Vietnam-based PE firm Mekong Capital closes fifth fund at $246m

Vietnam-based private equity firm Mekong Capital has closed its fifth investment vehicle, Mekong Enterprise Fund IV (MEF IV) at $246 million, more than double that of its predecessor fund.

DealStreetAsia had reported earlier that the fund manager was planning to close its fifth fund at a hard cap of $250 million. The vehicle, in which the World Bank’s International Finance Corporation has committed $60 million in capital, had an initial target of $200 million.

Mekong Capital has had three other funds in the Mekong Enterprise Fund series besides the Vietnam Azalea Fund, a 2007-vintage, pre-IPO fund.

MEF IV will invest in the range of $10-35 million per deal, and can make both minority and buy-out investments, according to a statement. It will continue to invest in Vietnamese companies and exclusively in proven consumer-driven sectors that benefit from the growth in Vietnamese consumer demand and the adoption of modern business practices.

“During 2020, many businesses such as resorts and high-end restaurants have grown their customer base with Vietnamese consumers, which I think is a great opportunity for them because local Vietnamese customers typically come in bigger groups, are more likely to be repeat visitors, and represent a bigger market opportunity,” Chris Freund, founding partner of Mekong Capital, told DealStreetAsia in an email interaction.

MEF IV will focus in particular on retail, education, restaurants, consumer services, FMCG, and healthcare.

The fund has a 10-year life cycle and expects to make a total of approximately 12 investments.

“Since Mekong Capital first established its operations in Vietnam in early 2001, Vietnam has consistently been a forward-looking, stable, and attractive investment destination. The people of Vietnam are welcoming and open-minded. Vietnam’s middle class continues to emerge as the driving force in the economy, and provides a robust base for the country’s ongoing growth,” Freund said.

“It has been so reassuring to see the Vietnam government’s strong coordination and leadership during this pandemic. Vietnam, together with other countries in East Asia, have really stood out and I believe that global investors will increasingly see that East Asia is a stable and well-coordinated region,” he added in the email.

MEF III, which was launched in 2016 at $112 million, has to date closed nine deals and exited one company — jewellery retailer Precita, according to the firm’s website. Some of its portfolio has witnessed high growth in terms of branch network since the fund’s investment, such as Pharmacity (from 45 stores to 500 stores), microfinance firm F88 (from 10 to 300 branches) and ABA Cooltrans (from 35 refrigerated trucks to 300 trucks and three cold storage facilities).

Among funds that Mekong Capital has fully divested, MEF II generated a net return multiple of 4.6x and a net internal rate of return (IRR) of 22.7%, while Vietnam Azalea Fund generated a gross return multiple of 1.8x and a gross IRR of 10.5%.

Ontological private equity

Mekong Capital has been using Vision Driven Investing, a framework of added values to its portfolio companies, to drive its corporate governance and performance.

The firm has also recently developed an ontological private equity approach, which it describes as “grounded in who people are being and how things occur to them, rather than the traditional knowledge-and-solutions approach of most private equity firms”.

In total, the firm has completed 35 private equity investments, of which 27 have been fully exited.

“We are not more cautious than before, but we do have more clarity about what kinds of companies will be the most successful investments for us,” Freund told DealStreetAsia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.