Singapore-headquartered OCBC Bank, through OCBC Bank (Malaysia) Bhd and its first private equity fund, is investing 60 million ringgit ($14.3 million) in a local accounting firm YYC Group, it said in an announcement on Wednesday.
OCBC will take up less than 20 per cent stake in YYC Group, according to the accounting firm’s executive chairman Yap Zhi Chau. The capital will be used for acquisitions and to further expand YYC Group’s client base.
“We are expecting strong organic growth, coupled with strategic acquisitions, to catapult the company to greater heights both within the country and regionally. Despite starting off with a confined focus on SMEs, we have now expanded into the realm of larger corporations. We believe this strategic collaboration between YYC Group and OCBC Bank will propel us forward,” said YYC Group CEO Yap Shin Siang.
The accounting firm said it would look to go public in five years’ time, where Malaysia will be the first choice for YYC Group to list, although it is also considering other destinations such as Singapore and Hong Kong.
Founded in 1974, YYC Group currently services 20,000 clients and has operations in Kuala Lumpur, Selangor, Johor, Penang and Singapore. Its existing management team will remain as key shareholders, alongside OCBC Bank as advisors.
The bank’s first private equity fund, the Lion-OCBC Capital Asia Fund I (LOCAF 1), was set up in late 2014 under OCBC’s PE investment unit Mezzanine Capital Unit (MCU).
The vehicle held its final close at S$550 million ($398 million) in nine months, exceeding its initial target of S$400 million ($289 million). Of the total amount raised, OCBC contributed S$200 million ($144.7 million). LOCAF 1 targets high-growth small and medium enterprises in four core markets of Singapore, Malaysia, Indonesia and China.
OCBC is said to be mulling the launch of its second private equity fund this year, which could be larger than LOCAF 1. The new vehicle may tap external parties for capital, making it independent of the financial institution.
According to a report by The Business Times, LOCAF 1 is on track to achieve a 20 per cent internal rate of return by the end of its 10-year term, said OCBC global head of mezzanine capital unit Daniel Kwan.
LOCAF 1 has invested in two tech unicorns – one is a Southeast Asia-based ride-hailing startup while the other is a Chinese tech hardware startup. The fund invested some S$34.1 million ($24.7 million) as part of the unidentified ride-hailing startup’s Series E round. It put in S$90 million ($65.1 million) into the Chinese startup.