Q&A: The Abraaj Group's Aman Lakhaney

Q: What has the acquisition of Aureos last year brought to the firm?

A: The benefit in bringing the two organizations together was the close to zero geographic overlap. Aureos had sub-Saharan Africa, South America and Southeast Asia as a focus, and no presence in the Middle East or North Africa where Abraaj is present. We have a platform with offices in each of the countries we invest in and six regional hubs. In Southeast Asia we have country offices in Singapore, Indonesia, Malaysia, Philippines, Vietnam, Thailand and Brunei and a hub in Singapore. We have over 30 offices globally, and I don't think there is another PE firm operating in global growth markets with the geographic presence that we have.

Q: What is the allocation to Southeast Asia?

A: From our global fund we're looking to invest $500 million, and we closed our second Southeast Asian fund at $250 million in March. Our most recent investments include ODG, an Indonesian mechanical and electrical contracting and engineering services provider; Crossland Logistics, which is a cross-border trucking company in Thailand; and Orca Global, an English Language Training provider based in Singapore, with a presence in Indonesia and Thailand. We are sector agnostic, but there are certain sectors we tend to focus on, such as consumer, fast moving consumer goods, quick service restaurant casual dining, healthcare, education and logistics. In agriculture, ASEAN is interesting in terms of being an exporter to China and other parts of the world. We are looking at opportunities in the processing space in particular.

Q: There have been a number of healthcare deals in the region - Abraaj recently exited the Filipino Daniel O. Mercado Medical Center, Vejthani Hospital and IHH Healthcare...

A: Healthcare is a big focus for us and we are evaluating a number of opportunities. This includes hospitals and also medical and laboratory chains, generic pharmaceutical manufacturing, pharmacy retail and medical consumables. If you look at any macro statistic in terms of healthcare spending, there is a significant gap. At the same time you have growing middle classes and with that comes demand for increased quality. So healthcare for us is about injecting additional funds and helping companies grow within their domestic markets first and then helping them expand outside their national boundaries.

Q: How has increased investor interest in the region affected competition for deals?

A: We see a lot of competition in a Southeast Asian context as the last three years has seen an influx of international firms and the growth of domestic and regional players. Many PE firms focus on the same sectors. I think the key differentiators for us are the deal size and local presence. Many international firms pursue $100-million-and-above investments where the number of companies that are potential targets is small and often competition is intense, driving up valuations. By focusing on $15 million investments and up, we have a much bigger spectrum to play in. In certain sectors, we are also seeing opportunities for a series of smaller deals in fragmented sectors, which bring together platforms we can help partner companies expand into places like Africa, the Middle East and South America as well. Within a growth markets context we're one of the few that have that kind of operating expertise across geographies and across sectors.

Q: Can you give an example of this expansion?

A: Pancake House, which is a fast casual dining chain in the Philippines with about 300 outlets. It was completely Philippines-based but we helped the firm expand into Malaysia and find a joint venture partner there. It also has a few Middle East franchisees. Crossland is another example. Right now it operates routes solely within Thailand. We're in the process of doing add-ons there which will give it a presence in Malaysia, Singapore, Vietnam and China, so it will have a contiguous ASEAN route. Southeast Asia is grouped as a bloc but every country is completely different in terms of the local sponsors, as well as regulatory environment and language. The ASEAN economic community will be implemented over the coming years and we see that as a big opportunity.

Q: Do the operational changes apply to minority stakes?

A: We're never passive in our investments. In many emerging markets, family groups or entrepreneurs are not willing to give up control. We look for a sizable minority stake of at least 25-30%, where we have an alignment of interest with the parties involved and can bring in the right operating expertise to help them grow. There is a lot of liquidity in the market so when you're meeting entrepreneurs and family groups you need to be able to demonstrate that you bring more than just capital. The Abraaj Portfolio Acceleration Group helps us do that. It's a 25-member group comprised of people with specific operating expertise that works with the investment teams from inception of the deal. It looks at potential investments from an operating lens and adds value in the due diligence process through the creation and subsequent execution of 100 day plans, and value creation with partner companies through to exit.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Southeast Asia
• People
• MENA
• Southeast Asia
• MENA
• The Abraaj Group