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China “sees private equity M&A boom ahead in 2009”

China continues to be the world’s most robust emerging market for private equity and venture capital finance, even in a difficult global economic environment, according to a report by b

China continues to be the world’s most robust emerging market for private equity and venture capital finance, even in a difficult global economic environment, according to a report by boutique investment bank China First Capital.

Peter Fuhrman, China First Capital’s chairman and the report’s author, says: ‘While the overall investment environment remains challenging and the effects of 2008’s turbulence are still being felt, 2009 will be a year of unique opportunity for private equity, venture capital and mergers and acquisitions in China.’

China’s economy continues to grow, powered largely by successful small and medium private businesses, many of which are among fastest-growing companies in the world. Private equity and venture capital investment in China will likely reach record levels in 2009, the report projects, with over USD1bn in new investment into high-growth Chinese SMEs with strong focus on China’s booming domestic market.

‘In 2009, China should rightly be among the most attractive – and active – private equity investment markets in the world,’ the China First Capital report predicts. ‘Many of the international private equity firms we work with are expecting to invest more in Chinese SMEs in 2009 than in 2008. Chinese companies raising capital this year will enjoy significant financial advantages over competitors, improving market share and profitability.’

The report identifies five central trends that will drive the growth in private equity and venture capital investment in China’s SMEs in 2009. They are: the drive for industrial consolidation; profit growth helping to reignite the IPO markets for Chinese companies in China, Hong Kong and the US; increased importance of convertible debt and other hybrid financings; opportunities for strategic mergers and acquisitions; and well-financed businesses with strong balance sheets will enjoy sustainable competitive advantage in China’s domestic market.

‘The pathways to success in China are fewer and narrower than in recent years,’ says Fuhrman. ‘But, for the entrepreneurs and private equity investors that can navigate their way in 2009, this will be a year of abundant opportunity.’

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