MergerMarket (AVCJ)‘s Q&A Interview: ShawKwei & Partners’ Kyle Shaw
This article is written by Tim Burroughs and first appeared in MergerMarket on 7 May 2025.
ShawKwei & Partners on what tariffs mean for Asia industrials, moving into energy
• Companies are adding US production in anticipation of more onshoring
• Trade deal expected to limit tariff impact on Southeast Asia manufacturing
• Energy accounts for the bulk of Fund IV following push into services
Kyle Shaw is founder and managing partner of ShawKwei & Partners, a Singapore-based buyout investor active in advanced manufacturing, automotive, medical equipment, energy and power, health and beauty, and logistics. Founded in 1998, the firm is currently deploying its fourth fund, which closed on USD 812m in October 2018.
Q: As an industrials-heavy investor, how have you responded to the tariff situation?
Kyle: The US government wants to take a different approach to taxation and raising revenue, and it wants to create more of a domestic industrial base – we have broken away from the post-Second World War era. We were expecting some kind of breakdown or reconfiguration in China-US trade, and we have been preparing for it. One of our companies [Singapore packaging business Icons Beauty Group] has bought a factory in North Carolina that sits on 62 acres. Onshoring will become more prevalent. Beyonics [a Singapore-based precision manufacturer] generates 93% of its revenue from Southeast Asia, but it makes sense for the company to have a facility in North America. Maybe it’s a bolt-on, maybe we look at greenfield. And maybe we look at doing something in Europe as well.
Q: And Beyonics has been moving production out of China as well…
Kyle: There’s only one factory left, it has eight customers, and they are all foreign companies buying from us for their consumption in China. We moved 11 exporting customers to our factories in Thailand and Malaysia last year. Within two weeks [since the 2 April announcement], we’ve had many companies come and say to us, ‘We want to pull our manufacturing out of China. We want to make it somewhere in Southeast Asia. Let’s talk.’ People will source from China into the China market, and export into certain other markets, but when it comes to the world’s biggest consumption market – the US – they are looking for alternatives.
Q: So, the 40% tariff on Vietnam and 35% tariff on Thailand – currently on pause – are not a concern?
Kyle: The tariffs are higher than I would have expected, but it quickly settled down to a 90-day hiatus, and I think we will probably end up around 10%, which isn’t a big deal. Southeast Asian countries are flexible. They will navigate between the US and China. It’s maybe the one part of the world that doesn’t make a stand one way or the other, but just stays in the middle. We have facilities across Southeast Asia, India, and the Middle East, and I don’t think I need to do anything about them.
Q: Do companies have sufficient pricing power to pass on cost increases?
Kyle: Most of our products are maybe 30% of the cost to the consumer. A 10% tariff would equate to a 3% pass-through to the consumer, which I think can be absorbed. There will be pressure on us to lower costs, to find ways to make it cheaper, but that’s an ever-present pressure.
Q: ShawKwei made direct investments in three US-based companies in 2023. Do those deals tie into the broader trade agenda?
Kyle: CTL Packaging [now part of Icons] does. We wanted to provide alternatives to China-sourced products by putting factories in Southeast Asia and the US that could serve the US market. The other aspect was trying to shorten supply chains. Consumers of packaged beauty and health products don’t want empty bottles to be shipped from China to the US to be filled locally. When we bought CTL, its customer base was about 80% US, and its production was 80% China. We’ve put more of the production closer to the end market. The other investments, ZymeFlow and Group14 Technologies, are part of our expansion into energy services and the transfer of technologies from North America to growth markets in India, Southeast Asia, and the Middle East.
Q: What prompted the move into energy?
Kyle: It’s a big industrials sector, and a lot of precision goes into manufacturing various equipment. That’s what attracted us – the equipment and coupling and other activities that require a bit of technology. In 2021, we invested in a Singapore-based company [CR3 Group] that does maintenance and construction for refineries. ZymeFlow followed in 2023. It specialises in decontamination chemistry, making it safe for workers to enter facilities. And we’ve just agreed to buy PEC, a Singapore-listed company that builds oil refineries and chemical facilities in Southeast Asia and the Middle East.
Q: Why services?
Kyle: Global private equity firms have generally gone into energy in two ways: investing in leases, where they buy large amounts of acreage and then drill it, frack on it, or dig on it; and investing in vessels, which means supply vehicles and drilling rigs, anything to do with the offshore industry. We don’t see many people doing services. Our clients are the likes of Shell, ExxonMobil, and Reliance Industries. We go into their facilities and ensure equipment is running efficiently. It’s less sexy, but it’s sticky because a USD 100bn refinery is going to hire people who know what they’re doing.
Q: Is there cyclical risk linked to commodity prices?
Kyle: These companies generate some revenue from clean energy as well – solar panel installation and design, sustainable aviation fuels. We see energy transition as complementary because we can service some of the same clients. Reliance has the world’s largest petrochemical plant in Gujarat, but the company is also investing USD 20bn in gigafactories. On the petrochemical side, these plants take a barrel of oil and split it into over 200 products, such as resins, industrial gases, and speciality fluids. I don’t think plastics will disappear any time soon. We aren’t tied to the price of oil; we are tied to the volume of oil that is processed and refined and made into various products.
Q: How would you describe your exposure in Fund IV?
Kyle: It’s mostly deployed, and energy is over 50%. There was very little energy in Fund III. We stopped making new investments in China in 2018 and started selling what we had there. Our biggest geographical exposure is now Singapore and Malaysia, and then the Middle East, Thailand, and the US are about equal. It’s unusual for an Asia-based private equity firm to go into markets like the US and Europe, but we found assets that are complementary to what we are doing in Asia. Our team in Asia does everything globally, we don’t have pockets around the world doing different things – we’ve never been big enough to build out that infrastructure. But in areas like energy, everyone speaks the same language. It doesn’t matter whether you are talking to a guy in Aberdeen, Houston, or Singapore, the dynamic is very similar.
Q: If portfolio companies have broader geographic exposure, does that make them easier to exit?
Kyle: The biggest consumer market in the world is the US, the biggest capital market is the US, and the best manufacturing is in Asia. We try to put those together. It does help having a US aspect to what you’re doing because valuations there have been higher than anywhere else in the world.
Q: What has the exit environment been like in the past 24 months?
Kyle: We haven’t exited anything. In 2023 and 2024, the focus was on building value. It takes us a bit longer because we do things like make real estate investments for portfolio companies and introduce ERP [enterprise resource planning] systems. The portfolio is also reasonably young. Apart from Beyonics, the investments are from 2020 onwards, so they are only now approaching the point of realisation.
Q: You’ve held Beyonics since 2012. How do you balance the ongoing value creation story with the potentially lower IRR?
Kyle: We focus on money multiple more than IRR, but the IRR on Beyonics is still good. Every year, I’ve looked at it and asked if we could invest in something better, and the answer is always no. When you have something with a good footprint that is growing at 25% a year, you don’t want to sell it because it’s hard to find a suitable replacement. However, I think we have now done everything we can with Beyonics, and the company should go to a different owner at this point in its development.
