The US government eased sanctions on Myanmar last week, giving the green light to private equity firms by removing a key obstacle to investment in the country, according to Doug Clayton, founder of frontier markets firm Leopard Capital.
Clayton, a US citizen, said that the firm is now able to raise its two planned Myanmar-focused vehicles, one each for private equity and real estate. The firm’s private equity fund is targeting $100 million to invest in growth capital opportunities in small- to medium-sized companies, with its real estate fund targeting $50 million.
However, the firm will still wait six-to-nine months to officially launch its Myanmar vehicles. Until now, the firm has only raised a fund for Cambodia, from which it has made 12 investments and three exits, generating an average IRR of 35 percent on its exits so far, according to Clayton.
Andrew Rickards, chief executive of Yoma Strategic in Myanmar said, “[The easing of sanctions] is undoubtedly good news. It has been somewhat frustrating for players to see sanctions being talked about being lifted, but not actually be lifted. From a private equity point of view it will allow American investors, LPs included, to invest in funds looking to focus on Myanmar.”
He said that the move will also provide exit options for private equity firms. “Once there is a portfolio company looking for an exit, having the Americans as potential buyers is a very important element, particularly in a market with no stock market. It will require trade sales [due to the absence of] listings.”
US companies, led by General Electric, have already rushed into Myanmar looking for opportunities, according to media reports.However, sanctions are still not fully suspended and restrictions will remain on certain investments, for example, in defense ministry-owned enterprises and with groups that undermine the reform process.
Other private equity players raising funds for the country include Cube Captial, Link Road Capital Management and Bagan Capital. Patricia Higase, founder of Link Road, said earlier this year that private equity’s opportunity in Myanmar would only fully open up once the US sanctions were lifted.