sourcing & structuring financing for jv and other business forms

1

Sourcing & Structuring Financing for JV and other Business Forms

October 2012

IOP INDOCHINA OPPORTUNITY PARTNERS

AMIP OVERVIEW

All Myanmar Investment Partners (AMIP) is a specialised investment and business advisory firm exclusively dedicated to developing business opportuni@es in Myanmar

PRIVATE EQUITY: AMIP – together with Dragon Capital & FIDP – is part of Indochina Opportunity Partners (IOP) IOP has established the Indochina Opportuni5es Fund (IOF)

BUSINESS ADVISORY: Inbound investors: Structuring and overall strategic advisory Local Corporates: Corporate Finance advisory

•  The Company has been a long-‐term dream of its founder, Thura Soe-‐Paing, who grew up and was educated abroad, but always envisaged to return to his homeland and contribute with his work experience and capabili@es to create new business and development opportuni@es that would impact posi@vely in the everyday lives of the Myanmar people

INDOCHINA OPPORTUNITY PARTNERS •  Indochina Opportuni@es Fund is a $250m

fund – minimum 20% (or $50m) is allocated to Myanmar through AMIP

•  IOP leverages the combined infrastructure of Dragon Capital and FIDP in the Indochina region, giving it insider status

•  Office network spread over six regional major ci@es (and one loca@on pending), with professional staff

•  Dragon Capital provides major back-‐office support in terms of legal, research, accoun@ng, admin from its Ho Chi Minh city headquarters

•  It also provides strong sponsor backing via a $10m commitment as co-‐anchor investor of the Fund, alongside Interna@onal Financial Corpora@on (IFC) – part of the World Bank Group

IOP OFFICE NETWORK

HANOI

PHNOM PENH

VIENTIANE

YANGON

BANGKOK

HO CHI MINH CITY IOP Office

Pending IOP Office

SINGAPORE Non-Indochina

INDIA

CHINA

MYANMAR

THAILAND

LAOS

CAMBODIA

VIETNAM

PRIVATE EQUITY POTENTIAL FOR MYANMAR

Reform

Other Drivers

Scarcity of Capital

Vast PotenFal

• Poli@cal reform

• Economic reform

• Liberalisa@on polices central bank independence, financial services

• Starved of growth capital • Produc@vity gains through technology and knowledge transfer with minimum CapEx

• Favourable demographics and geography

• 2013 SEA Games & World Economic Forum

• 2014 ASEAN Presidency

• 2015 ASEAN FTA

• Cash based economy • Very li]le bank/ins@tu@onal financing op@ons

• Most growth is organic

BUT…

CHALLENGES

•  Where’s the Law? •  The Exit? But first how about the Entrance?

LEGAL & REGULATORY:

•  Power •  TransportaFon •  CommunicaFon •  Market Data

INFRASTRUCTURE:

LOCAL COMPANIES:

•  ValuaFon •  Due Diligence •  Big Emphasis on “Trust” and “Seeing Eye-‐to-‐Eye”

STRUCTURING THE VEHICLE

Myanmar Investment Commission Myanmar Companies Act

Holding Company

Myanmar Company 100%

owned JV Company

Investment SPV

Holding Company

Offshore

100% owned

Myanmar Incorporate

JV Company

Foreign Investor

Technology

Investment $$$

Interna@onal Markets

Local Company

Opera@onal Licenses

Exis@ng Overheads and Support

Regulatory Knowledge

Local Market Knowledge

Knowledge

THE MIC & JV ROUTE

i. Friends, Family and Contacts

§  Ini@ally, most likely source of funding for fron@er economies §  Characteris@cs:

§  High in volume §  Accoun@ng for smaller deals §  Most < US$ 5 mil

§  Advantages: §  Quick to understand concept / get deal done §  Limited legal / structuring considera@ons

§  Limita@ons: §  Can be hands on / unsophis@cated investors §  Tenure could be shorter §  Limited follow on capital

Financing Considera@ons

Trust

Undefined Risks

Loose or No RegulaFons

Evolving business plan

Unchartered Territory

No Track Record

Be\ng on You

FINANCING CONSIDERATION

ii. Family Offices §  The next likely source of Funding §  Characteris@cs:

§  Largely decided by one investment professional §  Accoun@ng for small / mid-‐size deals §  Most < US$ 10 mil

§  Advantages: §  Rela@vely quick to understand concept/

get deal done §  Flexible on legal / structuring considera@ons

§  Limita@ons: §  Limited follow on capital §  Likely milestones need to be met §  Tying-‐in with core business that funds family office


OpportunisFc

Undefined Risks

Loose RegulaFons



No Track Record

Be\ng on Wild Card


iii. Corporates


Strategic

Undefined Risks

Regulated



Some/Limited Track Record

Beeng on LT Growth

•  Difficult source of funding •  Characteris@cs:

•  Likely focused on specific business opportunity •  Accoun@ng for variety of sizes •  Most > US$ 5 mil +

•  Advantages: •  Brings knowledge / technology transfers •  Experienced operators •  Ability for follow on investments

•  Limita@ons: •  Slow to make decisions •  Limited ability to react quickly to market


iv. Developmental InsFtuFons •  Good opportunity for fron@er markets

•  Characteris@cs: •  Accoun@ng for variety of sizes •  Most < US$ 2mil and > US$ 50 mil +

•  Advantages: •  Mandated to develop fron@er markets •  Understanding of country situa@on •  Ability for follow on investments •  Poli@cal coverage

•  Limita@ons: •  Slow to make decisions •  Can be poli@cally sensi@ve •  Tendency to replicate previous models


Development Driven

Undefined Risks

Regulated

Defined Business Plan

Based Previous

Investments

Limited Record

Beeng on Enhancement


v. TradiFonal Financial Players

•  Unlikely source of investment ini@ally

•  Characteris@cs: •  Likely focused on large projects •  Prefer liquid investments •  Most > US$ 20 mil +

•  Advantages: •  Quick to invest •  Sophis@cated investors

•  Limita@ons: •  Lack of local market knowledge •  Complex structures •  Sensi@ve to longer tenures •  Conserva@ve investors


Alterna@ve Investment

Undefined Risks

Regulated

Developed Business Plan


No Track Record

Beeng on Low Risk / High Return


Thura Soe Paing Managing Director Email: [email protected] Tel: (95) 9 731 20887