Mr. Jindu Cui, Vice Mayor of Tianjin City, is pleased to announce the First China International Private Equity Forum (CIPEF), to be held on June 6-8, 2007 at the Tianjin International Convention Center. Also sponsoring the event are the All China Federation of Industry & Commerce (ACFIC), the Association for Corporate Growth (ACG), and the Tianjin Municipal People’s Government. The CIPEF official website (www.pe-fund.com) is now live and accepting registrations online.
Mr. Yuanlong Zhang, the deputy director of the Tianjin City People’s Congress, and the director of Tianjin Federation of Industry & Commerce and Mr. Jindu Cui held a press conference to announce the upcoming Private Equity Forum. During the press conference, Mr. Patrick Hurley, former President and CEO of ACG, and Mr. Wei Wang, Chairman of China M&A Association – ACFIC, spoke about the growing demand from global private equity funds for investments in China.
The CIPEF is the first and largest capital raising event of 2007. Mr. Patrick Hurly indicated there would be more than 70 private equity funds with total capital ranging from US$30 billion to US$50 billions attending from the U.S., Europe, and Japan. Also attending this unprecedented forum will be many prominent domestic investment companies, commercial banks, and intermediaries.
Mr. Wei Wang from China M&A Association used the analogy of a “dating service” in referring to the conference set-up for introducing Chinese companies to private equity funds. He indicated that ACG’s internationally recognized Capital Connection and Deal Source (‘speed dating”) would be the two formats used during the forum. Through Capital Connection, attendees will be able to meet as many potential investors as possible. Deal Source, pre-arranged one-on-one meetings, will help target companies and potential investors exchange information and allow for brief in-depth discussions. All attendees will also have the opportunity to meet with financial services companies and intermediaries. Participants will also learn about China’s investment environment, policies and strategies as they attend panels discussing the “China M&A Annual Conference”, “Tianjin Investment Environment Conference”, “The Third Annual Privately Owned Enterprises Development Tianjin Summit” and other topics.
The private equity industry has grown rapidly worldwide and has become a major source of capital in financial markets. More and more private equity funds are interested in entering Asia’s emerging markets. The primary reasons for hosting the CIPEF are to meet the capital needs of fast-growing Chinese enterprises and the demands of international investors to invest in China. Research papers indicate that as of November 2006, 35 private equity funds (focusing on Asia, including mainland China) have successfully raised a total of US$12.2 billion.
As host city to the event, the City of Tianjin has the opportunity to become one of the first points of entry for global capital flowing into China. As such, Tianjin could become the most important economic and financial center in the northern region.
To ensure the success of the conference, the CIPEF Organizing Committee, through arrangements with ACG, has visited and exchanged ideas with more than 400 private equity funds and investment banks in San Francisco, Washington D.C., and Dallas in the U.S. The committee will soon have a number of promotional events in Japan and major cities in China as well.
Tianjin Municipal People’s Government, through its sponsorship of this conference, has shown full support for capital markets reform. ACFIC also has been a strong advocate of the forum as an avenue for privately-owned Chinese companies to raise large amounts capital.
Background Information:
Foreign Private Equity Funds
Private equity financing uses privately-raised funds to invest in privately held companies. Investors’ returns and risks are based on the amount of equity or shares purchased through capital investments. Key to private equity investors is consideration of the “exit” strategy, which may include a public offering, a merger, selling shares to other companies or to the management team. Currently however, a few private equity funds invest in shares of public companies. Mezzanine financing is another alternative used by private equity funds in providing capital. The difference between private equity and venture capital funds is private equity funds invest primarily in growth businesses while venture capital funds typically invest in start-ups or early stage companies.
The foreign private equity industry has been evolving for the past 30 years. It has become the third most frequently used method for raising capital behind bank loans and initial public offerings. International private equity funds have large capital resources and are able to invest in a wide range of industries. Private equity investments in developed countries account for approximately 4-5% of total GDP. There are more than several thousand private equity firms worldwide. Well-known private equity funds include BlackRock, KKR, Carlyle, Bain Capital, Apollo, Texas Pacific, Goldman Sachs and Merrill Lynch.
In 2006 private equity funds raised US$215 billion and worldwide private equity investments reached US$738 billion, a 100% increase from 2005. There were nine deals with single investments of over US$10 billion each.
Domestic Private Equity
China has become the most active market for private equity funds in Asia. At the end of 2006, 75 domestic and international private equity funds invested in 129 Chinese companies. Total invested capital reached US$12.97 billion. As of November 2006, 35 private equity funds (focusing on Asia, including mainland China) have successfully raised US$12.2 billion. Funds raised for future M&A investments equaled US$5.74 billion or 47.2% of the total and funds raised for growth investments equaled US$3.85 billion or 31.6% of the total.
Domestic and International Private Equity Success Stories
Mengniu Dairy
Morgan Stanley, Dinghui Investment and CGU-CDC China Capital Partners Ltd invested in Inner Mongolia Mengniu Dairy in December, 2002. In June 2005, three private equity funds reduced their shares to less than 0.1% after Mengniu’s IPO in Hong Kong. In less than three years, a US$60 million investment from private equity funds was valued at more than HK$ 2 billion.
Shanda Interactive Entertainment
SoftBank Asia invested US$40 million in Shanda Interactive Entertainment, the largest private equity investment in the Chinese Internet Gaming industry to date. Shanda’s IPO on the NASDAQ on May 13, 2004 was a huge success. In July 2005, SoftBank Asia exited Shanda investments, turning its US$40 million investment into US$560 million. SoftBank earned a return of 1400% in less than 3 years.
Suntech Power
DragonTech Ventures Management Limited, Goldman Sachs, and Actis China helped Suntech Power complete offshore restructurings by co-investing US$80million in the first half of 2005. Suntech Power raised more than US$400 million on the NYSE on December 14, 2005 becoming the first Chinese private company to go public on the NYSE.
Association for Corporate Growth (ACG)
Established in 1954, Association for Corporate Growth (ACG) is one of the world’s premier professional associations, focusing on corporate development and mergers and acquisitions. ACG has more than 10,000 members, and 51 chapters in North America and Europe. Its members include large multinational companies, many of which are included in the Fortune 500 and Fortune 1000 list of the largest US companies, and the FTSE 100 index, traded in London. ACG also has more than 700 small- to medium-sized investment funds with capital ranging between US$200 million and US$1 billion. ACG has successfully organized numerous private equity forums and conferences in the U.S. and Europe.