Taking Profits from the Middle
    Category: Private Money By : Gloria Haraito Read : 8486 Date : Wednesday, June 12, 2013 - 09:49:47

    Roy Rubianto for Forbes Indonesia

    In 2005, partners Thomas Lembong, Bratanata Perdana and Soegeng Wibowo set up the Quvat private equity firm, registering it in Singapore as Quvat Management Pte. Ltd. in 2006. While some private equity firms specialize in investing in one sector, say tech or mining, the trio are open to any sector.

    Their focus, instead, is doing mid-market private equity, which typically take stakes in small to midsized companies. “We want to be as strong as possible in the mid-market space because we believe that's what the industry needs right now,” says Tom, who at 42 is the founder and managing partner of the firm. Quvat's smallest investment can be $5 million and go as high as $75 million. It also has a regional mandate, investing only in Indonesia, Malaysia and Singapore.

    The trio—all Indonesians—have done a wide range of investments, including leveraged buyouts, control buyouts, growth equity and greenfield. In some cases, they don't invest in equity, but take a stake wholly in debt. For example, around the time of the global financial crisis of 2008, Quvat bought Garuda Indonesia bonds paying 23%, and state utility PLN bonds that offered 18%. While others saw these as risky, the Quvat trio figured the chance of default was small (and they were right). “We are really quite expert in lending and fixed income. Investing in distressed bonds can make you a lot of money,” explains Tom.

    As with many private equity firms, they look to have a five to 10 year term for their investments, and usually don't take majority stakes. However, Tom says Quvat is doing “bespoke” private equity, as every deal has a unique structure. Investments can often be a mixture of equity and debt. With this combination, Tom says Quvat can improve liquidity and payment to partners, from the debt repayments. They like to make regular payments back to the limited partners as much as possible.

    Tom declines to give Quvat's specific IRR but does say it is in line with the industry's IRR of about 23% per annum. It charges a fee of 2% of committed capital, plus 20% of profits—a standard fee structure for private equity. One of the most important elements, says Tom, is to control your risks. “We're focused on the downside,” he says.