Smiles in Taipei? Kuo on the China-Taiwan Investment Thesis Pension Funds Have LP Potential, but Insurers Retain Prime Position Page 10 Page 15

Asia’s Private Equity News Source avcj.com November 11 2014 Volume 27 Number 42

EDITOR’S VIEWPOINT Incremental postives for Taiwan PE deal flow Page 3

NEWS Abraaj, Auda, Bain, CLSA, Denham, GIC, Helion, Hera, Hony, IDG, Infinity, Intel Capital, KPCB, Matrix, Mavcap, Pantheon, QIA, Qiming, SoftBank, TDF, TVS Page 5

FOCUS Why corporate venture capital is flavor of the month in Taiwan Page 14

INDUSTRY Q&A Zoyi Capital’s Andrew All smiles in Taipei? Kuo on the China-Taiwan investment thesis Pension funds have LP potential, but insurers retain prime position Page 10 Page 15

2014 AVCJ AWARDS FOCUS

AVCJ award winners A race for relevance Affinity, CVC, CDH, KKR secure top honors Page 8 Trade treaties are vital to Taiwan’s future Page 12

PRE-CONFERENCE ISSUE AVCJ PRIVATE EQUITY AND VENTURE CAPITAL FORUM TAIWAN 2014 Anything is possible if you work with the right partner

Unlocking liquidity for private equity investors www.collercapital.com London, New York, Hong Kong EDITOR’S VIEWPOINT [email protected]

Managing Editor Tim Burroughs (852) 3411 4909 Staff Writers Andrew Woodman (852) 3411 4852 Back from the brink Winnie Liu (852) 3411 4907 Creative Director Dicky Tang THE TELLING BLOW CAME IN THE equity investors’ faith in Taiwan as a buyout Designers Catherine Chau, Edith Leung, American Chamber of Commerce in Taipei’s market are not yet complete. Industry participants Mansfield Hor, Tony Chow (AmCham) 2013 White Paper: Taiwan ranks are adamant that any move to change the rules second last among 17 Asian countries – trailing must be accompanied by consistent application Senior Research Manager Helen Lee Sri Lanka and ahead of only Pakistan – in of said rules. They want a more transparent Research Associates attracting private equity investment. The data approvals process include calls for publication of Herbert Yum, Isas Chu, used in the report, from 2012, were truly guidelines on investment criteria, the release of Jason Chong, Kaho Mak miserable. Just under $57 million was invested, a list of sectors and companies in which foreign Circulation Manager and most of that went into a single PIPE deal. PE investment is unwelcome, and detailed Sally Yip The Taiwan government promised to revise as explanations from the regulator as to why Circulation Administrator Prudence Lau rules on foreign investment and facilitate the particular transactions are being rejected. Subscription Sales Executive inflow of PE capital. It gave impetus to quiet Even if all these requests are granted, Jade Chan private equity investment in Taiwan is unlikely lobbying of the regulators by the Taiwan M&A Manager, Delegate Sales and PE Council (MAPE) and AmCham’s private to recapture the boom period of 2006-2008 Pauline Chen equity committee. when $11.1 billion was deployed in a mixture Director, Business Development At last year’s AVCJ Taiwan Forum, the minister of predominantly financial services and media Darryl Mag of economic affairs stressed that the government assets. Like many other Asian markets, in the Manager, Business Development sees private equity as an important contributor absence of severe distress it is difficult to see PE Anil Nathani, Samuel Lau to local economic development. He highlighted investors building up commanding positions in Sales Coordinator draft legislation that promises to ease the deal the banking sector. Debbie Koo approvals process. Several months later, Taiwan’s However, private equity deal flow can still be cabinet approved the first amendments to the significant, although its magnitude may not be Conference Managers Jonathon Cohen, Sarah Doyle, territory’s Business Mergers and Acquisitions Act fully reflected in the data. There have already been Conference Administrator in nearly a decade, including a provision that a handful of buyouts involving Chinese businesses Amelie Poon raises the level of shareholder support required ultimately owned by Taiwanese entrepreneurs. As Conference Coordinator Fiona Keung, Jovial Chung for a take-private transaction to go through. these founders approach retirement – perhaps The nadir of 2012 has not been revisited. without natural successors in place – and as Publishing Director Private equity investment came to $134 million Taiwan businesses become ever more entwined Allen Lee in 2013 and it stands at $309 million so far in with the mainland as a production and a Managing Director 2014. However, virtually all this capital has been consumption market, there will be more buyouts. Jonathon Whiteley deployed in growth and pre-IPO, PIPE and early- But they may well be categorized as China deals. stage deals. According to AVCJ Research, Taiwan has not seen a buyout of any discernible size Incisive Media since 2010, when EQT Partners teamed up with Unit 1401 Devon House, Taikoo Place the CEO of Gala TV to buy the business from MBK Tim Burroughs 979 King’s Road, Quarry Bay, Hong Kong Partners for around $190 million. Managing Editor T. (852) 3411-4900 This confirms that the efforts to regain private Asian Venture Capital Journal F. (852) 3411-4999 E. [email protected] URL. avcj.com PE investment in Taiwan by nancing stage Beijing Representative Office No.1-2-(2)-B-A554, 1st Building, No.66 Nanshatan, 5,000 Chaoyang District, Beijing, People’s Republic of China T. (86) 10 5869 6203 4,000 F. (86) 10 5869 6205 E. [email protected] 3,000

2,000 The Publisher reserves all rights herein. Reproduction in whole or

0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014YTD Buy-out Growth/pre-IPO PIPE Start-up/early stag Restructuring Source: AVCJ Research

Number 42 | Volume 27 | November 11 2014 | avcj.com 3 asianfn.com/Research_Database.aspx Your ultimate link to the Asian private equity, venture capital and M&A markets

AVCJ database is the ultimate link between Asian dealmakers and those who provide advisory, financial, legal and technological services to the private equity, venture capital and M&A industries. The AVCJ Database gives subscribers access to more than 125,000 companies and facts and statistics on over 90,000 transactions.

Deal Report

NASDAQ listed Focus Media has received a non-binding tender offer of $5.4 per share, or $27 per ADS, of its entire outstanding common shares from a consortium of investors, including company chairman Nan-chun Jiang, CDH Investments, China Everbright Limited, CITIC Capital Partners, FountainVest Partners and The Carlyle Group. The consideration would be approximately $2.88 Features billion based on the 532.95 million common shares outstanding and not held by the chairman.

Announced (US$mln): $2,877.9400 Previous Stake: 17.56% Stage: Buy-outs (MBO/MBI/LBO)

Announced Date: Aug 12, 2012 Deal Stake: 82.44% Closed (US$mln): n/d ■ Final Stake: 100.00% A large profile pool with around 6,800 Closed Date: n/d

Deal Type: Private Equity Buyout funds, 3,800 GPs and 3,000 LPs Deal Status: Agreement in Principle Acquisition Technique: Leveraged Buyout

Acquisition Attitude: Neutral ■ Comprehensive records, including Involved Companies Company Name Deal Role Amount(US$mln) Deal Stake Industry Nationality

Carlyle Asia - China Investor n/d n/d Private Equity United States more than 80,000 M&A transactions; CDH China Management Co., Investor n/d n/d Private Equity Hong Kong Ltd. China Everbright Ltd. Investor n/d n/d Finance Hong Kong CITIC Capital Partners Ltd. Investor n/d n/d Private Equity Hong Kong 19,000+ PE/VC investments; over FountainVest Advisors Ltd. Investor n/d n/d Private Equity China (PRC) Nan-chun Jiang Investor n/d n/d Unclassified China (PRC) Focus Media (China) Holding Investee n/d n/d Advertising China (PRC) 2,400 PE/venture-backed IPOs; and in Co., Ltd. (FocusMedia) Fosun International Ltd. Seller n/d -17.20% Steel China (PRC) Undisclosed Shareholder(s) Seller n/d -65.24% Unclassified United States Citigroup Global Markets Asia Financial Adviser, n/d n/d Securities/Investment United States excess of 3,400 exits Ltd. Investor (Carlyle Asia Banking - China) Citigroup Global Markets Asia Financial Adviser, n/d n/d Securities/Investment United States Ltd. Investor (CDH China Banking Management Co., Ltd.) ■ Pan-Asian coverage, including Citigroup Global Markets Asia Financial Adviser, n/d n/d Securities/Investment United States Ltd. Investor (China Banking Everbright Ltd.) Citigroup Global Markets Asia Financial Adviser, n/d n/d Securities/Investment United States Australasia and Japan Ltd. Investor (CITIC Banking Capital Partners Ltd.) Citigroup Global Markets Asia Financial Adviser, n/d n/d Securities/Investment United States Ltd. Investor Banking (FountainVest Advisors Ltd.) ■ Citigroup Global Markets Asia Financial Adviser, n/d n/d Securities/Investment United States Data that is updated daily and tracked Ltd. Investor (Nan-chun Banking Jiang) JP Morgan & Co Inc. Financial Adviser, n/d n/d Securities/Investment United States Investee (Focus Media Banking as far back as 1990 - the longest and (China) Holding Co., Ltd. (FocusMedia)) Morgan Stanley - Beijing Financial Adviser, n/d n/d Securities/Investment United States Representative Office Investor (CITIC Banking deepest track record in Asia. Capital Partners Ltd.) Conyers Dill & Pearman Legal Adviser, n/d n/d Legal Services United Kingdom Investor (Nan-chun Jiang) ■ Data downloads in MS Excel and PDF Copyright 2012 AVCJ Group Ltd. All rights reserved. formats Plus 1

■ Powerful search functions and accurate ✔ New features on selection statistics for the analysis ✔ Performance data on exits ■ Customer service via telephone and ✔ Portfolio holding period email

For a live demonstration or to subscribe, please call Helen Lee at +(852) 3411 4961 or email [email protected] avcj.com NEWS

KPCB China’s Tina Ju $22 million to TPG Capital’s latest biotech fund. GLOBAL The vehicle will make early- and late-stage launches new fund as TDF investments in biotechnology and life sciences. Ex-AVCJ chairman elected KPCB China’s Tina Ju is reactivating the TDF Capital franchise as she looks to raise $200 IDG, Morningside invest in Nevada state treasurer million for a venture capital fund that will target Dan Schwartz, former chairman of AVCJ, has been technology, media and telecom, consumer and P2P car-rental site elected Nevada state treasurer, defeating Kim healthcare deals. IDG Capital Partners and Morningside Wallin, the current Democratic state controller. While Ju is described on KPCB’s website as Technologies have led a $60 million Series B Republican Schwartz replaces another Democrat, founding and managing partner of KPCB China round of funding for PPzuche, a Chinese peer- Kate Marshall, who has served the maximum and TDF Capital, a source familiar with the to-peer (P2P) car-rental provider launched by permitted two consecutive terms. situation says the new vehicle is being marketed Singapore’s iCarsclub. Source Code Capital, as TDF’s third fund. She is working with Frank Sequoia Capital, Future Captial and Crystal ASIA PACIFIC Stream also participated. SIG, SoftBank back China Pantheon gets emerging wearables maker Codoon markets mandate from VER SoftBank China Venture Capital and SIG Asia Pantheon has won a EUR100 million ($124 have invested $30 million in a Series B round million) mandate from Valtion Eläkerahasto (VER), of funding for Codoon, a Chinese wearable the Finnish state pension fund, for investments electronic devices manufacturer. The round across Asia and emerging markets. This is the comes eight months after Codoon raised $10 first time VER has been awarded an emerging million in Series A funding led by Shenzhen markets-focused PE mandate. Capital, with participation from CITIC Capital.

Auda hires ex-Paul Capital Wang, who was at KPCB until 2009, when he VC-backed Chinese dating joined Morgan Creek. Asia head Lucian Wu Negotiations are underway with a US-based app Momo files for US IPO Lucian Wu, previously co-head of Asia at Paul fund-of-funds about coming in as an anchor Momo, a Chinese location-based social- Capital Partners, has joined Auda as a managing investor for the new vehicle. A first close is networking app best known for its “flirting” director. Based in Hong Kong, Wu has become expected in January 2015. TDF will deploy 80% function, has filed for a US IPO. Backers include part of Auda’s secondaries team. of the corpus into direct transactions, with Alibaba Group, Matrix Partners, Yunfeng Capital the remainder to be used to support several and Sequoia Capital. The app, which launched in incubation funds that make pre-Series A round August 2011, has 180.3 million users. AUSTRALASIA investments. Ju set up VTDF China in 2000 and TDF Capital Qiming, Innovation Works Denham backs start-up in 2005, raising two funds with the latter group. In 2007, TDF’s partners - Ju, David Su and Forrest invest in China Face++ Australia mining platform Zhong - joined forces with Joe Zhou, formerly of Qiming Venture Partners and Innovation Works Denham Capital has backed Auctus Minerals, a the SoftBank Asia Infrastructure Fund (SAIF), to have participated in a $22 million Series B round Australian start-up mining platform, with a $130 raise a China fund under the KPCB banner. of funding for Face++, a Chinese face recognition million capital injection. Denham has enlisted technology developer. The round reportedly Steve Murdoch, former CEO of Karara Mining, to values the company at $100 million. run the new business, which will take on stalled Qatar’s QIA to form JV with mining projects from around the country. CITIC Group Intel invests in two

Qatar Investment Authority (QIA), the Gulf state’s Taiwanese tech firms GREATER CHINA sovereign wealth fund, will set up a $10 billion Intel Capital has backed two Taiwanese start-ups joint venture fund with China’s CITIC Group. Each as part of an overall $62 million investment across Hony to buy Chongqing party will contribute $5 billion to the vehicle. QIA 16 technology ventures. The two firms are PilotTV, is looking to invest $15-20 billion over in the next which designs and operates digital signage hotpot restaurant chain five years. systems for retail venues; and Thundersoft, Hony Capital has agreed to buy a 93.2% stake which offers developer solutions and technology in Chongqing Cygnet Hotpot, a Chinese hotpot Hepalink invests $22m in services for mobile operating systems. restaurant chain. The company was founded in TPG biotech fund 1982 and operates more than 300 restaurants in Matrix, SIG commit $20m China. It was expected to go public but shelved Chinese drug maker Shenzhen Hepalink plans due to the global financial crisis and then Pharmaceutical, previously a highly successful PE to laundry app the embargo on domestic IPOs. investment for Goldman Sachs, has committed Matrix partners and SIG have committed $20

Number 42 | Volume 27 | November 11 2014 | avcj.com 5 NEWS

million in a Series A round of funding for Edaixi, a GIC invests $391m in funding worth INR300-500 million ($4.9-8.1 mobile laundry service app owned by Beijing- million) for CBazaar.in, an Indian online ethnic based laundry franchise Rongchain. Philippines liquor producer fashion retailer. Existing investors Inventus Capital GIC Private has agreed to pay PHP17.6 billion and Ojas Venture Partners also participated. NORTH ASIA ($391 million) for a 9.64% stake in Emperador (EMP), a Philippines-based liquor producer. Pakistan online Its parent is Alliance Global, a conglomerate marketplace gets $3.5m CLSA raises $210m for controlled by local businessman Andrew Tan. This is the Singapore sovereign wealth fund’s Pakistan online marketplace PakWheels.com second Japan fund third direct investment in the Philippines this has raised $3.5 million in funding from Malaysia- CLSA Capital Partners has reached a final close year, following commitments to Metro Pacific based venture capital fund Frontier Digital of $210 million on its second Japan-focused Investments’ hospital business and canned tuna Ventures. The company is a platform for trading fund - Sunrise Capital II. The fund is smaller than producer Century Canning Corporation. cars and bikes, sharing automotive reviews and its predecessor - which reached a final close of GIC will acquire 1.12 billion shares in EMP news, and checking vehicle prices. $350 million in 2006 - but will employ the same - representing a 6.95% stake in the business strategy of pursuing buyouts involving small and - at PHP11 apiece, for a total consideration of GHV forms partnership mid-cap Japanese companies. PHP12.32 billion. It will then pay PHP5.28 billion with Japan’s WiL Bain-backed Macromill India’s Green House Venture (GHV) Accelerator has teamed up with Japan and US-based early- acquires MetrixLab stage investor World Innovation Labs (WiL) to Macromill, the Japanese online research firm back Indian start-ups with the potential to go controlled by Bain Capital, has bought Dutch global. marketing analytics firm MetrixLab. Financial terms of the deal were not disclosed. The newly combined company will boast a global network SOUTHEAST ASIA of over 1,400 professionals across 25 offices in Asia, Americas and Europe, serving 2,200 clients. Abraaj buys Southeast Asia’s Wine Connection Infinity Venture launches for equity-linked securities with a seven-year The Abraaj Group has acquired a majority stake third China, Japan fund term, which if fully converted, will take GIC’s in the Wine Connection Group, a Southeast Japanese tech-focused investor Infinity Venture holding to 9.64%. In addition, the sovereign fund Asia-focused food and beverage chain. Founded Partners has launched its third fund - Infinity has the option to invest a further PHP4.4 billion, in 1998 by French national Michael Trocherie, e.venture Asia III - which will focus on start-ups taking its interest in EMP to 11.76%. Wine Connection has a network of 55 outlets in Japan and China. The fund has already raised EMP is the largest spirits company in the in Singapore and Thailand, offering wines from $32 million and is hoping to reach a final close of Philippines and the world’s biggest brandy around the world and Western-style cuisine. $100 million next year. producer. In 2013, it sold approximately 33 million cases of brandy, cornering close to 50% of total Malaysia’s Axiata launches spirits volume in the Philippines. The company’s SOUTH ASIA most successful brand is Emperador Light. $30m fund with Mavcap Malaysian telecom conglomerate Axiata Group Bain nets $400m through has partnered with Malaysia Venture Capital India (FTIL). The deal, which values IEX at INR22.5 Management (Mavcap) to set up a MYR100 Hero MotorCorp part-exit billion ($366 million), represents a full exit for FTIL. million ($30 million) VC fund to invest in Bain Capital has completed a second partial Malaysia’s digital services companies. Axiata will exit in five months from Indian motorcycle Helion provides Series A commit MYR50 million while Mavcap puts in manufacturer Hero MotorCorp, raising INR24.5 MYR20 million, with the remainder to be raised billion ($400 million). The private equity firm for packaged food maker from other investors. sold approximately 8.5 million shares at INR2,874 Helion Venture Partners has provided INR350 apiece, cutting its stake in the business from million ($5.7 million) in a Series A round of Hera re-ups in Philippines- 5.77% to 1.49%. funding for iD Fresh Foods, an Indian ready-to- cook packaged foods company. Founded in based Cashcashpinoy TVS Capital consortium 2006, iD Fresh Foods now employs 600 people Hera Capital has committed an additional and has 6,000 outlets across eight cities. $2 million in a Series B round of funding for picks 26% stake in IEX Cashcashpinoy, a Philippines-based online A consortium led by TVS Capital Funds has Forum Synergies leads shopping platform. The company has more than agreed to buy a 25.64% stake in Indian Energy 1.5 million consumers on its platform with 35,000 Exchange (IEX) for INR5.76 billion ($94 million) round for clothing retailer transactions made monthly. Hera made its first from Blackstone-backed Financial Technologies Forum Synergies has led a Series B round of investment in Cashcashpinoy last year.

6 avcj.com | November 11 2014 | Volume 27 | Number 42 When Rebalancing is your First Priority, Make Lexington your Secondary Priority.

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www.lexingtonpartners.com ASIA AWARDS [email protected] Affinity named firm of the year at AVCJ Awards 14th AVCJ Asia Awards: Affinity, KKR win two prizes for Oriental Brewery; CVC, CDH win awards for large-cap fundraising and investment; Quadrant, Advantage, FountainVest triumph in mid-cap categories

AFFINITY EQUITY PARTNERS was named firm of the year at the 2014 AVCJ Private Equity and Venture Capital Awards on the back of a strong fundraise, investments in three different markets, and the largest trade sale exit ever seen in the region. The $5.7 billion sale of Oriental Brewery (OB) to Anheuser-Busch InBev also secured large cap exit of the year prize for the Affinity and co-investor KKR, while the two firms won the Operational Value Add Award for transformative work undertaken during the holding period. A total of 14 awards were presented in a competition enlarged to better recognize mid-cap and venture capital activity. Victor Chu, chairman of First Eastern Investment Group, was also on hand to collect the AVCJ Special Achievement Award in acknowledgment of his place among the pioneers of private equity in Asia. Affinity announced a final close of $3.8 billion on its fourth pan-regional fund earlier in the year after agreeing with LPs to raise the hard cap from $3.5 billion. Over the 12 months ended September, the PE firm invested in a dairy farming joint venture with China’s Sunlon, bought a stake in Virgin Australia’s frequent flier business, and backed poultry producer Leong Hup International in its debut Malaysia deal. Accepting the award, K.Y. Tang, chairman of Affinity, looked back to the beginnings of his career as a buyout investor 17 years ago. He paid tribute to his colleagues at Affinity and the industry as a whole for riding out the initial market skepticism and the various cycles that followed to achieve what it has today. “When we started we had very modest ambitions,” Tang said. “We never thought the buyout business would grow to this size in Asia, so our success is also a testament to the whole industry and everyone who works in it.” OB, which Affinity and KKR bought from AB InBev for $1.8 billion in 2009 and then sold back to the previous K.Y. Tang, chairman of Affinity Equity owner for a 5x return, has inevitably drawn a lot of attention. Over the five-year holding period, OB went from Partners, receives the Firm of the being the number two player in South Korea’s beer market to the clear leader. Year Award, accompanied by Y.T. “What we did particularly well across KKR and Affinity was really enable the management to pursue that Park (left) and C.J. Lee effort, first by identifying and prioritizing attractive growth opportunities and then really working closely day-today to really implement those strategies,” said Stephen Ko, a director at KKR. He collected the Operational Value Add Award with Y.T. Park and C.J. Lee, managing partner and partner, respectively, at Affinity. CVC Capital Partners, Quadrant Private Equity and Qiming Venture Partners triumphed in the three fundraising categories, while Flipkart and Alibaba Group won the prizes for VC deal of the year and IPO exit of the year. The other two deal of the year awards went to Chinese investments - CDH Investments for Nanfu Battery, and FountainVest Partners and China Media Capital for IMAX China. Mid-cap exit went to Japan as Advantage Partners won for United Cinemas. Richard Folsom, representative partner at Advantage Partners, noted that Japan has lived in the shadow of other Asian markets. “Part of that is due to the fact that Japan in terms of market size and deal size has not met expectations in many ways relative to the size of the economy, but there are great deals like United Cinemas happening in the mid-market space,” he said. The VC Professional of the Year Award went to Jixun Foo, China-based managing partner at GGV Capital, while in the parallel PE category, for the first time, two individuals from one firm – KKR’s David Liu and Julian J. Wolhardt – shared the prize. KKR has committed more than $1.3 billion across five China deals in the past 12 months.

8 avcj.com | November 11 2014 | Volume 27 | Number 42 ASIA AWARDS [email protected]

Stuart Schonberger (right), managing director at CDH Investments, receives the Deal of the Year - Large Cap Award from Guy Miller, director at RCA

Roll of honor

Fundraising of the Year – Venture Capital: Qiming Venture Partners IV (Qiming Venture Partners) Fundraising of the Year – Mid Cap: Quadrant Private Equity No.4 (Quadrant Private Equity) Fundraising of the Year – Large Cap: CVC Capital Partners Asia Pacific IV (CVC Capital Partners) Deal of the Year – Venture Capital: Flipkart (Tiger Global/ Naspers/GIC Private/Morgan Stanley Investment Management/ DST Global/Accel Partners/Iconiq Capital/Sofina) Deal of the Year – Mid Cap: IMAX China (FountainVest Partners/ China Media Capital) Deal of the Year – Large Cap: Nanfu Battery (CDH Investments) Exit of the Year – IPO: Alibaba Group (Silver Lake/China Investment Corporation/Yunfeng Capital/CITIC Capital/Boyu Capital/Nepoch CapitalAsia Alternatives/Pavilion Capital/Siguler Guff) Exit of the Year – Mid Cap: United Cinemas (Advantage Partners) Exit of the Year – Large Cap: Oriental Brewery (Affinity Equity Partners/KKR) VC Professional of the Year: Jixun Foo (GGV Capital) PE Professional of the Year: David Liu & Julian J. Wolhardt (KKR) Operational Value Add: Oriental Brewery (Affinity Equity Partners/KKR) Firm of the Year: Affinity Equity Partners AVCJ Special Achievement: Victor Chu (First Eastern Investment Dorothea Koo of Baker & McKenzie presents the VC Group) Professional of the Year prize to GGV Capital’s Jixun Foo

Number 42 | Volume 27 | November 11 2014 | avcj.com 9 COVER STORY [email protected] Hare and tortoise GPs are watching with interest as Taiwan restructures its labor pension fund system, thinking of potential LP commitments. But insurers remain the most active players in the market, and they want to do more

TAIWAN’S LABOR PENSION FUND SYSTEM more efficient use of investment expertise across Post – have made investments in private equity. is in transition. Earlier this year, the silos the funds, it could potentially take on new Industry participants attribute this to two key separating six public labor fund schemes were investment strategies,” he says. “But in the short factors: an absence of industry know-how and a broken down to create a single investment term, integration issues have to be addressed lack of familiarity with the regulatory regime. department – the Bureau of Labor Fund (BLF). between different departments.” Firstly, Taiwan’s pension funds are used to With $80 billion in pension, retirement and investing in domestic government bonds and insurance assets to draw upon, this new entity Regulatory spider’s web public equities. There is little or no experience has the ability to make larger commitments to Prior to labor funds reform, there were four major of private markets and there are no established larger managers. pension and government-related funds in Taiwan investment teams that could redress the Alternatives will feature more strongly than – the Labor Insurance Fund, the Labor Pension balance. Secondly, pension funds have a residual before in the combined allocation. Having recently Fund, the Public Service Fund and Chunghwa discomfort with illiquid assets, long holding committed $200 million to a global infrastructure Post, also known as Postal Savings Fund. Between periods and a lack of information transparency. GP under a former scheme, BLF plans to invest a them they had more than NT$7 trillion ($230 “High liquidity and a high level of information further $200 million in alternatives over the next billion) in assets. disclosure do matter to us,” Chao-Hsi Huang, BLF’s year. This capital will not flow into private equity. The $38 billion Labor Pension Fund and $19 director general, told AVCJ. “Although investors The beneficiaries will be real estate investment billion Labor Insurance Fund were regulated could generally obtain higher returns from trusts (REITS) and infrastructure, in accordance by different government bodies. The Labor private equity investments compared to buying with previous practice. Pension Fund Supervisory Committee (LPFSC) stocks, this type of investment might not be what Even without a specific private equity was responsible for two labor pension funds we favor right now.” allocation, the move has fueled speculation – the Labor Retirement Fund and the newer However, the fundamental issue is that the that Taiwan’s pension fund will soon become Labor Pension Fund. The former operates under government is unaware of the benefits the asset a significant new target for international GPs. BLF may end up following the path Taiwan’s largest LPs trodden by many of its counterparts globally in building up exposure to alternatives: start Investor Type Assets (US$b) Alternative investments preferences with yield-producing assets such as real estate Chunghwa Post Public pension fund 194 Real estate, infrastructure and infrastructure, then broaden the scope Cathay Life Insurance Insurance company 127 Private equity, real estate, infrastructure, hedge funds of investments to include other asset classes, including private equity. Nan Shan Life Insurance Insurance company 79 Private equity, real estate, infrastructure, hedge funds “There is a lot of activity, from advisers to Fubon Life Insurance Insurance company 71 Private equity, real estate, infrastructure, hedge funds gatekeepers, happening in Taiwan, which Shin Kong Life Insurance Insurance company 65 Private equity, real estate, infrastructure, hedge funds means they see an opportunity to meet and Source: Preqin; public filings work with potential new LPs,” says Mounir Guen, founder and CEO of MVision. “We are a defined benefit (DB) model while the latter is class could bring – so there is no push, formal or seeing more regular activities concerning defined contribution (DC). informal to build an exposure to private equity. It Taiwanese institutional investors. Right now the In addition to the labor pension funds, the would help if a government agency were willing LPs are mostly insurance companies, but pension BLF platform also absorbed four labor insurance to assume responsibility for promoting private funds aren’t that far behind them.” and reimbursement schemes, formerly controlled equity investment, but as it stands, none are. To many, the labor fund schemes merger is by the Bureau of Labor Insurance Department. “People would look at this asset class seriously a significant step in this evolutionary process. StepStone’s Tsai explains the newer Labor if it started to be regulated. But it’s unclear which Others, however, are more skeptical on the pace Pension Fund, which replaced the old scheme in agencies should be responsible for taking the lead,” of progress. If Taiwan’s pension funds are only just 2005, is the most suitable candidate for capital says a senior investment professional with a Taiwan starting to consider putting private equity in their commitments into private equity. As a DC system financial institution. “We have tried to promote the portfolios, actual allocations into the asset class – where responsibility for providing the pension asset class to government-related funds. Some are unlikely to happen in any time soon. lies with the employee, not the employer – it has government officials have even suggested setting Andy Tsai, managing director at StepStone greater flexibility and fewer existing liabilities. up a sovereign wealth fund (SWF) to generate Group, argues that the recent structural reform However, the newly-established bureau has no better investment income. But there have been has nothing to do with looking at new asset plans to invest in PE. years of talks without any progress.” classes like private equity. It is an efficiency drive, Neither of the other two major pension There is a indeed a strong case to be made for pure and simple – and a positive one. “By making systems – the Public Service Fund and Chunghwa the government setting up a SWF to help cover

10 avcj.com | November 11 2014 | Volume 27 | Number 42 COVER STORY [email protected]

future pension liabilities and other social needs. Cathay, the largest insurer in Taiwan by assets Given the continued low interest rate Like most other countries in the region, Taiwan’s under management, ventured into alternative environment, insurers are eager to deploy capital population is aging rapidly. investments in the wake of global financial crisis in order to generate higher returns. But the The fertility rate, which stood at four children in 2008. It initially invested through fund-of-funds local market lacks ample supply of diversified per woman in 1970, dropped to 1.2 in 2005. It is and some separate account mandates, and has investment instruments, such as private equity estimated to be 1.11 in 2014, according to the accumulated around 60 GP relationships. Most and other alternative assets. CIA World Factbook, ahead of only Macau and of these managers are in North America and Last April, restrictions were lifted on the Singapore. The old-age dependency ratio – the Europe, partly because insurers are only allowed island’s insurance companies acquiring overseas number of people age 65 and older per 100 to invest in GPs registered in member nations of commercial property. The regulators then working age people (aged 15-64) – is currently the Organization for Economic Co-operation and permitted insurers to make direct investments quite favorable at 13, but it is expected to Development (OECD). in overseas financial services sectors. In August, increase dramatically to 63 by 2050. Taiwan’s total With alternative assets programs still in their Cathay purchased an office building in the city of population will drop from 22.8 million to 19.8 nascent stages, the industry regulator – the London from TPG Capital and Canada’s Ivanhoe million over the same period. Financial Supervisory Commission (FSC) – allows Cambridge for GBP311 million ($516 million). It is “The likes of China, South Korea and Japan, insurers to invest no more than 2% of their total the first Taiwanese insurance firm to get exposure and certainSoutheast Asian, all have their own assets in private equity and hedge funds. It is a in this space. versions of SWFs. Taiwan has yet to develop relatively small proportion compared to other “Taiwanese insurers are desperate and they’re one despite years of discussions. It’s difficult to under pressure to look for higher returns in figure out why but I would imagine the political overseas investments. The regulator realized that environment could be a factor,” says Vincent Ng, “While we will maintain if it continued to prevent insurance companies a partner at Atlantic-Pacific Capital. “They appear close relationships with from investing in other sectors, industry players to be moving in the right direction, but it may would suffer financial losses,” says Sonia Sun, a take some time before a SWF is in place to start top-tier GPs, we will partner at KPMG Law Firm. “Private equity can’t investing into alternatives.” accommodate the needs of insurance companies Structural reform aside, industry participants award separate account to deploy capital, so opening up overseas real suggest Taiwan should adopt a top-up approach mandates or use fund- assets and financial assets for investment makes to promote the PE asset class, starting from the sense.” government level. Two agencies are seen as of-funds to look at well-placed to take the initiative: the Ministry of Future plans Labor, which oversees the Labor Pension Fund; mid-market GPs – an There are a handful of home-grown private and the Economic Development Council, which area we’re less familiar equity firms setting up with a view to attracting supervises venture capital investments made by capital from insurance companies. However, the the National Development Fund. with” – Allen Lee FSC keeps a close watch over the industry due to its immaturity. While overseas investment Insurance angle developed markets, where financial institutions approvals come relatively fast, domestic are slow It may turn out to be the longest of long games, can allocate as much as 10%. Nevertheless, with – 3-4 months or more – because they are dealt and in the meantime, insurance companies about $130 billion in assets, Cathay has a sizeable with on a case-by-case basis. approval is slow as represent Taiwan’s most significant LP $2.6 billion to deploy in PE and hedge funds. the regulator will review on a deal-by-deal basis. constituency. “Apart from GPs’ track records, in recent years The general expectation is that the more There are about seven insurance companies we have started evaluating whether they have established insurance players will see further looking at alternatives opportunities, with specialized strategies, such as financial services investment liberalization, allowing them total assets of $6-8 billion. In terms of capital or energy,” says Allen Lee, head of alternative to participate in co-investments alongside deployment, there are three main groups – investments at Cathay. “While we will maintain international GPs. Beyond that, they hope to Cathay Life Insurance, Fubon Life Insurance and close relationships with top-tier GPs, we will play the GP role themselves and make direct Nanshan Life Insurance. And Nanshan only started award separate account mandates or use fund- investments. making commitments to the asset class last year. of-funds to look at mid-market GPs – an area “There are two things on LPs’ minds – co- “The insurance companies are at various we’re less familiar with. If mid-cap managers investment and direct investment. Apart from stages of development as it relates to investing in perform well and want to raise next funds, we reducing management fees, we could also be PE. Groups like Fubon and Cathay started making can deal with the GPs directly without going more involved in the due diligence, transaction private equity and alternative investments a lot through the third-party groups.” and portfolio management process,” Cathay’s earlier. They have been in the market for several Lee says yield-generating products are Lee says. “With those in place, we can control the years, have established deep portfolios, and will important to Cathay, notably credit, mezzanine process as well as seek higher returns without continue for investing, while Nanshan is still at an and infrastructure funds. These asset classes can paying management fees and carried interests.” early stage of portfolio construction. Having said deliver income to supplement the current payout Furthermore, new participants hope the that, Nanshan has been very active in the last burdens on underlying insurance programs. It is 2% ceiling on private equity and hedge fund year or so, investing in some top-tier global GP very different behavior from the newer insurance exposure will be raised. “We have already started brand names,” says Atlantic-Pacific’s Ng. groups, though. Nanshan, for example, will focus lobbying with the regulator to allow us to He estimates the group has invested $500 more on mega funds launched by brand name allocate more capital to the asset class but it million to $1 billion in alternative assets already, GPs pursuing buyout strategies, Atlantic-Pacific’s seems this not yet been put into the regulatory if not more. Ng says. agenda,” says one insurer.

Number 42 | Volume 27 | November 11 2014 | avcj.com 11 FOCUS [email protected] Beyond Beijing Taiwan’s future success as a foreign investment – and a private equity – destination largely hinges on the future of its free trade relationships. But the territory must first it must manage its ties with mainland China

LAST WEEK, VINCENT SIEW, TAIWAN’S Taiwan joined as Chinese Taipei and its president Taiwan has already signed the Economic former vice-president, travelled to Beijing for agreed never to attend meetings. Cooperation Framework Agreement (ECFA) with the 2014 Asia-Pacific Economic Cooperation “The China permission element is always China; this happened in 2010 and it opened the (APEC) summit where he met with Chinese going to be a wild card any time Taiwan wants to way for Taiwan to sign FTAs with other countries. President Xi Jinping in an encounter both parties negotiate a bilateral multilateral trade agreement Treaties have since been concluded with New hoped would soothe relations. Beijing recently with somebody,” says William Bryson, chairman of Zealand and Singapore. In both cases, Taiwan rebuked the territory for voicing support for the American Chamber of Commerce in Taipei’s entered into these agreements not as a sovereign pro-democracy protesters in Hong Kong, while (AmCham) PE committee. “China has issues with state, but as the “Separate Customs Territory of anti-Beijing sentiment has it been simmering in Taiwan entering into multilateral agreements that Taiwan, Penghu, Kinmen and Matsu” – which also Taipei as the city moves toward its tightly-fought China is not part of, and even if they do. it will not forms the basis of its membership in the World mayoral elections. necessarily support Taiwan membership.” Trade Organization (WTO). Following the meeting, Beijing struck a More recently, President Ma Ying-jeou said in conciliatory tone, with the state media quoting Reaching out? his New Year address that joining the Trans-Pacific Xi as saying that the two parties should respect This is not only an issue for potential investors Partnership (TPP) – currently being negotiated by each other’s “choice of development path and – including those in private equity who see free a bloc of 12 nations – would be a goal for Taiwan. social system.” This points to the complexity trade agreements (FTAs) as a driver for liberalizing The group includes the likes of the US, Japan and Australia, but not China. Taiwan is also reported to have entered into preliminary FTA discussions Taiwan’s international trade with other countries, although these have since hit a roadblock. 350 Problems arose when the Cross-Strait Service 300 Trade Agreement (CSSTA), a trade treaty signed 250 by China and Taiwan in June last year under the umbrella of ECFA, was not ratified by the 200 Taiwanese legislature. Ratification was prevented 150 by protestors against the pact occupying the

US$ million 100 Legislative Yuan for 19 days.

50 “There are six countries that have either have signed an agreement with Taiwan or have 0 been in negotiations – all have been put on hold, Imports ExportsImports ExportsImports ExportsImports ExportsImports ExportsImports ExportsImports ExportsImports ExportsImports Exports 2005 2006 2007 2008 2009 2010 2011 2012 2013 partly because these countries do not want to Imports: Mainland China Other Exports: Mainland China Other upset China,” says C.Y. Huang, president of FCC Source: Taiwan Bureau of Statistics Partners and founding chairman of the Taiwan M&A and Private Equity Council (MAPE). “So China is a bit like a big brother; if these countries can behind cross-strait relations and the difficulty foreign investment laws – but also for Taiwan’s get Beijing’s blessing they can go ahead.” Taiwan and China face in balancing their broader economic development. Cross-border What Taiwan’s government must do now is respective political with economic reality. agreements will inevitably rely on cross-strait reassure the public that strengthening trade ties Taiwan’s future prosperity depends on relations, but nurturing the latter can be complex. China is the right course of action in order to push relations with China, not only because the Despite having sixth largest GDP in the through the CSSTA and then hopefully restart the mainland is its largest trading partner – Taiwan region ($474 billion, according to 2012 figures), stalled FTA negotiations. For many Taiwan business currently relies on China and Hong Kong for Taiwan has seen very little PE deal flow with just leaders at least the case for CSSTA is strong. 39.6% of its exports and 18% of its imports – but $134 million transacted across 31 deals last year AmCham’s 2014 business climate survey revealed also because of these same relations will likely and $309 million across 14 deals so far this year. that of 423 businesses polled, 69% agreed that the to dictate its future trade agreements with By contrast, Singapore – which ranks behind CSSTA is mutually beneficial for China and Taiwan. other countries. Taiwan has so far largely been Taiwan in terms of GDP – saw $3.2 billion across However, convincing the broader public is a excluded from efforts on delivering greater 97 deals and $3.6 billion across 65 deals, in 2013 different matter, with many feeling that integration regional economic integration due to China and 2014 so far, respectively. with China has already gone too far. making objections on political grounds. However, some industry participants have “Our politics and economy is somewhat The one exception is APEC; China and Taiwan been encouraged by recent efforts to enter into segmented by pro-China and anti-China are both members, on the understanding that agreements with a number of countries. attitudes,” says Sonia Sun, a partner with KPMG

12 avcj.com | November 11 2014 | Volume 27 | Number 42 FOCUS [email protected]

Law Firm. “So the government has been doing laws and regulations that would be required to with an agreement once it is adopted. what it can to educate people on the importance qualify for membership to TTP,” Bryson says. “The “Taiwan in general has done well with its WTO of opening up.” second question is how long would it take?” obligations, for example, but some in Congress FCC’s Huang describes how those who are have publicly pointed out Taiwan’s failure to live against greater integration through the CSSTA Accentuate the positive up to the beef trade protocol, or expressed been fear that the mainland has become a strong On the positive side, Taiwan has already frustration at the dispute over its imports of US competitor to Taiwan’s high-tech industry. made some moves in the right direction with pork, and that doesn’t help,” he says. However, he points out that Taiwan is left with the Financial Supervisory Commission (FSC) Despite the ongoing uncertainty over FTAs, few alternatives. loosening controls on private equity by allowing and questions about Taiwan’s future relations “People say we should not rely on China and domestic asset managers to raise funds for with China, many remain upbeat regarding focus on globalization, but globalization without commodity-linked PE investments. Meanwhile, the territory’s competitiveness in the region. China – when the other countries view China the same AmCham survey cited earlier shows “When we speak to our multinational clients – as their biggest trading partner – is simply not that 65% of business leaders feel that Taiwan is particularly those from Europe and Japan – they feasible,” Huang says. “Talking about TPP without capable of meeting the high standards required view Taiwan as a good partner,” says Audry Ho, a CSSTA is like talking about graduate school when for TPP membership. But much still needs to be partner at EY. “ Many of our clients are now saying we didn’t even get a high school diploma.” done to bring regulatory practices in line with that their first priority is focus on places like Even if Taiwan is able to proceed with its international norms. Taiwan before mainland China where issues over ambitions of joining the TPP – without ratifying “Some of our industries are well prepared, but corporate governance and financial reporting the CSSTA – the practical hurdles to entry are not all of them and that is why it has been hard systems can make it challenging.” significant. AmCham’s Bryson describes the for the government to speed up the process,” AmCham’s Bryson adds that many Japanese TPP as representing the gold standard for says KPMG’s Sun. “In particular, Taiwan needs to companies have used Taiwan as a springboard to trade concessions. Again, there is the issue prepare its weak industries, such as agriculture, other markets within the region. This trend may of convincing the public, industry and the which are not that competitive. Because once gain momentum as the cost of doing business in Taiwan legislature that making the necessary you open up to free trade, you have to open up Japan and China equalizes. concessions will secure better access to some of all industries.” “China was clearly a place to invest in for a the largest economies of the world. Sun’s sentiment is reflected by AmCham’s long time but the cost of doing business in China “The first question is whether the executive Bryson who also highlights agriculture as a is going up and as they reach parity you begin can make those concessions, and do they have the potential stumbling block. He questions whether look at other factors, so there is a push to look at political will to make the modifications to existing Taiwan will be able to demonstrate it can comply Taiwan more,’ says Bryson.

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To subscribe, call Sally Yip at +(852) 3411 4921 or email [email protected] avcj.com FOCUS [email protected] Captive element Taiwanese corporations are launching captive VC units to invest in technologies that can update their product offerings. The new source of funding is welcome in the absence of independent VCs, but is it a panacea?

STARTING A SOFTWARE COMPANY IS with internet innovation, so they won’t put any a sustainable source of capital for local start- relatively simple and cost-effective, but scaling capital into those kinds of start-ups,” says Lucas ups. The check sizes are relatively small and the up can be much more of a challenge. AirSig, a Wang, CEO of TMI, a Taiwan-based angel investor investments are strategic in nature, which means Taiwan-based mobile authentication app that group. the money could equally well go overseas in launched in June of last year, is currently facing Corporates are already filling the gap. Two search of technology to support the parent’s this very issue. months ago, Acer established a NT$1 billion ($34 expansion plans. As a result, the government is Its main product, Air Signature, allows users million) VC fund – Acer Venture Capital Fund – to also trying to reboot the start-up ecosystem. to unlock devices – such as mobile phones – by invest in start-ups. The corporate investment Last month, the $10 billion National writing their signature in the air. The technology arm will help speed up Acer’s cloud-computing Development Fund (NDF) initiated a new can also be used in a wide range of hardware strategy for Acer. Although the new fund has program to attract international VCs to invest devices, such as smart home systems or private yet to make any investments, Acer has formed in Taiwanese start-ups and also help local cars. Three months ago, AirSig received $2 million partnerships with incubators and accelerators – companies expand into overseas markets. Any in Series A funding from Taiwan electronics giant including appWorks – to promote start-up using foreign VC firm with a presence in Taiwan could Foxconn Technology Group. its existing resources and technology. feasibly receive a grant equivalent to 40% of the “Capital isn’t our main concern. The key According to industry participants, a number total fund size. However, all the capital must be consideration is how we set up alliance with a of other listed technology firms have followed invested in local early-stage firms. The NDF has large corporation that is using our technology. Foxconn is well-established in the global market, Start-up and early-stage investment in Taiwan so it could help us expand overseas quickly,” says Moss Chuang, technical director of AirSig. 60 20 Foxconn is one of numerous traditional 50 hardware players seeking solutions to make 15 their businesses more internet-related. With 40 independent venture capital funding stagnant in 30 10 Taiwan over the last few years could corporate VC Deals US$ million 20 play step into the breach? 5 “It’s a transition time, which requires 10 corporates and start-ups to explore what tech 0 0 applications are going to be like in 2-3 years,” says 2009 2010 2011 2012 2013 2014 Joseph Chan, a partner with incubator appWorks. No. of deals Amount (US$m) “In the past, corporates mainly invested in their Source: AVCJ Research own supply chains. Now they are thinking about how to integrate technology into their hardware to meet consumer demand.” suit, including Asus. At the same time, a number also introduced other measures designed to of key shareholders in listed companies are reduce the bureaucratic and economic burden Growth momentum making angel investments. Momentum is picking on start-ups. Go back 10 years and VC funding was readily up, to the point that corporates are now a Local industry participants identify IPO available in Taiwan from multiple sources. Large meaningful source of Series A funding. deregulation as another potentially useful move. PC makers such as Acer were actively investing “We have got a lot of good start-ups, but At present, listing applicants must have a track so independent VC players were willing to do we haven’t established an ecosystem from the record of profitability, but this can be a big ask the same, backing a string of local start-ups. funding side, which means we only have early for a start-up in expansion mode. The regulator But when the world moved on to internet investment at this stage. Moving forward, I think occasionally makes exceptions but the approval technology, Taiwan’s start-ups got left behind. we still lack Series A investors. But we do see process is long and uncertain. VC firms are put off The VC firms followed the innovation, entering corporates doing early-stage investments. A by the lack of liquidity. China and Southeast Asia. couple of local VCs are also starting to do later “The technology industry doesn’t lack capital,” “Funding has dried up in Taiwan in recent stage of investments in internet companies,” says says appWorks’ Chan. “The main issue lies with years. There is still some early-stage VC TMI’s Wang. ‘I think the whole environment is liquidity as every investor wants to realize investment but most of it is capital-intensive, changing in a practical way, but it’s very slow.” their investments. Government funding is an targeting areas such as biotech. Those investors encouraging move, but it would also be helpful are more familiar with traditional businesses like Government action if the government allowed companies that have semiconductors and PCs. They are less familiar It remains to be seen whether corporates can be yet to post a profit to go for IPOs.”

14 avcj.com | November 11 2014 | Volume 27 | Number 42 ANDREW KUO | INDUSTRY Q&A [email protected] The Greater China opportunity Andrew Kuo has spent two decades working on China deals, first as a banker and then as an investor with H&Q Asia Pacific and The Blackstone Group. He formed Zoyi Capital to focus on the China-Taiwan angle

Q: What led to the three of are trying to build a platform regulated than most sectors and you [Pei-Pei Yu, formerly of for succession. Now they realize the global buyout firms were Goldman Sachs, Eric Chen, the younger generation is not very active in these areas in formerly of Temasek Holdings, coming back to take over the Taiwan. That is why they can’t get and Kuo] setting up Zoyi? business. The founders are in out easily. We try to avoid these A: We saw lots of opportunities in their late 50s and 60s and the sectors. We focus on consumer- China – no one questions the competition is getting more retail, high-end manufacturing potential of that market – and intense. The succession-planning with certain technology hurdles, we thought we could leverage issues are obvious.. and then services. If you are not our respective connections in a highly-regulated industry to Taiwan and Hong Kong Q: So how many of your deals are and you have a good local companies that have been in control transactions? partner, the chances of getting China for many years, as well A: We have closed five deals – in blocked are less. In the same as local mainland companies, one case we own 60% and in “There are many way, take-privates should not to identify good investment another we are the single largest reasons why a be a problem, provided there opportunities. These companies shareholder, Eric is chairman is proper communication with need more help. A lot of them of the company, and we are deal might come regulators. I worked on the take- were export-oriented with driving the future strategy and private of Primax Technologies manufacturing plants in China, development. But all our deals and succession in 2007 when I was at H&Q Asia but now they recognize China involve close cooperation with could be one Pacific. The deal closed in 2008 is an important consumption management. There are many and then the company re-listed market. Domestic marketing reasons why a deal might come reason why we in Taiwan last year. is often the weak point – they and succession could be one don’t have the knowledge reason why we can get control. can get control” Q: What do you see as the most base to do the branding, for But beyond that it is a question attractive exit channels for example – so our senior industry of who can upgrade a company a shop in Shanghai’s Yuyuan your portfolio companies? professionals and functional and add value. Most of our deals Garden and a manufacturing A: When we talk about a deal we experts can bring in the talent come through our personal plant in Kunshan in Jiangsu are up front with the owner required to run these companies. relationships rather than through province. It is very difficult to find and management team about We emphasize the value-add third parties. All three of us have even a mid-cap company that the fact we will need to exit at element. At the same time, these made investments in China is only doing business in Taiwan some point. We know how to list are mid-cap companies so the so we know how to own and – any business with annual companies, but we only want global private equity firms will operate a business there. When sales of $30-50 million or more to do public market exits for not focus on supporting them. you have a long relationship has a China element. In some about 50% of our deals because with someone, and they know cases, these companies still get the markets can be volatile. We Q: And then there is the your background, they are more the majority of their sales from also want to demonstrate that succession-planning comfortable talking to you. Taiwan but they have a Greater trade sales are available. For opportunity… China dream. a lot of global manufacturers, A: When I was a banker with J.P. Q: To what extent are you Greater China is still a relatively Morgan over 10 years ago, targeting Taiwanese Q: The pan-regional buyout small portion of their overall if you went to see company companies? firms have experienced asset base. They will continue to founders in Taiwan and Hong A: The targets are not only in some problems in Taiwan make capital investments in the Kong and asked them if they Taiwan. We invested in a with getting approval for region. If we make an auto parts would consider selling their company in Beijing founded by certain deals – particularly investment, for example, maybe a business, the immediate two mainland Chinese but they privatizations – and exiting big international brand would be response was, “You must be have a group of managers from businesses. Is this a concern a natural buyer for the business. kidding.” At that age, around Taiwan and one of our partners for Zoyi? We hope with our international 50, these entrepreneurs think previously invested in the firm. A: In any part of the world, there experience and knowledge of they can carry on running the We invested in Vigor Kobo, a are restrictions on investment capital markets and M&A, we can business and then their children Taiwan-based company that in certain industries. Telecom give our companies more choice are studying overseas so they sells pineapple cakes, and it has and financial services are more over an exit.

Number 42 | Volume 27 | November 11 2014 | avcj.com 15 15th Annual Private Equity & Venture Forum India 2014 2-3 December • Taj Lands End, Mumbai

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