Articles
KAMAL TAYARA
24.06.2010
Exclusive interview for Private Equity Russia&CIS Journal (PERCIS) of Kamal Tayara, KCP Capital managing partner (the United Arab Emirates).
 |
Your company KCP Capital serves as private equity fund. Please explain briefly – in what companies and under what conditions do you invest? What are the sums and expected returns?
We basically operate in a merchant banking model, whereby we co-invest or have previously invested in the deals we share with out investors before getting them on board. Our investors are our partners, we advise them from the day they invest until securing them the exit with PE returns, managing expectations. IRRs of 25 to 30% are great to achieve and realistic. Our sweet spot is in TMT space with emphasis on Digital Media, whereby in the past we focused on Telecom hardware and traditional Media. We have also currently an interest in the ecommerce space and looking at Russia and Australia in that domain. From an investment perspective we think that value is created by coming in early and we like early stage investments.
|
What is the current size of investments that you manage?
The investments that we manage vary between our proprietary book and our LPs book. We manage in total a portfolio in excess of $250 million.
Who are your current investors, what countries are they from?
Current investors are family offices, semi government companies & PE houses from Russia, the GCC and Europe.
Some time ago you started to look close to the CIS region. What opportunities do You see in Russia and what are the advantages and the factors that influence your decision to come here?
Based on our success stories in representing Russian investors in Dubai (understanding the culture is very important) & the risk premium in Russia & CIS is 5%, the lowest of any emerging market, we see Russia represents for us a rewarding market in terms of both raising and sourcing funds.
In what companies and how much do You plan to invest?
Mainly in the TMT sector and any other opportunistic deals, investing at a range of $5-15 million, targeting early stage, business to consumer, volume driven, defensive deals. We are also looking at expanding in the digital media space in Russia and looking for various opportunities. In fact we have screened 10 opportunities so far and there could be some positive news announced soon as we are progressing with one of the target investments.
In Your opinion, what industries currently represent the greatest interest for investors in Russia and the CIS?
In our opinion the technology space represents the largest appetite for us as investors. It comes with little legacy and we think that Russia is seeking to modernize its economy by promoting hi-tech industries and services, is seeking to reduce dependence on the energy sector and seeking to switch to a knowledge-based, innovative economy. Hence our appetite for this space.
According to Your experience of work with foreign investors - what are their sentiments towards investments in Russia?
The Carrot and the Stick...they see the market size and potential as the Carrot but frankly have concerns about the local currency, which Russians can do a better job at promoting its stability and we have concerns on the available exit routes for PE being only limited to trade sales, sending a sentiment of fear from transparency associated with public listing.
How did the crisis influence the private equity market and fundraising?
Strategic changes to the business model taking place whereby the old model saw PE returns resulting from multiples expansion, operational improvements and leverage. The new model will mainly see returns from operational improvements. In addition industry investors will have to acquire the proper turnaround talent, process and infrastructure to evaluate, plan and manage new investments. Keeping in mind that entry and exit at same multiples can still generate IRR. Not to forget to mention that the balance of power is shifted towards LPs who are expected to use this power and guide major changes on how the industry operates and be results driven rather than promises driven.
Did the crisis change the sentiments of investors towards Russia? What is the current situation – are there any changes?
We see a pick up in the 3rd quarter because the overseas funds with strong local knowledge is tempted by the market, and the help of domestic private equity firms and some of the state-backed Russian banks.
Do you plan to cooperate with other private equity funds in Russian PE market, for example, in coinvestments?
Yes, we are looking to join forces with a local PE house in order to reduce our time to market in Russia.
Your head office is in Dubai and you are not represented in Russia yet, do you have plans to open an office here?
Destination: Moscow! We have a solid partnership already on the ground with a leading private equity house based in Yekaterinburg, provided us with an excellent depth into the market...but we still see that a Moscow office is a must in the future. Actually we have identified two boutique advisory houses which we approached for a potential acquistion to decrease our time to market. If we invite you over to our office in Moscow soon, we will be happy to share these names in the future! Dobre Diem and Spasiba!
