"What is interesting about Asia is that the economies here are in the midst of rapid evolution. During this period, if companies have an extra insight or can deliver a top rate product or service, then they can quickly evolve into businesses of real substance." So says Tobias Brown, a managing director of UCL Asia, a boutique private equity provider based in Hong Kong.
This is what drives UCL Asia's investment philosophy. The firm searches for good businesses run by insightful managers. It's a simple as that. By putting their capital to work with good managements, the companies they have backed have historically enjoyed long periods of compounded growth. UCL Asia has the capital and is looking for ideas. Put the two together and one plus one equals three and compounds from there.
But who is UCL Asia? It is probably the most successful private equity boutique in Asia that you have never heard of. Jamie O'Donnell and Tobias Brown, two veterans of Asian direct investing, run the firm. Both have over 15 years experience of putting money into good ideas and have the successful track record to show for it. With over $250 million under management and the backing of blue chip institutional investors, UCL Asia is known in the private equity world for consistently finding good companies to back.
"We have an unusual mandate and a structure which allows us to move fast and without a great deal of bureaucracy," says Brown. "Our approach is very hands-on and very focused. We don't believe in endless layers of people between us and our companies. We don't have associates and analysts and our partners deal only with the principals. We tend to invest with very few companies and we stay closely involved with their development over a number of years. We have a long history of finding companies which, once we back them, go on to become dominant figures in their industry."
Key to their success is a flexibility of approach. UCL Asia does not seek out companies in the latest "hot" sector. Indeed, UCL Asia makes a virtue of developing its own investment insights, which often run counter cyclical to prevailing fads. For instance during the dotcom boom, the firm was putting money into companies involved in raw materials and chemicals because the investments were cheap, the growth prospects were good and the managements were outstanding. "It was tough to put 'dotcom' around industrial adhesives, but therein lay the appeal," notes O'Donnell, "We have a background of focusing on industries when they are out of fashion and backing management that have the guts to act on years of industry experience to take advantage of an unusual opportunity". Adds Brown, "Because we don't have the strictures of an institutional corpocracy around us we are able to look at people and ideas in a pretty entrepreneurial way".
While many firms prescribe what deals they are interested in by size, type and sector, UCL Asia has no such constraints. The firm has done deals for as little as $1 million and will commit as much as $25 million. "We are not stuck on the idea of a minimum size, our entire goal is to compound value," says O'Donnell. "Sometimes a small-sized company presents an outstanding opportunity to do so -why preclude this? Some of our best investments started small."
Similarly, Brown and O'Donnell are not obsessed by "control stake investing". Many firms will only invest in a private equity transaction if they can assume majority voting control. "We prefer minority stakes and we know a great deal about how to structure minority investments so that the entrepreneur is encouraged to protect the downside and go for the upside. The sweet spot for us in terms of ownership is around 25%," notes Brown.
The only criteria that UCL Asia requires is that the managements they invest with are steeped in their industry and possess unique insight. "We know good businesses when we see them. One thing I think we are good at is building a structure that links our capital with the opportunity and the management to maximize their potential. For us, it is never just the provision of capital," says Brown, "we like to have a voice in the business."
The firm has invested in companies in many different sectors: raw materials, pharmaceuticals, shipping, media, technologyàindeed according to the partners, they have looked at businesses in nearly every sector there is over the years. "We spend a lot of time looking at various industries," says O'Donnell. "We only do two or three transactions a year, so we have a lot of time to look into these sectors and to see what and who makes them work."
What makes all the difference for UCL Asia is the quality of the management it backs and potential growth that can be achieved. UCL Asia is seeking ambitious managers with a keen sense for what can be achieved, who happen to need capital to execute that vision. It is a simple message but one that resonates with managers who seek to build a lasting franchise.
For more information on what UCL Asia can do for you, please contact Tobias Brown or Jamie O'Donnell on:
Tel: (852) 2524 6611
Fax: (852) 2526 6138
E-mail: [email protected]
