Thursday, August 13, 2009

Moral lesson in Private Equity

Many argues that private equity ("PE") is just another way to fund a company's growth. Many didn't realize that PE is the most crucial funding stage in a company to unleash its real potential. The metaphoric transformation of butterfly may serve this the best! Even though the PE can be undertaken via so many investment strategies such as leveraged buyout, management buyout, venture capital and so on; many companies (especially in Malaysia) have shunned away from exploring such possibilities.

Ok, I will stop there first so that you - boys & girls - can try to take some time and absorb each and every word; and try make some sense out of it. If you're still having problem, then it's a good sign because you are not alone. That's how confused many entrepreneurs (especially in Malaysia) in understanding PE to grow and expand their businesses.

One of my firm's interest is to find good Malaysian companies and participate (invest) through PE while figuring out ways to unleash the highest value for its shareholders (in this case, the company's owner and its investors). Still blur?

I got a chance to visit two such companies this week. They have incredible capabilities in e-learning, animations and system integration. But they don't have enough money to grow their business. In both cases, they need to get capital injection from investors. To attract big investment, they need big ideas. The U.S. e-learning market is hitting more than $50 billion by 2010. Korea and Japan combined have a market size of more than $12 billion. Based on current internet penetration in Malaysia which is around 40%, I anticipate the market size is around $2.5 billion. Understanding how to tap into this is crucial. These companies need to reformulate their business model; re structure the revenue mix and create a strong sales & marketing task-force. They need to think big and independent.

So boys & girls, this is my lesson to you - Think big but start the small works today. After all, Allah loves those who perform small deed but in a continuous fashion eventhough we always wish for the highest level of paradise!

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