Pri­vate eq­uity looks to­ward China

China Daily (USA) - - ACROSS AMERICA - By PAUL WELITZKIN in New York paulwelitzkin@chi­nadailusa.com

Pri­vate in­vestors con­tinue to seek op­por­tu­ni­ties in China as the main­land shifts its eco­nomic fo­cus from ex­ports and man­u­fac­tur­ing to con­sump­tion and ser­vices.

On Sun­day, Ocean Link, the first pri­vate eq­uity firm fo­cused on the tourism sec­tor in China, an­nounced a strate­gic part­ner­ship with Ctrip, the largest on­line travel agency in China, and Gen­eral At­lantic, a US global growth eq­uity firm.

“The travel and tourism sec­tor in China is at a piv­otal pe­riod of growth. The industry’s on­go­ing tran­si­tion will pro­vide Ocean Link with am­ple op­por­tu­ni­ties to bring cap­i­tal and op­er­a­tional ex­per­tise to innovative com­pa­nies serv­ing the ris­ing num­ber of trav­el­ers in this mar­ket,” said James Liang, co-founder, chair­man and CEO of Ctrip.

Bain & Com­pany’s “Greater China 2016 Pri­vate Eq­uity Mar­ket Overview”, which was re­leased ear­lier this year, found that the greater China pri­vate eq­uity (PE) mar­ket had a block­buster year in 2015, driven by a surge in multi­bil­lion-dol­lar deals and grow­ing op­por­tu­ni­ties in the dig­i­tal/in­ter­net sec­tor.

The busi­ness con­sul­tancy found that deal value jumped 56 per­cent to a record $69 bil­lion last year, due to a dou­bling of multi­bil­lion-dol­lar deals — 14 in 2015, up from seven in 2014. Ro­bust PE ac­tiv­ity in the in­ter­net sec­tor ac­counted for 40 per­cent of deal value, up from just 15 per­cent in 2014, and more than 50 per­cent of vol­ume, far ex­ceed­ing other sec­tors.

“Pub­lic-to-pri­vate buy­outs soared to $17 bil­lion in value, more than three times the fiveyear av­er­age, and made up 14 per­cent of to­tal PE deal value in 2015,” ac­cord­ing to Bain’s Asi­aPa­cific Pri­vate Eq­uity Re­port 2016. “The trend spawned three of the top four deals in China in­clud­ing the $7.1 bil­lion Qi­hoo 360 deal, the $3.1 bil­lion buy­out of WuXi Phar­maTech led by a con­sor­tium of PE funds, and the $3 bil­lion buy­out of mo­bile so­cial me­dia com­pany Momo, put to­gether by the com­pany’s CEO, Ma­trix Part­ners, Se­quoia and Hu­atai Ruil­ian Fund Man­age­ment.”

The Bain re­port said dig­i­tal tech­nol­ogy in­creas­ingly de­fines the daily rou­tine in mid­dle­class China and com­pa­nies of­fer­ing in­ter­net-based so­lu­tions are ex­plod­ing, gen­er­at­ing in­ter­est among PE funds look­ing for growth.

War­burg Pin­cus LLC has been active in the Chi­nese main­land since 1994 when cur­rent global Co-CEO Chip Kaye es­tab­lished a Hong Kong of­fice. The firm has in­vested more than $6.5 bil­lion and sup­ported the growth of nearly 100 com­pa­nies in China — mak­ing it one of the largest global pri­vate eq­uity in­vestors in the coun­try.

“We are con­fi­dent on the long-term growth of the Chi­nese econ­omy and the in­vest­ment op­por­tu­ni­ties driven by the con­sump­tion upgrade, which trans­lates into in­vest­ment themes in var­i­ous sec­tors,” Mingxia Li, com­mu­ni­ca­tions di­rec­tor for the firm in Bei­jing told China Daily in an email.

Li said War­burg Pin­cus takes a sec­tor-fo­cused, the­sis-driven in­vest­ment ap­proach to in­vest­ing. The firm’s cur­rent port­fo­lio of more than 30 Chi­nese com­pa­nies cov­ers six sec­tors: en­ergy; fi­nan­cial ser­vices; health­care and con­sumer; in­dus­tri­als and busi­ness ser­vices; real es­tate; and tech­nol­ogy, me­dia and telecom­mu­ni­ca­tions.

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