Despite a perception by many in the market that Viet Nam's private equity focused investment funds have difficulties achieving exits from their investments, a survey conducted by Grant Thornton Vietnam shows that over 150 private equity exits have been achieved in the country since 2003.
But, with the tightening of capital markets following the global financial crisis it is through exits that fund managers have been able to continue to make new investments without raising additional capital, says the survey, which was released yesterday.
As a result, the level of exits that have been actually achieved by the fund managers is of significant importance to the industry, according to the survey that was conducted in December 2010, and includes data up to 30 November 2010 with voluntary participation of fund management firms including Dragon Capital, Indochina Capital, Mekong Capital and VinaCapital, among others.
Results of the survey show that the participating fund managers have invested more than US$1.8 billion in private equity investments in Viet Nam since 2003, in almost 200 companies.
The year 2007 saw the largest number of investments made, both in value and in number, of $750 million in more than 50 private equities.
However there was a substantial decrease in the years following, with 2010 having only several investments worth less than $100 million, which was a reflection of the constraints in the capital markets as a result of the global financial crisis as well as issues that consequently arose in Viet Nam, according to the survey.
2007 was also the year of the largest number of exits at 40, worth $293 million.
By November 2010, 77 full and another 76 partial exits were made for $1.146 billion.
Among the exits were the sale of Mekong Enterprise Fund II's stake in Golden Gate that runs around 30 hotpot restaurants under Ashima and Kichi Kichi brands completed last October, the sale of Dragon Capital's stakes in VP Bank in 2007 and 2010 and VinaCapital's stake in Hilton Hanoi hotel in 2006.
The average holding period for each exited investment was approximately three years for each full and partial exit achieved. "The average holding period has been trending upwards over the survey period, with exits in 2010 taking, on average, between four and five years. Based upon the large number of investments made in 2007, the next two years should result in a large number of investment exits by the fund managers," said Ken Atkinson, managing partner of Grant Thornton Vietnam.
The survey also found that stock exchange listings had been the predominant method used by fund managers for exiting from their investments, accounting for over 60 per cent of all exits.
"In 2010 we saw an increase in the number of secondary sales (sales to other fund managers), especially as new entrants sought to take a cautious path and invested in targets that had already been vetted by experienced fund managers," said the survey.
The Grant Thornton survey also noted that fund managers had been actively promoting their new investment funds to global investors. "They appear poised to have fresh capital to underpin an upswing in private equity investments in the near term," it concluded.