Deal focus: PrimeMovers buys Malaysia machinist in debut deal

Soo Jin Goh (pictured) and Randy Teo set up Platinum Equity's Singapore office in 2014 and proceeded to make a handful of industrials and manufacturing-oriented investments. They had long considered establishing their own independent firm – but an ongoing dialogue didn't transition into meaningful action until last year.

As the myriad business disruptions of the pandemic diminished, a track record of exits from Platinum came into focus. This included the sale of Singapore-headquartered electronics maker PCI to US-listed Celesta in 2021 for USD 306m in cash. Teo and Goh felt it was time to act.

Last week, they secured their debut deal, teaming up with Lingotto Investment Management, a division of Dutch industrials giant Exor, to acquire Malaysia-based precision manufacturer EngTek at a valuation of SGD 150m (USD 111m).

The name of the new firm – PrimeMovers Equity – is borrowed from a church-connected leadership mentoring programme that Goh and Teo had both participated in during their time at Platinum. In essence, they wanted to motivate talent and help people live out their callings.

"The nature of private equity is to activate high-impact leaders and in that process transform businesses," Goh said. "But at the end of the day, whatever initiative we catalyse, the ownership will always be with the managers. Our job is not to be the hero – our job is to make management the hero of the initiative. They need to own it."

Even before Goh formally stepped down from Platinum last December, PrimeMovers had secured multiple anchor investors for its first fund. Lingotto is one of them, but otherwise the LP mix is largely Singapore and US-based, comprising institutions, family offices, and individuals.

The show of confidence is underpinned by a long history of partnership. Indeed, PrimeMovers is Goh and Teo's third venture together.

They first met in 2010, when Goh, as a director at Standard Chartered Private Equity (SCPE), supported a merger that established high-tech manufacturer Infastech. Goh sat on the company's board and Teo was brought in as CEO. SCPE and co-investor CVC Capital Partners sold Infastech to Stanley Black & Decker for USD 850m in cash in 2012.

PrimeMovers is hoping to achieve similar feats across industrial manufacturing, knowledge-based services, and healthcare. Investee companies will be sub-USD 300m in terms of enterprise value with operational improvement upside and manifest downside protections.

The target corpus has not been set, but the fund is expected to write eight to 10 cheques falling in a flexible range or USD 50m to USD 75m. Platform plays are a significant part of the strategy, so these eight to 10 investments will include bolt-ons. Family buyouts, MBOs, and corporate carve-outs are all part of the playbook.

EngTek, a family-owned business founded in 1974, fits the bill from several angles. Goh and Teo became familiar with the company in 2015, when most of the business was focused on data storage equipment such as disc drives. Since then, operations have diversified across heating, ventilation, and air conditioning (HVAC), semiconductors, automotive, and telecom.

The development is seen as fulfilling downside protection requirements around customer stickiness, a significant real estate component, good levels of working capital, and a high degree of variability in costs.

A variable cost structure – effectively allowing management to switch off various aspects of the business when needed – is arguably the key to much of PrimeMovers' value-add strategy. The firm has dubbed the framework "GTO," an acronym for growth and transformation through operations, and considers it part of its DNA.

"Sometimes we'll ask companies when the last time was that they did a spend analysis for procurement. And they'll say, ‘What do you mean?' Therein lies the opportunity," Goh said.

"In our experience, when you go through that process of spend analysis and the centralisation of procurement of some of your key products, very often you are able to get 3-4% savings from a procurement perspective."

For EngTek, automotive could be the most prospective growth area, given the company was recently included on an approved vendor list. PrimeMovers will provide advisory in areas such as digitalisation, competitive value proposition, and search engine optimisation. In HVAC, a longstanding area of strength, the most critical guidance could be more nuanced.

In keeping with the mentoring programme that inspired its name, PrimeMovers has made a feature of its inputs around leadership skills creation and instilling a sense of purpose.

Earlier this month, the GP convened EngTek staff – including about 20 managers – for a three-day workshop focused on refreshing the company's mission, vision, and value system. Talking points included operational philosophy, defining lean management, and what governing and organisational structures are required to realise these aspirations.

"We say, ‘This is where you are, and this is where we would like you to be.' It's not us telling companies what to do – it's a process of inception," Goh said. "After you have learned and see what the best-in-class processes can be, you begin to see how far you can go."

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• Topics
• Southeast Asia
• GPs
• Fundraising
• Buyouts
• Buyout
• Industrials
• Technology
• Singapore
• Malaysia
• Platinum Equity
• manufacturing
• semiconductor
• automobiles