Competition for large-cap Indonesia deals to intensify – AVCJ Forum

The challenge isn't a shortage of potential investee companies but a general lack of awareness of the asset class. "The number of corporates that think about private equity as an alternative source of funding is not many," observed Ridha Wirakusumah, a director at KKR.

"I would put out a word of caution to LPs - it's still an emerging market," added Veronica Lukito, CEO and managing director at domestic GP Ancora Capital Management. "Are the regional and global guys going to be able to find the type of deals they are used to? It's going to be very few. They might have to wait another 3-5 years."

The economics would appear to lie in private equity's favor for those willing to be patient. According to Wirakusumah, the sum of all equity investments made in Indonesia over the last five years is just $4 billion, while the country's GDP has surpassed $1 trillion and bank lending market is worth $400-500 billion. The implication is that companies can't rely on banks and the capital markets forever and it will ultimately come around to the merits of private capital.

"Yes, there are more global and regional players in the market; yes the local GPs are stronger, but I see this as good news," said Wirakusumah. "It means increased transparency, greater efficiency and improved governance. This is good news for Indonesian corporates at large and for the economy as a whole."

Wai Hoong Fock, a managing director at CVC Capital Partners, also emphasized the value that regional and global private equity firms can bring to local business. He noted that when CVC completed its investment in Matahari Department Store in 2010 - still Indonesia's largest-ever PE deal - the fact that the firm had previously invested in UK department store Debenham's was immensely helpful.

A rich source of deal flow for the global and regional players might ultimately turn out to be domestic private equity firms. "There is a strong logic for funds like Ancora, Saratoga and Quvat , which are good at taking local companies nationwide, collaborating with regional funds that then take these companies international," said Tom Lembong, co-founder and partner at Quvat Management. "It's like an assembly line moving local or national to larger scale and a more regional footprint."

Kay Mock, founding partner at Saratoga Capital, added that there are plenty of candidates in the mid-market space that can be scaled by local investors before being exited via secondary sales. There is also a greater willingness among LPs to back managers with the skills to do this.

"Over time there has been greater comfort with exposure to Indonesia and the quality and size of LPs coming here has developed," said Mock.

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

• Topics
• Buyouts
• Expansion
• Southeast Asia
• Indonesia
• Southeast Asia
• AVCJ Events
• buyout
• Growth capital
• KKR
• CVC Capital Partners
• Saratoga Capital Group
• Quvat Management
• Ancora Capital Management