Private equity as alternative source of funding for businesses
After four years in operation, Ekuiti Nasional Berhad, or Ekuinas, has slowly but surely proven that its private equity (PE) investment model is an effective way to transform companies. The model differentiates Ekuinas in a vibrant funding ecosystem, filling a clear gap at the growth stage.
Entrepreneurs seeking funding to grow their businesses should widen their search beyond the usual funding method and consider welcoming an active partner for the business. One that would not only provide a company with growth capital, but also access to experience, expertise and resources.
Small and medium companies benefit significantly from having access to the invaluable capital resources, networks, financial discipline and governance, which PE firms typically bring to its portfolio companies.
There is also more to be gained as a minority shareholder in a bigger company as opposed to a majority shareholder in a small company.
Increasing bumiputera equity value
Ekuinas operates two investment operations simultaneously. Its direct investments, which enable Ekuinas to directly acquire equity in the high potential companies, now has 10 companies operating across five sectors: education, oil and gas, retail, food and beverage, fast moving consumer goods and services.
Another investment operation is Ekuinas outsourced programme, where it appoints selected third-party fund managers to undertake smaller, minority investments in dynamic local companies. The outsourced fund managers (OFMs) are allocated a specific amount of capital by Ekuinas and are required to raise funds from other private investors, in line with the government's call to encourage more public-private partnerships.
The programme now has seven portfolio companies under two OFMs and Ekuinas expects the other five OFMs to undertake their investments soon.
Through its direct investments and outsourced programme, Ekuinas has successfully increased Bumiputera equity value by RM2.1 billion, or 1.5 times the capital invested as at end of last June.
Building the bumiputera talent pool
As Ekuinas strives to achieve its financial target of at least 12 per cent IRR and 20 per cent IRR on the whole portfolio each year, it pursues its social objectives just as tenaciously. The first and most commonly known social objective is for Ekuinas to increase institutionalised Bumiputera equity ownership.
The other objectives are to enlarge the pool of capable Bumiputera entrepreneurs and professional managers, increase employment opportunities across its portfolio companies and improve the supply chain.
Dr Jamal Yusof of Icon Offshore Berhad, Datuk Rahim Zin of San Francisco Coffee and Datuk Ir Dr Ahmad Fikri of Strateq Sdn Bhd are among the entrepreneurs receiving the backing of Ekuinas and its OFMs to enter the next level. Ekuinas also appoints high caliber managers in the respective companies to lead the transformation process. As at December 2012, there were 144 professional managers at Ekuinas' portfolio companies, out of which 46.5 per cent are Bumiputera.
Wan Ahmad Saifuddin of UNITAR International University, Hizwani Hassan of Cosmopoint Group and Ahmad Fariz Hassan of Burger King Malaysia are some of the professional managers heading the respective portfolio companies. Ekuinas hopes to expand this talent pool progressively as its investment portfolio expands.
By the end of last year, Ekuinas had also successfully increased the number of employees at its portfolio companies prior to entry by 9.6 per cent to 7,749 personnel, of which 62.8 per cent are Bumiputera. This signifies a positive impact which is expected to continue in tandem with growth in Ekuinas' investment portfolio.
Efforts to improve the supply chain are part of a continuous process and wherever possible, Ekuinas would recommend its portfolio companies to appoint bumiputera vendors for their operational requirements.
SJJB for capacity building
Although Ekuinas' operations are on track, much still needs to be done to transform businesses and enhance Bumiputera economic participation. The Skim Jejak Jaya Bumiputera (SJJB), which was introduced in 1997 to provide last-mile assistance for Bumiputera companies to go for listing and was recently mandated to be steered by Ekuinas, is expected to take on a new dimension under Ekuinas' leadership.