Main benefits from an investment by the Mekong Enterprise Fund II
Some of the benefits of an investment by the Fund are as follows:
- Capital for expanding the business - The Fund is
a source of long term equity capital which can be used by the company
for expansion purposes. This is particularly important if the company
doesn’t want to finance its expansion entirely through bank debt, but
needs to grow more quickly than what their internally-generated cash
flow can support.
- Management processes – Mekong Capital puts
significant effort into assisting investee companies to improve their
management processes, based on international best practices, but
implemented in such a way to be responsive to the particular needs of
the company. Mekong Capital has significant experience and knowledge
in various areas such as human resource management, finance and
accounting, production management, sales management, supply chain
management, etc. These programs are generally intended to lead to some
combination of: 1) increased growth; 2) greater efficiency; 3) lower
costs; 4) higher quality; and 5) higher customer satisfaction.
- Management team – We believe that the capability of
the management team is essential for the success of any business. As
such, Mekong Capital places significant effort on assisting the
investee company to strengthen its ability to continuously develop the
capabilities of the management team and the depth of management skills
within the company in general, including on the factory floor.
- Industry knowledge - Mekong Capital collects and
shares with investee companies industry specific knowledge based on
the experience of similar companies in other countries, particularly
issues relating to reasons for success and failure. This will help
companies to evaluate their strategic priorities based on a more
complete set of information.
- Continuous improvement – Mekong Capital
continuously searches for the best ways to assist its investee
companies to make improvements and help the companies to understand
the potential benefits of those improvements. This helps create a
culture of continuous improvement in the companies in which the Fund
has invested.
- Reputation - An investment by the Fund
contributes positively to the reputation of companies due to the
Fund's comprehensive due diligence process, the Fund's high corporate
governance and transparency requirements, the prestigious institutions
that are investors in the Fund, and the fact that Mekong Capital will
support the company in the event of any significant problems.
- Focus on value creation - As large shareholders
of the investee company, the Fund has a strong incentive to do
whatever it can to help the investee company increase shareholder
value. This means the Fund will also be a good source of objective
advice because the Fund's interests are fully aligned with the
interests of the other owners of the business - to maximize
shareholder value. However, the Fund differs from other small
investors in that it has significant experience and resources to have
a large impact on the success of the companies in which it invests.
Approach to Providing Assistance to Investee companies
The assistance provided by Mekong Capital to the companies in which
the Fund invests will depend on the specific circumstances of each
company. Mekong Capital aims to be as responsive as possible to the
needs of each particular company. During the investment appraisal
process, Mekong Capital performs an initial assessment of the ways in
which it can help add value to the company, and subsequently refines
that assessment as a result of ongoing contact with the company, for as
long the Fund is an investor in the company. The ultimate objective of
any assistance provided to the companies is to increase the value of the
Fund’s investment, usually by helping the company to takes steps that
will allow it to reduce risk, grow more quickly and/or increase
profitability.
Ways that Assistance will be Provided to the Fund’s Investee
Companies
Areas where assistance may be provided may include any of the
following, but Mekong Capital will usually focus on the 1-2 most
critical areas at any given point in time:
- Business strategy and expansion planning;
- Accounting and financial management;
- Human resource management;
- Customer relationship Management;
- Sales management;
- Supply chain management;
- Quality management systems;
- Partnership development;
- Internal controls and risk management;
- Production planning and management;
- Process improvement;
- Assistance with the process of preparing for a listing on a stock
exchange.
Fund Will Not Be Directly Involved in Management of Investee
Companies
The Fund aims to help companies identify and address their weaknesses
while strengthening their own management capabilities, but the Fund does
not aim to be involved in the management of investee companies in which
it invests. In this sense, the Fund should be seen as an advisor who is
helping to increase shareholder value. Regarding management decisions,
the Fund will only be involved in major decisions that concern the
shareholders or the Board of Directors.
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