HANOI — Vietnam-based private equity (PE) company ABB is raising a $100 million second fund, according to a top executive at the firm.
ABB, which is associated with local investment banking company Asia Business Builders, expects to close fundraising in the first half of the year. It launched its first $20 million PE fund in 2018, which has now fully invested.
The second vehicle will continue to back growing Vietnamese small and midsize enterprises (SMEs) that are already making money or substantial revenue, said Peter Sorensen, co-founder and managing partner at ABB.
The first fund — ABB I — raised capital from Asian and European limited partners, including the Dutch Good Growth Fund, said Sorensen, adding that he expects around 40% to 50% of the capital for ABB II to come from development finance institutions (DFI), while he will raise the remainder from regional family offices and local investors.
“As we expect to have more DFI financing, we will [more deeply] integrate ESG practices in our investments,” he told DealStreetAsia. ESG refers to environmental, social and corporate governance.
With a larger corpus, the new fund will write bigger checks at $8 million to $10 million, a segment that, according to Sorensen, is less competitive because pan-regional investors and even other local PE managers are investing to the tune of several tens of millions of dollars.
ABB takes minority positions in its SME portfolio companies and works along with management teams to help grow their businesses, the managing partner said.
“Our pipeline is looking very good. The M&A business gives us better origination of deals, while we have a strict policy between our private equity and M&A advisory businesses,” Sorensen said. “They are complementary to each other.”
He said ABB’s advisory business targets more mature companies that have already gone through the PE cycle, addressing the concerns of possible conflict between his company’s two different businesses.
The merchant banking team was formed in 2013, and the PE arm was launched after the company closed over $200 million worth of strategic merger and acquisition (M&A) transactions in Vietnam.
The investment banking business has advised M&A transactions in Vietnam such as Japanese energy infrastructure company Toenec’s acquisition of Hawee Mechanical & Electrical, Noritz’s acquisition of home appliances producer Kangaroo, FWD Insurance’s purchase of GINET Vietnam, and Japanese buyout firm Advantage Partners’ investment in fashion retailer Elise.
ABB I has invested in local SMEs such as DTP Education Solutions, retail pharmacy chain Trung Son Care, industrial services provider Care Solutions, KA Logistics and smart-living platform Aplus Home.
While acknowledging the pressure of delivering distribution to paid-in capital to investors amid competition for deals by general partners focusing on Vietnam, Sorensen said there are a lot of opportunities to look at smaller transactions in companies with $10 million to $30 million in revenue, which still have a lot of room to absorb capital to grow. “They have the jewel, and we can help them polish [it],” he said.
As Vietnam emerged from COVID-19 lockdowns in 2021, gross domestic product grew 8.02% in 2022 — the fastest expansion in 25 years and exceeding the government’s target of 6.5%.
Mekong Capital and VinaCapital are the two prominent names in the local PE industry, while other players in the midmarket segment include Vietnam Investment Group, SSI Asset Management and Excelsior Capital Vietnam Partners.