Some private equity firms are seeking to get in on the ground level as Myanmar’s economy gets on track.
Myanmar is creating buzz among private equity investors looking to catch the first wave of deals in the frontier market as it develops its economy after years as a pariah state.
U.S. private equity firm TPG Capital made its first steps into the Southeast Asian country earlier this year when it injected capital into Apollo Towers and its operating unit Apollo Towers Myanmar, which provide telecommunications tower infrastructure. In a statement, Cleary Gottlieb Steen & Hamilton LLP, counsel to TPG, pegged the value of that transaction at $35 million.
The country’s appeal lies in its large population, government initiatives to encourage foreign investment and a strategic location close to India, China, Thailand and Vietnam, but the investment landscape can be riddled with challenges.
“Myanmar is not for the faint of heart,” said Tim Dattels, who co-heads TPG’s Asia operations.
Some market participants say a crucial hurdle is that small businesses are less mature there compared with their Asian counter- parts, meaning general partners may need to hold on to companies beyond a fund’s average holding period of roughly five years.
For this reason, Myanmar Investments International Ltd., an investment company listed on the London Stock Exchange, said a fixed-life private equity fund structure may be less suitable in Myanmar than an evergreen or perpetual structure.
“There are those companies which you’re likely to hold on for 10 to 15 years, and you don’t want an artificial gun to your head to exit them,” said Mike Dean, a co- founder of Myanmar Investments.
A healthy supply of deals is another benefit to investing in Myanmar, but the question remains: how will firms exit portfolio companies? The country is in the process of opening a stock exchange, which is slated for next October, but in general underdeveloped capital markets could give some private equity firms the jitters.