In June 2020, ADM Capital fully exited from its investment in Project Clarion achieving an 12.6% IRR and a 1.37x cash-on-cash multiple.
Project Clarion was an October, 2014 transaction where ADM Capital provided capital to an Indonesian private equity firm to facilitate a Management Buy-Out of an Indonesian foods business from a private equity fund that was nearing the end of its term and the company’s original founder.
Clarion was established in 1997 in Bandung, Indonesia, catering exclusively to the lower-end segment of the middle-class market via four brands which serving popular Indonesian, Japanese, Thai, and various international foods. Clarion’s central concept/value proposition is to create a cosy dining experience serving quality fresh food at affordable prices with the average customer spending between USD3–8. At the time of the ADM Capital financing, Clarion operated approximately 83 outlets in Greater Jakarta, Bandung and Cirebon; Clarion generated USD28.7m of revenue and approximately USD4.1m of EBITDA. The private equity sponsor’s business plan sought to expand the F&B platform substantially, propelled by the positive demographic trends in Indonesia.
Expecting strong upside in the business, ADM Capital structured its financing as a loan and equity in the acquisition consortium representing approximately 14.2% of Clarion.
The USD11m Project Clarion acquisition loan was repaid via a refinancing in December 2015, generating a 12.2% IRR and leaving ADM Capital with the equivalent of USD4.5m of equity in the business.
By the end of 2019, Clarion operated 260 outlets and generated USD78.4m in revenue and USD14.4m in EBITDA. On the back of the strong performance, the Private Equity Sponsor was targeting a Q1 2020 IPO. With the onset of Covid-19, however, Clarion was forced to close all of its restaurants, leaving open 32 for home deliveries over Ramadan and Eid, and putting on hold the expected IPO until at least 2021. Despite the challenges presented by Covid-19 and the temporary closing of the restaurants, ADM Capital was able to negotiate an exit from its remaining equity.