US-based private equity firm The Riverside Company which is currently pursuing to add more to its portfolio from the $235 million Riverside Asia-Pacific Fund II (RAF II), has no plans for now to put money into platforms beyond its existing Asian markets — Singapore, Hong Kong and Taiwan, a top official from the firm has told this portal.
The Cleveland-headquartered firm that has assets over $5 billion under management has invested in seven firms from the current 2012 vintage fund RAF II. Its platforms in Asia Pacific include Malaysia’s DCM Asia, Japanese bike retail chain Y’s Road, four companies from Australia and one from New Zealand.
“We are actually already active in Australia, New Zealand, Singapore, Hong Kong and Taiwan. We also look in many other countries throughout Asia Pacific for add-ons. But at this point, we don’t expect to look for platforms beyond these countries for the next three years at least,” Riverside Asia-Pacific Fund Managing Partner and Fund Manager Simon Feiglin told DEALSTREETASIA in an email interaction.
He added that Riverside was of the view that it has a broad coverage in the countries where it can be successful in pursuing its strategy.
The firm has a global strategy to make control and substantial non-control investments in companies that are often transitioning from entrepreneurial or family ownership to more institutional ownership.
“The Riverside Asia-Pacific Fund (currently investing our second vintage) is industry agnostic but focused on growing, high margin, “special” companies. Thus, they tend to fall into higher growth, less commoditized industries such as healthcare, software, education & training, consumer branded products, and industrial distribution,” Simon said.
With regard to the private equity space in the region, he noted that the sophistication of the market and PE players is increasing. “There are more entrants, and more experience, and that has an impact on the competitiveness of the market,” he said.
However, as a player from the west, Riverside feels that valuations for acquisitions continue to increase in this region, “probably not as quickly as in North America and Northern Europe, but they are going up.” That indicates that the region is still an attractive market for PE firms to explore when compared to North America or North Europe.
The firm mostly makes control investments, although rarely at 100 per cent and it has a preferred strategy to partner with the existing owners and managers to help accelerate a growth strategy over a 4-6 year period.
“Most of our investments include add-ons as part of their go-forward growth strategies. Our approach is simple – we want the platform to be able to succeed on its own (so we don’t pursue roll-ups, for example), but we find that a well-structured add-on strategy can accelerate our intended outcomes, enable the business to use scope and scale to attract and retain more and better customers, suppliers and employees,” Simon said.
He explained that even before the firm closes an investment, the ream sits down with the management team to discuss how they will move ahead, developing a growth strategy including potential targets, and then they proactively approach those businesses.
Last month, the PE-backed Drex-Chem Malaysia (DCM Asia) from Malaysia acquired polymers and elastomers company Erapoly Marketing Sdn Bhd and as we speak, Riverside is exploring further add-on acquisition opportunities for the firm.
“We recently acquired Erapoly as an add-on to DCM Asia. As a courtesy to the owners of Erapoly, we are not in a position to disclose the purchase price, but suffice to say that it is a material business within our target range for add-ons, which fall in a broad range of $5 million and $100 million in EV”.
The firm plans to leverarge Erapoly’s expertise in polymers as we build up the distribution and value-add capabilities in Malaysia and throughout South East Asia for DCM Asia.
With regard to Asia Pacific and a trend that emerges from the region, Simon said, “It is really a story of many markets, and it is hard to lump them all together.” He also added that control deals are still in the minority across the region, but starting to grow slowly.