Ekuiti Nasional Bhd CEO Datuk Abdul Rahman Ahmad fields the 10 questions posed to him by StarBizWeek readers.
Why is there a need for government-run private equity in Malaysia? Aren’t there too many funds going for the same thing? James, Johor
Ekuinas aims to invest in mid-sized businesses with high potential for growth and which are capable of becoming future market leaders.
While there are a number of government-backed institutions involved in investments currently, they tend to be either entrepreneur development organisations (EDOs) focused on assisting new start-ups and early stage companies, or government linked investment companies (GLICs) that focus on larger, more mature businesses.
Ekuinas avoids overlap and fulfils a gap by focusing on businesses that have established themselves but are looking for the next level of growth, either by way of providing additional capital or enhanced strategic and corporate expertise. Private equity investment by Ekuinas also provides a new, additional avenue for business owners to expand their business and monetise some of their investments instead of relying on premature capital market listing, which has historically been the case for some companies in Malaysia.
After reading about the leveraged buyouts in the US, is taking on more risks and shuffling assets and cash around, what the country needs? Percy, Penang
Private equity (PE) investment is very broad and covers a multitude of different types of investment categories. These include providing growth capital, where money is injected into existing businesses for expansion and buy-outs, where ownership of existing businesses are bought using predominantly equity (equity buy-outs), or where a high degree of debt is used (i.e. leveraged buy-outs).
In most cases, PE investment is focused on investing in existing businesses, helping to aggressively grow these businesses to enhance their value and thereafter exit the investments at higher valuation to provide higher than market returns to investors.
In such instances, PE investment can be a real agent to create value and productivity in its investee companies either operationally, organically or through mergers and acquisitions (M&As). In cases where there is too much exuberance in the industry and over leverage is used (such as in the US), such investments may backfire and result in losses similar to any type of high risk investments, if misused. As a government-linked PE firm, Ekuinas adopts a more conservative approach. We focus on growth capital investments and equity buy-outs where minimal leverage is used. Our focus is on value creation and we help drive investee companies to aggressively grow their business either organically or through M&As.
You seem pretty young. Are you and those employed in Ekuinas qualified to manage so much government/taxpayer money? Connie, KL
Thank you for the comment, although at 41, I am not sure whether I still qualify for that description. I have been very fortunate to have been given what I consider to be tremendous opportunities throughout my career.
Prior to Ekuinas, I had the honour of serving for eight years as chief executive officer/group managing director of initially Malaysian Resources Corp Bhd (MRCB), and thereafter Media Prima Bhd, after the de-merger exercise, where with the help of a strong team, we managed to successfully restructure and transform both groups.
We are also fortunate to be able to assemble at Ekuinas a small and talented, albeit young team from various cross disciplines, that we believe would be able to execute and deliver successfully the mandate set by our stakeholders. We are highly passionate in ensuring that Ekuinas is run with integrity and operates successfully based on the best practices of global private equity firms.
What is the representation ratio between bumiputras and non-bumiputras in the private equity space in the country? Tabitha, Penang
Private equity is still a relatively nascent industry in Malaysia and we are not aware whether such data is currently available. However, when we successfully undertook our first Tranche Outsourcing Programme, where we invited and assessed a large number of private equity firms operating in Malaysia, we were pleased to encounter strong and capable bumiputra and non-bumiputra private equity practitioners.
It was most heartening to note that there are also a number of private equity firms where genuine partnerships between bumiputra and non-bumiputra exist. We hope, through our current and future outsourcing programmes, to further catalyse the development and expansion of such private equity firms while encouraging the participation of all.
Do you miss the glam world of a TV station boss? Ahmad, Perlis
I was extremely privileged to have had the opportunity previously to lead Media Prima with its exciting array of media assets, comprising television networks, newspaper, radio networks, outdoor advertising and content creation.
I do not really miss the normally-perceived limelight involved in television and media, as I was more involved in managing the business side of the operations and was lucky enough to have a number of talented CEOs working with me, representing the face of their media platforms.
However, I have to admit that it’s hard not to miss Media Prima, given that it was the place I literally grew up professionally, where I gained exhilarating experiences and lifelong friends.
And most of all, I miss working with the amazing and talented colleagues in Media Prima whose passion, effort and dedication to their work is second to none.
But at the same time, I am equally excited and passionate with my new role at Ekuinas and, together with my team, hope to build an organisation which is equally as strong and capable of achieving the challenging mandate set by our stakeholders.
Ekuinas was set up in September last year and it’s been reported that you have a target return of 12%. What if you don’t achieve this? Chin, Perak
The financial target return of 12% was set based on the average return earned by private equity funds in emerging markets over the last 10 years. We feel the target set is fair given our commitment to benchmark ourselves against the best in the market.
However, given the risks inherent in business and private equity investment, there can never be certainty of returns. It is important to be extremely careful and diligent in our investment decisions.
Both you and Shahril Ridza Ridzuan joined MRCB together and left about the same time. Now, both of you are doing almost the same thing – managing the people’s money. Also, the Employees Provident Fund (EPF) invests in private equity. Do you exchange notes? Nesa, KL
Yes, it’s an ironic coincidence that after eight years of managing corporates, we both left at the same time to do the same thing in managing investment funds. But of course, he (Shahril) is managing a much larger fund size that invests in a cross portfolio of investment assets (and of which private equity is only a small component), whereas Ekuinas is focused purely on private equity.
Shahril is a lifelong friend, whose insights and advice I value enormously. Like all friends, we do keep in touch but generally our work does not overlap much and when they do, we are always cognisant to ensure the discussions are kept at arms’ length and professional.
Would you rather be managing a company than taxpayers’ money? Suit Chye, Selangor
In a lot of ways, managing Ekuinas is similar to managing any other company (especially listed companies) in that both involve managing public money. I guess the only difference is that in a listed company, the shareholders are limited to the public that buy and own the shares, whereas in Ekuinas, everyone is a stakeholder.
The main difference I believe is that when managing a company, one is more involved in managing the actual business operations, whereas in Ekuinas we manage investments by way of overseeing the equity interests that we have in various businesses that we invest in. Both present different excitement and challenges. It is hard to say which is preferred.
What do you do for relaxation? What’s your favourite holiday destination? Lim, PJ
I try to spend as much time on the weekends with my two lovely children. I also like to unwind by watching television and movies whenever I can but the one thing I try not to miss is my weekly tennis session with close friends.
I have a number of favourite places. Having spent nine years in the UK, I have a soft spot for London. But I also love Los Angeles and a year ago, had a wonderful holiday in New Zealand, where the natural landscape and scenery was amazing.
Do you aspire to be Malaysia’s Gordon Gekko? Lalitha, Perak
I love the movie “Wall Street” when it came out and really look forward to watching “Wall Street 2”. But Gordon Gekko is hardly someone you would aspire to be. If I were to choose one movie character, I’d rather dream to be Edward Lewis in “Pretty Woman” but sadly, I am in no way qualified.