new businesses. The newer generation of companies are typically better managed that the companies that were founded in the 1990s.
Equitization is good for the economy but still moving too slow, and the government share remains too high in many equitized companies, which I believe slows down the rate at which those companies adopt international best practices. Former SOEs like FPT and PNJ, which have 0-10 per cent government ownership, tend to be better managed than companies in which the government owns a large stake.
On the other hand, corruption is still a serious challenge in Vietnam, which is why Mekong Capital avoids investing in companies that sell to the government or state owned companies.
As a foreign investor, what advice can you give to local business founders who would like to call for foreign investment?
Companies that comply with taxes and have their accounts audited by a Big-4 auditor on a regular basis will make it much easier for a foreign investor to invest.
Another important issue is how the company is building the management team, as foreign investors will be much more interested to invest in companies in which there is a strong team of professional managers and that the company is regularly taking actions to build its team.
Another important element is corporate governance, including a strong Board of Directors and a history of treating their business partners and minority shareholder well.
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