LP interview: Verlinvest

Verlinvest’s mandate is about diversification: it takes a portion of the dividends paid to the founding families of the Anheuser-Busch InBev brewing empire and puts them to work in broader consumer goods and services portfolio. In pursuit of this goal, the family office has over the past two decades entered areas ranging from food and beverage (F&B) to e-commerce across Asia, Europe and the US.

Asia accounts for one third of Verlinvest’s EUR1.8 billion ($2 billion) in assets under management, primarily through 10 direct deals in India, China and Southeast Asia. This in itself represents an evolution. Verlinvest takes a cautious approach to new markets by investing in funds launched by local managers. Before setting up its Singapore office in 2014, the family office backed Everstone Capital’s second fund, which closed at $580 million in 2010.

“We have only looked at funds that would either open new geographies or new verticals,” says Nicholas Cator, an executive director at Verlinvest. “For Everstone – which is a generalist fund but also looks at consumer deals – it was interesting for them to have a partner like Verlinvest because there is specific consumer expertise that we could share with them.”

Our unique investment approach enables us to be a long-term and flexible partner for entrepreneurs and GPs

Once this relationship was formalized, the family office started co-investing alongside Everstone to learn about the Indian and Southeast Asian markets. It has participated in funding rounds for Sula Wines, India’s largest winemaker, and invested in two F&B services platforms established by the GP.

Going early

It was through Sula Wines that Verlinvest came into contact with Deepak Shahdapuri, who was working for GEM India Advisors. When Shahdapuri established DSG Consumer Partners in 2012, Verlinvest invested alongside him in yogurt and ice cream maker Drums Food and specialty food ingredients manufacturer Veeba Food. It then became an anchor LP in DSG’s second fund which closed at $40 million in April. Everstone bought a 50% stake in DSG last year.

For Verlinvest, the relationship with DSG represents an extension of the funds then directs strategy. Partnering DSG also gives the family office, which typically targets growth-stage deals, exposure to the early-stage consumer space.

“Ideally, we want to deploy at least $15 million initially in every company, with the goal of reaching our minimum threshold of $50 million over the next 3-4 years. Through DSG we can invest in earlier-stage companies, but always with the aim of reaching $50 million. When companies raise multiple rounds, we can increase our stakes gradually and become more active,” says Cator. “As such, we certainly want to keep investing in companies like Drums Food.”

In China, it is a case of same approach, different market. Verlinvest has backed both funds raised by consumer-focused private equity firm ClearVue Partners, the second of which closed $362 million two months ago. Its first co-investment with the GP came in 2014 with a commitment to New Peak Group, which operates an online pharmacy known as 111.com. 

Having initially concentrated on F&B, Verlinvest has gradually expanded into additional verticals in Asia. While New Peak offered healthcare exposure, Singapore K-12 education start-up Xseed and India-based learning app Byju’s are among the family office’s early forays into the education sector.

Then there is e-commerce, where Verlinvest backed Rocket Internet’s Global Fashion Group, which controls retail businesses such as Jabong in India and Zalora and Lazada in Southeast Asia. Last year, Chinese internet giant Alibaba Group bought a controlling stake in Lazada for $1.1 billion, facilitating an exit for Verlinvest, as well as the likes of Sweden’s AB Kinnevik and UK-based Tesco, after a four-year holding period.  

“Our unique investment approach enables us to be a long-term and flexible partner for entrepreneurs and GPs,” says Cator. “We’re happy to stay in a company for a long period and deploy capital over multiple rounds. However, that doesn’t mean we aren’t willing to sell when our co-investors or partners want to exit.”

Platform plays

Verlinvest allocates $250-$350 million for deployment in direct investments globally each year. It can commit up to $200 million in a single company over its lifecycle, across multiple stages, and up to $300 million to sector-focused investment platforms that it controls.

The most recent example of the latter is China Resources Verlinvest Health Investments, a Hong Kong-based joint venture with China Resources that targets on health and consumer products as well as healthcare services for the elderly. Since its establishment last year, the entity has invested in Shanghai nursing home operator Red Sun Enterprise and also Nordic-based oat-based dairy-free beverage brand Oatly with a view to taking the company into new markets such as China and the US.

A similar platform now exists in the education sector as well. After making a few individual growth-stage investments, Verlinvest teamed up with education specialist Brian Rogove to form ChangedEdu, which is pursuing a roll-up strategy. So far one asset has been acquired in Vietnam. “The idea is to continue building a platform by acquiring a number of smaller assets and by developing greenfield projects. This enables us to buy assets that would be too small for us to buy directly,” explains Cator.

Now firmly established in the region, Verlinvest wants to make more direct investments and it is increasingly looking at control deals, which would mean competing directly with GPs. The immediate priority, though, is co-investment alongside established partners Everstone, ClearVue and DSG. Verlinvest will consider opportunities with other GPs as well, but there are no near-term plans to expand coverage through additional fund commitments.

“Fund investments are rare – we don’t intend to make any new ones this year or next year. We already have a presence in Asia, Europe and the US. If we decide to open a new geography or a new sector in the consumer space – we will never venture outside the consumer space because it’s in our DNA – we might consider looking at new fund investments,” says Cator.

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• Topics
• Greater China
• South Asia
• Southeast Asia
• LPs
• Consumer
• Fundraising
• China
• India
• Everstone Capital
• Co-investment
• ClearVue Partners
• Verlinvest