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“Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land.”

Ecclesiastes 11:2 (NIV)

“Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

Warren Buffett (1986)

Discover the purpose of your work and your corporation 

What is your purpose in work?

  • Seizing the chance to spearhead the investment industry within burgeoning markets.
  • Pioneering a fresh paradigm for the upcoming trends in the private equity fund sector.

What drives your corporation’s core value?

  • Revolutionising the investment landscape through a revitalized business model.
  • Achieving business triumph while embracing a spirit of philanthropy.

Signing the Mayflower Compact 1620. 

The Massachusetts Bay Company was a joint-stock trading company chartered by the English crown in 1629 to colonize New England. A group of Puritans took it up later. The Massachusetts Bay Company was an example of the early prototype of the private equity model.

Source: Wikipedia. A painting by Jean Leon Gerome Ferris in 1899 / scholastics.com Oscar Zeichner / workandmoney.com Eric Ortiz 2020.

1.0 Executive Summary

Mission:

  • Entity: Forge strategic alliances with global investors, international operators, government agencies, local developers, and establish private equity management companies.
  • Stage 1: Establish private equity funds totalling US$623 billion for 26 projects in Borneo.

Key Management Team:

  • Mentors: Visionary pioneers and industry leaders with a vast global network, providing invaluable guidance and inspiration.
  • Coaches: Mission-oriented industry experts offering practical solutions to challenges, ensuring the team stays focused on its objectives.
  • Partners:
    1. A project leadership group with a successful track record in development, operation, and financial management of the business investment industry.
    2. Reputable investment firms with access to diverse sources of funding.
    3. International investment management groups.
    4. Visionary business entrepreneurs with high net worth and philanthropic compassion.

Product Benefits:

  • Market: The new frontier market in Borneo provides direct access to a population pool of 4.6 billion and a combined GDP of US$31.58 trillion within the Asia Pacific hub.
  • Exclusive: Investors enjoy exclusive rights in the target industry.
  • Growth: Capitalize on growth opportunities in the Asia Pacific.
  • Portfolio: Diversify investments to include emerging markets.

Target Market:

  • Private equity, buyout, growth, venture, and distressed industries.

Financial Projections:

  • Investment: US$623 billion
  • Fee Revenue: US$12.457 billion
Source: Author

Unique Business Model:

  • Acquire: Benefits of acquiring existing companies include rapid entry to foreign markets, economies of scale, diversification, increased market share, vertical integration, enhanced productivity, and rapid growth.
  • Compete: Effective strategic alliances with international operators, funding managers, government agencies, and local developers yield competitive advantages.
  • Partners: The unique model involves recruiting the target market and end buyers as part of the management partners, ensuring sustained revenues.
  • Team: Strategic alliances among stakeholders shape the most dynamic management team and eliminate 95% of investment issues.

2.0 Mission 

2.1 Problem

  1. Negative: The COVID-19 crisis led to a global growth reduction of -4.9% in 2020.
  2. Unknown: International private equity groups face challenges in the emerging markets of the Asia Pacific due to limited exposure, narrow scope, and cultural barriers.

Challenges faced by international groups – Australia example

Source: Asialink Business. Wodak, Ma, Manning, Burtt, and Narayanamurti 2020

2.2 Solution

  1. Invest: Identify opportunities and establish private equity funds focusing solely on rapid growth and higher profitability investments in the emerging markets of Borneo.

2.3 Mission

  1. Entities: Form a strategic alliance with global investors, international operators, government agencies, local developers, and establish private equity management companies.
  2. Stage 1: Set up private equity funds totaling US$623 billion for 26 projects in Borneo.

3.0 Product 


3.1 Product Description

The funds will strategically invest in target segments that present distinctive products, services, and business models.

IndustryProjectFund (US$/billion)
AgricultureCassava plantation0.58
AgricultureOil Palm plantation4.00
AgricultureTimber plantation1.40
AquacultureFishery0.63
AviationLow-cost airline0.23
AviationLow-cost airport0.27
ChemicalSpecialty chemical3.60
EducationInternational school0.13
HealthAged care retirement villages10.31
InfrastructureConstruction86.70
InfrastructureHighway30.80
InfrastructureRailway10.10
InfrastructureSeaport13.00
InfrastructureWater supply19.80
MigrationNew migrants198.00
LogisticsCold Chain Logistics0.60
MiningCoal1.60
MiningGold0.17
MiningOil and Gas1.44
Real EstateIndonesia New Capital27.00
Real EstateProperty development196.00
Real EstateSpecial Economic Zone12.00
TourismEcotourism0.02
TourismExperiential tourism0.09
TourismSpecial event tourism0.38
TourismHotel4.00
FinancialPrivate equity fund622.85

Functions of private equity firms

Source: Corporate Finance Institute 

3.2 Product Attributes

  1. Unique: These projects feature distinct attractions exclusive to Borneo.
  2. Success: Special attributes include:
    • Securing the target market
    • Unique business models offering competitive advantages
    • A powerful strategic partnership and a management team with a proven track record.
  3. Solid: These projects offer:
    • Tangible assets like gold, oil, and real estate as hedges against inflation
    • Foundational investments in agriculture, logistics, health, education, infrastructure, tourism, and more.
    • Addressing actual needs of the Asia Pacific markets.
    • Promising rapid growth and high returns.

Private Equity Fund Investment Pathway

Source: Wikipedia. Urban renewal, 2008

3.3 Product Benefits

  1. Market: The new frontier market in Borneo provides direct access to a population pool of 4.6 billion and a combined GDP of US$31.58 trillion within the Asia Pacific hub.
  2. Exclusive: Investors enjoy exclusive rights in the target industry.
  3. Growth: Capture growth opportunities in the Asia Pacific.
  4. Portfolio: Diversify investments to include emerging markets.

3.4 Product Competitive Advantages

  1. Team: A robust team with proven track records.
  2. Target: Secure demand from target customers.
  3. Viability: Finance by international and local investors with solid support from the government.

4.0 Market

4.1 Market Segment

Source: Wikipedia. Pieter Breughel the Younger 1564-1638
Industry SegmentFunding
AgricultureBuyout
AquacultureNew project
AviationDistressed asset
Specialty chemicalNew project
EducationGrowth capital
HealthGrowth capital
InfrastructureGrowth capital
MigrationGovernment and sovereign fund
LogisticsBuyout
MiningBuyout
Real EstateGrowth capital
TourismDistressed asset
FinancialPrivate equity funds

4.1 Funding Strategies

  • PE (Private Equity): Private equity funds for these projects are based on a strategy of capital growth, stable income, and higher profits.
  • Buyout: Buyouts acquire projects through large capital, providing more control to investors.
  • Growth: Growth capitals fund mature companies seeking capital for expansion and acquisitions in new markets in Borneo.
  • Venture: Venture capital provides funds to startups and new companies pursuing high-growth, high-return, and higher-risk projects.
  • Distressed: Distressed projects target companies facing financial and business difficulties.

4.2 Target Market Strategy

  1. Team: Strategic alliance between a powerful management team:
    • Fund managers with a network of global high net worth investors.
    • Specialist operators with in-depth industry knowledge.
    • Supporting government agency expediting approvals and implementing financial and business infrastructure policies.
    • Local developers aiding in site selection, labor organization, and cultural interaction.
    • A defined customer base.
  2. Financial Goals:
    • High growth, higher profit, capital gain, and stable income are major financial goals.
  3. Expert Industry Specialization:
    • Project developers, private equity fund managers, and operational partners have extensive successful track records in target industries.
  4. Time Milestones:
    • Search and pool capitals: 2 years
    • Invest and manage companies: 4–7 years
    • Exit / concession: 2–30 years

4.3 Market Needs

IndustryNeeds
AgricultureAnimal feed / competitive edible oil for developing nations
AquacultureNorth Asia market
AviationLow-cost travel for mass-market tourists
Specialty chemicalExpansion into emerging markets
EducationExpatriate workers
Health careRetirement homes
InfrastructureStable long-term income for investors
MigrationGDP growth
LogisticsCold storage needs in the tropics
MiningBasic building block
Real EstateMigration and new economic activities
TourismNew vision and development
FinancialPrivate equity funds

4.4 Growth Drivers

  1. Growth: Robust economy attracting investors. By 2030, APAC will account for 70% of the world capital stock.
  2. Demand: Growing demand from the middle class in Asia for new products and services.
  3. Compete: Producers and manufacturers will switch their operations to a lower-cost center.
  4. APAC Growth Fund: A dedicated fund to leverage opportunities arising from the growth in the Asia-Pacific region.

APAC- Focused Fund

Source: BCG. Kaku et al., 2020

4.5 Key Customers

IndustryTarget Customer Market
AgricultureBrunei, Indonesia, Malaysia – Feed mills / India, China – Oil refineries.
AviationNorth Asia, India, and Middle East – MNCs with large employees.
Specialty ChemicalDistributors and licensed manufacturers in Asia.
EducationMNC expatriates.
HealthcareEuropean expatriates, Asian diaspora communities.
InfrastructureGovernment agencies.
MigrationInternational, regional, and local migrants.
LogisticsCold storage industry.
MiningSteelmakers in Asia / Gold smelters in China and India / Refineries.
Real EstateResidential and retail sectors in Borneo.
TourismTourists from the Asia Pacific.

4.6 Industries and Competition

1. Key global private equity firms (Additional key players are highlighted under other chapters)

2. Key Asia private equity firms (Additional key players are highlighted under other chapters)

3. Key Private and Growth Equity Funds that invest in Asia (Additional key players are highlighted under other chapters)

  • 3i Investments
  • ACA Investments
  • Actis
  • Adams Street Partners
  • Advent International
  • Ardian
  • Artesian Venture Partners
  • Avenue Capital Group
  • Bain Capital
  • Battery Venture
  • Carlyle Group
  • Dymon Asia Private Equity
  • Eight Roads
  • EQT Partners
  • General Atlantic
  • Goldman Sachs
  • Horsley Bridge Partners
  • Insight Venture Partners
  • Kestrel Capital
  • KKR
  • L Catterton
  • Light Speed Venture Partners
  • Matrix Partners
  • Oaktree Capital
  • Quantum Global
  • Sequoia Capital
  • SOSV
  • TA Associates
  • Terra Firma
  • TPG Capital
  • Warburg Pincus.

3. Top Greater China-Focused Private Equity Funds (As at 29 March 2016)

Source: Preqin 2016

4. Key Asia Pacific Venture Capital & Private Equity Associations

  • Asian Venture Capital Private Equity Council (AVCPEC)
  • Asosiasi Modal Ventura Untuk Startup Indonesia (AMVESINDO) 
  • Australian Private Equity & Venture Capital Association Limited (AVCAL)
  • China Association of Private Equity (CAPE) 
  • Hong Kong Venture Capital & Private Equity Association (HKVCA) 
  • Indian Private Equity & Venture Capital Association (IVCA) 
  • Japan Venture Capital Association (JVCA) 
  • Korean Venture Capital Association (KVCA) 
  • Malaysian Venture Capital & Private Equity Association (MVCA) 
  • Singapore Venture Capital & Private Equity Association (SVCA) 
  • Taiwan Mergers & Acquisitions and Private Equity Council (MAPECT) 
  • Thai Venture Capital Association (TVCA)

5.0 Operation

5.1 Private equity fund operation

Source: PitchBook Data, Inc. 07/11/2018
https://files.pitchbook.com/website/files/pdf/Private_Markets_Guide.pdf

5.2 Private equity operation essentials

Source: Marcum LLP. 

5.3 Operation stages in the private equity investment process

Source: European Private Equity and Venture Capital Association (EVCA) 2007

6.0 Financial Implications

6.1 Investment Segment

  • Food: Agriculture and aquaculture segments cater to domestic and regional food demand within the Asia Pacific market. Target markets include animal feed, edible oil, fishery, and timber downstream industries. Short-term returns are expected.
  • Distress: Aviation and tourism segments offer distressed asset investments. The aviation industry in Asia is undergoing restructuring and rationalization phases, with the target industry expected to emerge stronger. This segment provides a midterm investment cycle.
  • Bases: Specialty chemical, mining, infrastructure, logistics, and real estate are industries providing the basic building block for business growth. These segments offer a longer-term investment strategy, with acquisitions enhancing rapid market entry.
  • Social: Education and health (age care retirement villages) are essential services for expatriate and local niche markets. Strategic alignment with existing education and healthcare groups will enhance success in this segment.
Total Investment: US$622.85 billion in 26 segments

6.2 Private Equity Costs

  1. Management Fee:
    • LP pays the fee from the fund’s assets to the manager (GP) for investment management services. The industry benchmark is around 2%.
  2. Performance Fees / Carried Interest:
    • Incentive fee of 20% (or other agreed percentage) of profits above the agreed benchmark, to be paid by the LP.
  3. Transaction and Operational Cost:
    • Includes organizational, investment, service provider, insurance, regulatory, and tax expenses.
  4. Extraordinary Expenses:
    • Includes litigation costs.
  5. Borrowing Costs.
  6. Placement Agent Fees.
  7. Business Operation Costs:
    • Includes staff costs, director fees, rent, and utilities.

6.3 Private Equity Revenue

  1. Fee:
    • Private equity firms generate revenue by charging management and performance fees from investors in a fund. A yearly management fee of around 2% of the invested amount is charged to the limited partners (LP).
  2. Waterfall:
    • There are four tiers in a distribution waterfall schedule:
      • Return of Capital: LP investors receive 100% of their initial capital.
      • Preferred Return: LP investors receive the preferred return (7-9%) of the remaining amount.
      • Carried Interest: Around 20% of the performance fee on the profit is paid to the GP upon fund exit when the fund’s profit exceeds an agreed level, usually around 8-10%.
      • 80/20 Share: The remaining profit is divided, with 80% going to the LP investors and 20% to the GP.
Fee: US$622.85 billion X 2% = US$12.457 billion

Two and twenty revenue

Source: Investopedia. Elvis Picardo. Graphic Jiang 2020

6.4 Financial Returns

Case Study 1: China

  • One-year return on investment for 15,000 private equity products exceeded 30%.

Case Study 2: APAC

  • The average Internal Rate of Return (IRR) in the Asia Pacific market is at 12%. The top performer reached 16% for the emerging markets.

Case Study 3: US

  • Private equity funds in the US produced around 10.48% return per year between 2000–2020.

Source: Bain & Co. Kiki Yang, Sriwatsan Krishnan, and Johanne Dessard 2020

Images: Used with permission from Bain & Company.  

2019 Public listed international group

CompanyRevenue (US$)Net Income (US$)
Apollo Global Mngmt2.8 billion0.8 billion
Ares Management Corp1.8 billion140 million
Blackstone Group6.0 billion2.1 billion
Carlyle Group3.4 billion0.4 billion
EQT Partners683 million182 million
Kohlberg Kravis Roberts4.7 billion2.0 billion
TPG Capital2.1 billion481 million
Warburg Pincus2.1 billion481 million
Source: https://www.wsj.com/market-data/quotes/company-list 

Top private equity stocks with high returns 2021:        

RankCompanyPrice Gain Year to Date (%)
1Oxford Square Capital Corp62.30%
2Prospect Capital Corporation48.80%
3Gladstone Investment Corp39.44%
4BlackRock Capital Investment Corp35.69%
5Apollo Investment Corp34.93%
6TCG BDC33.72%
7KKR and Co31.66%
8IAC/InterActiveCorp31.18%
9Main Street Capital Corp30.94%
10TCP Capital Corp29.89%
Source: fknol.com 2021

6.5 Source of Funding

1. Strategic Investors:

  • New Investors:
    • Limited Partners (LP) and General Partners (GP).
  • Financiers:
    • Sovereign wealth funds, pension funds, private equity funds, high net-worth individuals, family offices, foundations, fund-of-funds, and institutional investors.
  • Developers:
    • International developer groups that focus on emerging markets in Asia.
  • Operators:
    • Global operators of the industry segments.

2. Private Equities and Investors

Largest private-equity firms by PE capital raised 2023

Source: Wikipedia 

3. Consultants, development and funding managers to the financial industry:

6.6 Rapid Entry Industry

Low hanging fruits projects:

  • Agriculture
  • Infrastructure
  • New Capital Relocation
  • Property development
  • Tourism

7.0 Management Team

7.1 Key Management Team:

  • Mentors: Visionary pioneers and industry leaders with a vast global network, providing invaluable guidance and inspiration.
  • Coaches: Mission-oriented industry experts offering practical solutions to challenges, ensuring the team stays focused on its objectives.
  • Partners:
    1. A project leadership group with a successful track record in development, operation, and financial management of the business investment industry.
    2. Reputable investment firms with access to diverse sources of funding.
    3. International investment management groups.
    4. Visionary business entrepreneurs with high net worth and philanthropic compassion.

In the private equity and financial investment industry, several global leaders have made significant contributions, shaping its growth and success. Here is a list of some of these remarkable individuals, honoured for their vision and dedication:    

These are just a few of the outstanding professionals and captains of the industry. The readers are encouraged to explore further and conduct their research to learn more about the management teams in this dynamic field.

7.2 Key Management Team Model

Source: Author

8.0 Unique Business Model

8.1 Successful Track Record

The key factor is to select winning partners, invest in the right product within the high-growth industry at the right place and at the right time. The success is based on:

  1. Management Team with Diverse International and Asia Pacific Experience.
  2. Differentiation through Cost Transformation and Higher Productivity Performance.
  3. Aggressive Strategy to Pursue Larger Market Share through Acquisition, Buyout, and Alignment with Target Customers.
  4. Long-Term Investment, Dominant Player in the Industry, Experienced Operator, and Strong Government Support.

8.2 Entry Model

  1. Acquire:
    • The private equity fund will buy 100% of the target firm in the new frontier market in Borneo, with the option of the previous owner to stay on for a period until the new operator is ready.
  2. Partner:
    • Another option is a strategic partnership with the existing owner, with the private equity providing new capital for the expansion program.
  3. Growth:
    • The private equity fund will provide additional capital to speed up the rapid growth strategy.
  4. Buyout:
    • Funding is through a leveraged buyout, using the assets as collateral and support from private investors and institutional funds.
  5. Team:
    • The private equity firm will inject new capital, set up a new management team to contribute creative ideas to generate business innovations and attainment of financial goals.
  6. New: Search Fund Model
    • Another popular model is to set up a search fund of US$250,000 – $500,000 for the entrepreneur to identify and acquire the business that offers rapid growth, higher profit, and a unique business model.
    • The search fund is invested by 10–15 private individuals. The time frame for the search is about two years.
    • A successful find will assure funding up to US$20 million in the purchase and position the businessperson at the executive level.
    • Exit strategy is to sell and capitalize on the profits in five to seven years’ time frame.

Entry Model Options Sources:

Source: Asialink Business. Wodak, Ma, Manning, Burtt, and Narayanamurti 2020

8.3 Unique Business Model

Entry model compare

Source: Asia Task Force. 2020.
  1. Acquire:
    • Benefits include rapid entry to a foreign market, economies of scale, diversification, increased market share, vertical integration, enhanced productivity, and rapid growth.
  2. Compete:
    • Effective strategic alliances with international operators, funding managers, government agencies, and local developers will produce competitive advantages.
  3. Partners:
    • The unique model includes the recruitment of the target market and end buyers as part of the management partners, ensuring revenues.
  4. Team:
    • The strategic alliance between all stakeholders helps shape the most dynamic management team and eliminates 95% of the investment issues.

Private Equity Business Model

Source: European Private Equity and Venture Capital Association (EVCA) 2007

9.0 Key Success Factors & Risk Mitigation

9.1 Key Success Factors

  1. Strategy:
    • Identify and capture growth opportunities with higher rates of return potential. The assets are undervalued or badly managed. Investors inject funding and improvement strategies to turn around business performance.
  2. Team:
    • Form winning teams, establish a critical network, and enhance operational performance to explore the maximum potential of undervalued companies.
  3. Culture:
    • Successful businesses in Asia incorporate cultural values, including family-based relationships.
  4. Long-Term:
    • Long-term investment vision is a key success factor inherent in private companies in Asia.

9.2 Risk

  1. Stability:
    • Political instability, frequent changes in legal and government policies are common traits in Asia.
  2. Ethics:
    • Cultural norms of the host country can impose serious compliance risks for foreign investors. Illegal bribes can adversely affect the reputation of the involving parties.
  3. Culture:
    • Asian strategy focuses on long-term investment against Western short-term results of short-term growth and profitability.
  4. Changes:
    • Business dynamics and market trends can change drastically with disruption.
  5. Local:
    • Acquisition of local knowledge requires groundwork and robust governance.

9.3 Risk Mitigation

  1. Political:
    • Plan and constantly monitor macroeconomics and microeconomic factors. Maintain a close connection with government agencies.
  2. ESG:
    • Good governance, full compliance, and regular due diligence audits.
  3. Vision:
    • Long-term investment vision.
  4. Speed:
    • Identify and capture opportunities and gain early mover advantages.
  5. Team:
    • Leaders and senior executives with Asia experience.

10.0 Exit Strategy

10.1 Forms of Exit

  • Forms: IPO, buy-out, M & A, and transfer.

10.2 Key Attractions for New Investors

  1. Portfolio:
    • Diverse projects provide investment opportunities in the emerging market.
  2. Revenue:
    • Long-term revenue projects.
  3. Demand:
    • Secure target market.
  4. Team:
    • Solid management team with successful track records.
Bibliography
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