Asia’s Private Equity News Source avcj.com March 01 2016 Volume 29 Number 08

EDITOR’S VIEWPOINT China-US acquisitions face regulatory scrutiny Page 3

NEWS Asia Climate Partners, BanyanTree, Brookfield, CIC, CPPIB, GIC, IvyCap, Monk’s Hill, Shunwei, TCL, Tsinghua Unigroup, Page 5

INDUSTRY Q&A Jonathan Li and Xin Wang of BHR Partners Page 19

FOCUS Investors suffer due to online fundraising scams Page 20

Engagement issues AVCJ RESEARCH Strategic investors, private equity target China’s media value chain Page 9 Data f ile Page 23

FOCUS ANALYSIS

Returns on research Automation agenda Pharma presents choices for corporate VC Page 12 GPs eye cross-border industrial strategies Page 15

PRE-CONFERENCE ISSUE AVCJ PRIVATE EQUITY AND FORUM CHINA 2016 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) 2158 9661 Associate Editor Regulatory risks Winnie Liu (852) 2158 9663 Staff Writer Holden Mann (852) 2158 9646 Justin Niessner (852) 2158 9678

Design Edith Leung, Mansfield Hor

NO OFFICIAL REASON WAS GIVEN FOR “under the principles of openness and fairness,” Events George Sengulovski, the regulatory decision that led to Procon with Go Scale stressing its commercial and Jessie Chan, Jonathon Cohen, Mining & Tunnelling – which is controlled by market-oriented interests, but to no avail. Sarah Doyle, China National Machinery Industry Corporation The wasted process has cost Philips time Amelie Poon, Fiona Keung, – unwinding its acquisition of Canada-based and a bit of money; and the company will no Jovial Chung, Lincoln Mining in 2013. The unofficial explanation doubt be more wary when it puts the asset up Marketing was that one of Lincoln’s facilities was too close for auction once again. Such considerations were Agrina Sandri, Priscilla Chu, to Fallon Naval Air Station in Nevada, home to the likely uppermost in the minds of board members Yasna Mostofi US Navy’s TOPGUN flight school. at Fairchild Semiconductor International when This investment would receive the prize for they rejected a take-private bid from China Research most bizarre (alleged) grounds for rejection by Resources Microelectronics and Hua Capital in Helen Lee, Herbert Yum, the Committee on Foreign Investment in the February. The board said the risk of rejection Jason Chong, Kaho Mak, Tim Wong, United States (CFIUS), but TOPGUN is said to have by CFIUS was too great, regardless of the buyer thwarted two other Chinese M&A transactions. consortium’s offer to pay a $108 million break fee Sales While it seems odd that Procon didn’t if approval was not forthcoming. Anil Nathani, approach the regulators prior to the deal closing The following week, China’s Tsinghua Darryl Mag, Debbie Koo, and seek a compromise solution, the company Unigroup scrapped its plan to invest in US- Samuel Lau, might not have realized it needed to do so. based disk drive manufacturer Western Digital Pauline Chen Lincoln is Canadian by incorporation – so on the after CFIUS decided to launch a review of the Subscriptions surface it could appear beyond CFIUS’ purview – transaction. Jade Chan, Prudence Lau, but its principal mining operations are in the US When CFIUS said in its annual report that Sally Yip and any change in ultimate ownership must be there may be a coordinated strategy among Publishing Director signed off by the authorities. foreign governments or companies to acquire Allen Lee Procon’s misfortune underlines the US firms involved in the development of critical importance of good advice when dealing with technologies, it might have been referring to

a regulator that reviews the national security semiconductors. Unigroup has made no secret of Hong Kong Headquarter implications of foreign investments in companies its desire to become a major player in the sector Suite 1602-6 with US operations, has the power of veto, yet and has launched several aggressive bids for Grand Millennium Plaza is under no obligation to explain its decisions assets around the world. It is unclear whether the 181 Queen’s Road Central Hong Kong publicly. With Chinese outbound M&A at record company really expects to be successful in some T. (852) 2158 9700 levels – and Sino-US political relations bedeviled of these situations or is just testing the water as F. (852) 2158 9701 by issues ranging from territorial sovereignty to part of a longer-term strategy. E. [email protected] URL. avcj.com state-sponsored electronic espionage – perhaps What this probably has done is heighten it has never been more important. the sensitivity around all Chinese outbound Beijing Representative Office According to its annual report to Congress deals targeting the US. The majority of these No.1-2-(2)-B-A554, 1st Building, Anything is possible No.66 Nanshatan, on activities from the 2014 calendar year, CFIUS transactions will get through, but prospective Chaoyang District, Beijing, reviewed 147 filings, up 50% year-on-year and investors would be advised to ensure they have People’s Republic of China not far off the all time high of 155 from 2008. covered all the bases – to the point of identifying T. (86) 10 5869 6203 China accounted for 24 of the filings, more than areas in which they might have to appease the F. (86) 10 5869 6205 if you work with the right partner E. [email protected] any other country, retaining a position it first regulator and mitigate security concerns. The last occupied in 2012. thing companies want is to see the crown jewel CFIUS has already made an impact on several of an outbound strategy torn from their grasp by The Publisher reserves all rights herein. Reproduction in whole or China transactions in 2016. In January, Go Scale a retrospective ruling. in part is permitted only with the written consent of AVCJ Group Limited. Capital – a private equity firm sponsored by ISSN 1817-1648 Copyright © 2016 GSR Ventures and Oak Investment Partners – terminated its deal to buy a majority stake in Philips’ LED components and automotive Tim Burroughs A Mergermarket Group company Unlocking liquidity for private equity investors lighting unit due to “unforeseen concerns” from Managing Editor the regulator. Both companies made their case Asian Venture Capital Journal www.collercapital.com London, New York, Hong Kong Number 08 | Volume 29 | March 01 2016 | avcj.com 3 EXTRAORDINARY Opportunities.

EXTRAORDINARY Challenges.

For more than a quarter century, our firm has advised world-class private equity firms in their most high-profile and significant investments in China. With global resources and local expertise, Paul, Weiss helps private equity firms capitalize on opportunities by creating long-term strategic partnerships with Chinese enterprises that add value beyond just capital.

Our lawyers’ extensive knowledge of the foreign investment environment and M&A experience in both local and global markets helps Chinese investment managers expand their global footprint and take advantage of opportunities for growth.

NEW YORK BEIJING HONG KONG LONDON TOKYO TORONTO WASHINGTON, DC WILMINGTON

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP www.paulweiss.com EXTRAORDINARY Opportunities. NEWS

ASIA PACIFIC Ex-Khosla partner raises used to build additional distribution centers and $200m for tech fund upgrade the company’s information system. Asian pension funds to Andrew Chung, formerly a partner at US-based Salvage car auction Khosla Ventures, has launched his own VC firm EXTRAORDINARY boost alternatives exposure - 1955 Capital - and reached a first close of $200 platform raises $45m Pension funds in Asia Pacific expect to increase million on a cross-border technology fund. Beijing Fairlubo Vehicle Auction, a Chinese online their allocations to alternative assets over the The first close on the new fund is said to be salvage car auction platform, has raised a $45 Challenges. next three years in an effort to boost returns and above the initial target. The vehicle will invest in million round led by PE-backed used car trading cover liabilities. More than half of the Asia-based companies in the US and Europe that can address platform Uxin. Fairlubo collects damaged cars pension funds surveyed by State Street said they challenges faced from companies and helps sell them to plan to increase private equity exposure. by developing dealers, rebuilders and exporters. countries relating Markus Ableitinger joins to energy, Cross-border shopping healthcare, food, For more than a quarter century, our firm placement agent Pyramid agriculture, platform gets $15m Markus Ableitinger, formerly Asia-based education and California-based Chinese cross-border shopping has advised world-class private equity firms managing director with Capital Dynamics, has sustainable platform 55Haitao has raised a $15 million Series in their most high-profile and significant joined Pyramid Private Equity Partners as an manufacturing. A round from JJ Capital, a VC arm of Chinese associate partner. He will continue to focus on Potential investees game developer JJ. 55Haitao generates 5,000- investments in China. With global resources Asia. At Capital Dynamics, Ableitinger handled will have some 10,000 orders every day; sales exceeded $150 and local expertise, Paul, Weiss helps investments into over 30 Asian GPs, overseeing degree of product million in 2015. commitments of more than $1.3 billion. traction and be private equity firms capitalize on opportunities 1-2 years away from product commercialization. Impact Therapeutics gets Chung believes companies with these by creating long-term strategic AUSTRALASIA characteristics are available at attractive $10m Series B round partnerships with Chinese enterprises that valuations in the US and unlikely to be well- Existing backer Lilly Asia Ventures has been Brookfield, Qube consider covered by local VC firms. He will help them joined by new investors, including China add value beyond just capital. negotiate local strategic partnerships, initially in Summit Capital, in a $10 million Series B round joint Asciano bid China. “I have experience taking US companies for China-based cancer drug developer Impact A Brookfield Asset Management-led consortium into China – flying here a few times a year and Therapeutics. Impact has several anti-tumor drug Our lawyers’ extensive knowledge of the and a group led by Qube Holdings that includes driving for hours in the middle of nowhere projects in pre-clinical and clinical testing. The Canada Pension Plan Investment Board and outside Shanghai – and helping them negotiate capital will be used to grow the product pipeline. foreign investment environment and M&A China Investment Corporation may make a joint head-to-head with the Chinese entrepreneurs. experience in both local and global markets A$9 billion ($6.5 billion) bid for Australian rail That is the biggest advantage I can bring to the PE-backed SF Express freight and cargo port operator Asciano. It comes table,” Chung said. targets A-share IPO helps Chinese investment managers days after Asciano accepted an A$8.8 billion bid 1955 Capital is named for the year when from Qube, rejecting an earlier Brookfield offer. influential technology figures like Bill Gates, Steve China’s largest express delivery services provider expand their global footprint and take Jobs, Eric Schmidt and Vinod Khosla were born. SF Express, which is backed by several PE advantage of opportunities for growth. investors including CITIC Capital, is targeting an GREATER CHINA A-share IPO. As of July 2015, the company had generated $6.8 billion in box office revenue last 340,000 employees, 160,000 logistics vehicles TCL, Tsinghua Unigroup year, accounting for 24.8% of the industry total. and 19 freight planes. launch $1.5b M&A fund Warburg Pincus joins Series Unigroup scraps Western TCL Group has partnered with Tsinghua Unigroup, an investment arm of Tsinghua B for D&J China Digital investment plan NEW YORK University, to launch an M&A fund with a target D&J Industrial Property, a business park builder China’s Tsinghua Unigroup has scrapped its plan BEIJING of RMB10 billion ($1.53 billion). The fund, known co-founded by Warburg Pincus, has raised $220 to pay $3.78 billion for a 15% stake in US-based as Xiang Dongwei Xinghua Investment, will focus million in a Series B round from the GP and disk drive manufacturer Western Digital after HONG KONG on technology and advanced manufacturing. Dongping Sun, D&J’s founder. They have invested US regulators decided to investigate the deal. LONDON $420 million in the company in all. Unisplendour will still set up a joint venture with Western, with registered capital of $158 million. TOKYO Wanda Media to raise $1.5b ahead of listing Tian Tian Express raises TORONTO Shunwei leads round for Chinese conglomerate Dalian Wanda Group $92m WASHINGTON, DC is seeking RMB10 billion ($1.5 billion) from Chinese courier service Tian Tian Express has legal services platform WILMINGTON domestic investors for its film and TV production raised a RMB600 million ($92 million) Series A Shunwei Capital Partners has led a Series B division, Wanda Media, ahead of a planned round led by domestic PE vehicle CICC Qianhai round for Kuaifawu.com, a Chinese legal services onshore IPO. The films Wanda Media produced Development Fund. The new capital will be platform that targets small and medium-sized

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP www.paulweiss.com Number 08 | Volume 29 | March 01 2016 | avcj.com 5 NEWS

enterprises. The size of the round reportedly SAIF seeks $800m for China Asia Climate Partners backs amounts to tens of millions of dollars. fund ColdEX Logistics SAIF Partners is targeting $800 million for its fifth Asia Climate Partners, a fund set up by the Asian NORTH ASIA Greater China fund, which will make growth Development Bank, Orix Corp, and Robeco investments in the technology, healthcare and Institutional Asset Management, has invested in Mitsui Fudosan launches VC cleantech sectors. The fund – the first raised by Indian cold chain provider ColdEX Logistics. The SAIF since its India team spun-out in 2011 – has a company will invest INR2.5 billion ($36.4 million) fund with Global Brain hard cap of $1 billion, according to sources in the over three years to build warehousing capacity. 31 Ventures, a VC firm sponsored by Japanese LP community. The firm’s fourth vehicle, which developer Mitsui Fudosan, has launched a JPY5 covered Greater China and India, closed at $1.3 BanyanTree invests $9m in billion ($44 million) fund with Global Brain billion in September 2010. Corporation. The 31 Ventures Global Innovation Investors in SAIF Partners IV include California Safex Chemicals Fund I will commit early stage capital to start-ups Public Employees’ Retirement System (CalPERS), BanyanTree Finance has invested INR600 in the US, Europe, Israel and Asia. New York State Common Retirement Fund, million ($9 million) in farming, pesticide and agrochemical maker Safex Chemicals. The capital Eight Roads leads $8m from the $175 million BTGC-II fund will support Safex’s growth efforts, marketing and round for Japan’s Port long-term working capital requirements. Eight Roads Ventures Japan has led a JPY900 million ($7.9 million) round for Tokyo-based IvyCap leads $4.5m round online content developer Port. Port mainly offers hiring and social media consulting services to for Taskbob Japanese businesses. It also operates several IvyCap Ventures has led a INR280 million ($4.5 vertical media sites. million) Series A round for Indian home services start-up Taskbob. The capital will be used to expand Taskbob’s presence in multiple markets, SOUTH ASIA support product growth and innovation, and Massachusetts Pension Reserves Investment identify acquisition opportunities. IDG targets $200m for third Management Board, and State of Wisconsin Investment Board. Performance data disclosed by India fund CalPERS indicate that the fund delivered a net IRR SOUTHEAST ASIA IDG Ventures has launched its third India fund, of 9.6% and a multiple of 1.3x as of June 2015. targeting $200 million. IDG invests in technology- The firm will partner with local entrepreneurs GIC to invest $387m in focused Indian companies at early and growth who have built companies with exposure to stage, committing $1-10 million per deal. fast-growing and emerging industries and cross- Indonesian retailer border investment opportunities. Companies Singapore’s GIC Private will invest IDR5.2 trillion IFC commits $25m to VC- should be established and cash-flow positive. ($387.4 million) in Trans Retail, a hypermarket SAIF invests between $10 million and $100 operator run by Indonesian conglomerate CT backed Lenskart million across one or multiple rounds of funding, Corp. With GIC’s support, Trans Retail will add The International Finance Corporation (IFC) has typically takes a stake of 15-40%, and has board locations and expand into new formats. committed $25 million to Indian online eyewear representation. The firm manages more than $4 retailer Lenskart. The company’s backers include billion in capital and has invested in over 200 Telstra backs latest Monk’s TPG Capital, IDG Ventures, TR Capital, and Unilazer companies since its inception. Ventures. Hill fund Telstra Ventures has made an LP commitment Accel leads $5.8m round Partners India. The company will use the new to Monk’s Hill Ventures’ debut Southeast Asia capital to grow its team and improve its platform fund, which targets S$100 million ($80 million). for Juspay aimed at connecting small and medium-size Telstra will leverage Monk’s Hill’s network to grow Accel Partners has led a INR400 million ($5.8 enterprises with customers and suppliers. businesses outside its traditional service areas. million) Series A round for Indian mobile payments start-up Juspay. Juspay will use the IDFC buys toll road from VCs commit $15m to proceeds from the round to expand its team and build its technology platform. Blackstone-backed NCC Indonesia’s Orami IDFC Alternatives will buy a controlling stake in MoxyBilna, an Indonesia-based mother and baby- Matrix leads $5m Series A a Bangalore toll road from NCC Infrastructure focused e-commerce group, has received a $15 Holdings – backed by – million funding round led by Sinar Mas Digital for OfBusiness and Soma Enterprise at an enterprise value of Ventures and rebranded as Orami. Gobi Partners, Indian B2B e-commerce platform OfBusiness has INR7.5 billion ($109 million). NCC and Soma each Velos Partners and Facebook co-founder Eduardo raised a $5 million Series A round led by Matrix hold a 38% stake, which they will exit entirely. Saverin also participated, as did Ardent Capital.

6 avcj.com | March 01 2016 | Volume 29 | Number 08 First Order of Business: Secondaries

Lexington Partners is a leader in the global secondary market. Since 1990, we have completed over 380 secondary transactions, acquiring more than 2,600 interests managed by over 600 sponsors with a total value in excess of $34 billion. For over 25 years, we have excelled at providing customized alternative investment solutions to banks, nancial institutions, pension funds, sovereign wealth funds, endowments, family of ces, and other duciaries seeking to reposition their private investment portfolios. Our unparalleled global sponsor relationships, capital resources, and reputation as a reliable counterparty are widely recognized, and we have skilled professionals to work with you in six locations. To make an inquiry, please call us or send an email to [email protected].

Innovative Directions in Alternative Investing

New York • Boston • Menlo Park • London • Hong Kong • Santiago

www.lexingtonpartners.com 5th Annual Private Equity & Venture Forum Indonesia 2016 14 April • Grand Hyatt, Jakarta

GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY EARLY BIRD Finding routes to create alpha ENDS FRIDAY SIGN UP NOW! KEYNOTE AND SAVE SPEAKER H.E. Dr. Sofyan A. Djalil US$200 Minister of National Development Planning & (until 4 MAR only) Chairperson of National Development Planning Agency REPUBLIC OF INDONESIA

Early confirmed speakers to attend the event include:

Fazil Erwin Alfitri Jeffrey Chi Kimihiro Fukuyama President Director Vice Chairman - Asia Director, Growth & Cross PT MEDCO POWER VICKERS VENTURE Border Investment Department INDONESIA PARTNERS DEVELOPMENT BANK OF JAPAN

Veronika Linardi Gary Ng Jean-Christophe Marti Co-Founder & CEO Managing Director, Senior Partner QERJA Private Equity NAVIS CAPITAL CLSA CAPITAL PARTNERS PARTNERS And many more... For the latest programme and speaker line-up, visit avcjindonesia.com

Forum key statistics: 200+ 10 30+ 5 6 Delegates Countries Speakers Networking Interactive Breaks Sessions Registration & Sponsorship: Anil Nathani T: +852 2158 9636 E: [email protected] Enquiry

Co-Sponsor

Scan this QR code with your Join your peers mobile phone to review the event #avcjindonesia avcjindonesia.com latest updates 5th Annual Private Equity & Venture Forum COVER STORY Indonesia 2016 [email protected] 14 April • Grand Hyatt, Jakarta Kings of content From Alibaba Group to Wanda Group, Chinese companies are looking to tighten their hold on the media value chain, moving upstream and downstream. Private equity can profit from this evolving ecosystem

CMC CAPITAL PARTNERS HAS CLOSED ecosystem, the rewards could be substantial. media business, but they are rapidly gaining in two funds – one renminbi-denominated and “The Chinese media industry is generally influence because they control highly valuable GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY the other in US dollars – and deployed around maturing, so we will see more high-profile distribution channels and are able to spend $650 million over the past five years, leveraging outbound and inbound deals – actually you more on production than the traditional studios,” EARLY BIRD its status as the first private equity firm to focus could argue this trend is long overdue,” says says Rob Caine, a partner in film co-production ENDS FRIDAY exclusively on China’s media and entertainment Marcel Fenez, president at Hong Kong-based company Pacific Bridge Pictures. “More and Finding routes to create alpha industry. A second US dollar fund is understood advisory firm Fenez Media. “But it is important to more of the top talent and writers are working to be in the market, targeting around $1 billion. consider what these deals are about; obviously for these internet companies. TV and movie SIGN UP NOW! But to capture the whole gamut of many of them are around films and sports.” production will eventually be dominated by the AND opportunities presented by a fast-evolving internet players.” KEYNOTE SAVE industry, CMC wanted a level of flexibility History lessons In contrast, China is much more fragmented SPEAKER not offered by traditional private equity fund The idea of controlling a media value chain is than the US, and this is almost entirely the structures. This led to the establishment not new. Right up until they were taken apart result of strict regulation. The major television H.E. Dr. Sofyan A. Djalil US$200 last November of CMC Holdings, a vehicle at the end of the 1940s by antitrust legislation, broadcasters, like most of the media distribution Minister of National Development Planning & (until 4 MAR only) designed to remain invested in assets – typically the US movie studios took this approach: they apparatus, are all state-owned, which means they Chairperson of National Development Planning Agency greenfield project that require deep operational held actors under strict contracts; they employed have never been fully commercialized. REPUBLIC OF INDONESIA involvement – beyond a 10-year horizon. the film makers; they were directly responsible Foreign investment therefore squeezed The holding company received RMB10 billion for distribution. Regulators separated them into the spaces beyond these red lines, and on ($1.6 billion) in seed capital from Alibaba Group, from the movie theaters, but to this day the occasion edging over them. In this sense, the Tencent Holdings and fund-of-funds Oriza industry remains highly consolidated. A handful internet has also been a change agent in China. Early confirmed speakers to attend the event include: Holdings. While CMC Holdings will continue to of companies generate the bulk of the revenue, Venture capitalists got direct exposure to the make shorter-term investments, CMC Holdings distributing content through multiple channels. nascent online advertising industry through Fazil Erwin Alfitri Jeffrey Chi Kimihiro Fukuyama is the vehicle of choice for the likes of smart President Director Vice Chairman - Asia Director, Growth & Cross TV manufacturer Whaley Technology and China’s entertainment and media market PT MEDCO POWER VICKERS VENTURE Border Investment Department DreamCenter, a Shanghai-based entertainment DEVELOPMENT BANK OF INDONESIA PARTNERS complex developed by CMC in conjunction JAPAN 250,000 with Hong Kong’s Lan Kwai Fong Group and DreamWorks Animation. 200,000 Veronika Linardi Gary Ng Jean-Christophe Marti “Today investing in media and entertainment 150,000 Co-Founder & CEO Managing Director, Senior Partner sector, it’s no longer mainly about traditional QERJA Private Equity NAVIS CAPITAL movie and TV businesses. We have to look at the 100,000 US$ million entire media value chain from content creation CLSA CAPITAL PARTNERS 50,000 PARTNERS And many more... to distribution platforms, and there are so many new models coming out from each segment, 0 For the latest programme and speaker line-up, visit avcjindonesia.com especially driven by the disruption from internet 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E and mobile,” Ruigang Li, the media mogul who Soures: PwC founded CMC, told AVCJ in an interview last Forum key statistics: November. CMC’s approach is unique within Chinese Nevertheless, in recent years the internet investments in web portals and then supported 200+ 10 30+ 5 6 private equity but it closely resembles the has shaken up traditional business models. For internet-enabled business models as they Delegates Countries Speakers Networking Interactive investment strategies of the country’s internet example, Netflix started out in 1998 as a DVD evolved, moving into e-commerce, online video, Breaks Sessions giants, Baidu, Alibaba and Tencent (BAT), as well mailing service but has since developed an social networking and online-to-offline services. as strategic players such as Dalian Wanda Group online TV and movie streaming platform that According to PwC, China’s entertainment Registration & Sponsorship: and Huayi Brothers. These companies are trying doesn’t rely on cable networks for distribution. and media market – a broad classification that Anil Nathani T: +852 2158 9636 E: [email protected] Enquiry to monetize changes in media consumption – It had more than 74 million subscribers, most ranges from book publishing to out-of-home driven by rising disposable incomes and rapid of them in the US, at the end of last year and advertising to online gaming – was worth $164.8 adoption of handheld devices – by creating is expanding globally. Netflix has also moved billion in 2015, with internet access and internet Co-Sponsor their own industry value chains that run all the upstream, developing content itself or in advertising accounting for 45% of the total. This way from origination to distribution. For PE and partnership with different production studios. share is projected to exceed 50% as the overall VC investors that pick the right points in this “Amazon and Netflix do not yet control the market reaches $242.2 billion by 2019, but Scan this QR code with your Join your peers mobile phone to review the event #avcjindonesia latest updates 9 avcjindonesia.com Number 08 | Volume 29 | March 01 2016 | avcj.com COVER STORY [email protected]

segments such as filmed entertainment and TV “Don’t forget that the quality of content project but in multiple projects. And where the subscriptions and license fees are also likely to is also complemented by computer graphics film slate is global in nature, there are common see rapid growth. and animation technology,” explains Jixun Foo, models on the fund flows. Chinese counterparts managing partner at GGV Capital. “All the movies and investors can then easily lever production BAT attack you’re seeing right now will become more financing with debt. And then there is a brand The BAT have in recent years sought to diversify appealing, thanks to a combination of acting, association financing a foreign studio, as the their businesses, entering new verticals in story-telling and technology.” Chinese partners are forging the strategic order to create more points of contact with Light Chaser Animation Studios, which sees relationship with the whole Hollywood majors,” users and gain a better understanding of itself as “China’s answer to Pixar” is an example says Raine’s Mei. consumption patterns. Leveraging rising demand of this. Set up by Gary Wang and Zhou Yu – who for entertainment is part of this: it enables left their roles as founder and senior executive at The Wanda model companies to engage a younger demographic Tudou following the merger with Youku – it wants Wanda, on the other hand, took a more direct that is increasingly resistant to traditional forms to combine advanced computer processing route. Earlier this year, the conglomerate of advertising and content consumption. technology from the US with China’s cheaper controlled by billionaire Wang Jianlin paid $3.5 Alibaba has launched Tmall Box Office, a operating costs. Yu says the risks are lower for billion for Legendary Entertainment, the studio subscription service along the lines of Netflix, animation than movie production because responsible for the Batman and Jurassic World franchises. It is the first Chinese acquisition of US studio, and also facilitated an exit for several No one believed that the Chinese population private market investors. The rationale for the deal is rooted in Wanda’s would pay for content, but now we are starting origins as a commercial property developer. The company wants to complement its core to see the subscription model being putting in business by entering three other sectors, place – Deborah Mei culture, financial services and e-commerce. The Legendary purchase makes Wanda’s movie production business, which was previously and recently took full ownership of Youku-Tudou, monetization channels are more diversified domestic only, truly global; the same can be an online video platform that has deals in place – from box office revenue, to VR platforms, to said of overseas acquisitions in the cinema chain to stream Hollywood movies, at a valuation of merchandising. GGV led a $20 million Series B space. By essentially adding a front-end services $4.8 billion. It has also created movie studio Ali round for Light Chaser two years ago. component to its existing real estate offering, the Pictures which has production and distribution Lacking the domain expertise to mitigate this company is approaching the media value chain agreements with a string of local TV stations and risk factor in traditional movie production, some from a different angle to the BAT. invested directly in the latest Mission: Impossible private equity investors have targeted foreign “Traditional investors like Wanda are building movie. players that need local partners to assist with their content production capabilities, while the Meanwhile, search giant Baidu has China’s distribution and monetization of their products BAT are enhancing their online operations. It is largest internet video streaming business in iQiyi, in China. natural for companies to focus on areas in which which has about 10 million paid subscribers who The likes of Hony Capital, CMC, FountainVest they are already strong, and a successful business watch more than 1.28 billion hours of content Partners and Fosun International have all model doesn’t need to be simply content-driven every month, and Tencent can use the powerful participated in Sino-US media investments where or channel-driven,” says Laurence IP, executive QQ and WeChat social networking platforms as the value they bring is knowledge and networks director at LKF Capital, a PE arm affiliated to Lan tools for content marketing and distribution. in China. For example, Hony introduced STX Kwai Fong Group. “The bottom line is monetizing “Previously many distribution platforms Entertainment – a greenfield Hollywood venture resources in order to build a sustainable business faced challenges when it came to monetization, it is backing alongside other investors – to Huayi, model.” because they relied on advertising-driven resulting in a three-year partnership that will see With this in mind, Wanda’s interest in the models. No one believed that the Chinese Huayi co-fund, co-produce and co-distribute media value chain extends beyond visual population would pay for content, but now we almost all of STX’s movies through 2017. content. In the past six months, it has bought are starting to see the subscription model being Versions of this co-investment or slate two sport-related assets from overseas PE putting in place,” says Deborah Mei, managing financing model are being pursued by numerous investors: World Triathlon Corporation (WTC), partner at The Raine Group, a financial advisory other Chinese companies. Two weeks ago, the leading global operator of Ironman events, group that has worked on numerous media- China’s Perfect World Pictures agreed to invest was acquired from Partners related transactions. $250 million in 50 films produced by Universal for $650 million; and marketing specialist Infront More tie-ups between digital platforms and Pictures over the next five years. It will receive Sports & Media was picked up from BridgePoint high-quality content providers at home and 25% of the revenues from each release. Hunan Private Equity for $1.19 billion. overseas are inevitable as monetization efforts TV, China’s second-largest broadcaster, signed a CMC has also been active in the segment, gather pace. While it is difficult for venture $1.5 billion slate deal with US-based Lionsgate paying a record $1.3 billion for broadcast rights to capital investors to tap directly into areas like film that will see it underwrite 25% of the production matches in China’s domestic football league and production, they see user-generated content costs of at least 50 movies over the next three then teaming with CITIC Capital among others to platforms, ranging from text format to short-term years in return for a share of the box office. buy a 13% stake in City Football Group, owner of video apps, as a sweet spot. Virtual reality (VR) “The advantage of a slate is it de-risks the Manchester City Football Club and other global technology also has potential. investment: they aren’t investing in a single assets.

10 avcj.com | March 01 2016 | Volume 29 | Number 08 COVER STORY [email protected]

There is a policy angle to these investments. However, for strategic investors looking says GGV’s Foo. “This will drive more media- Culture and entertainment is one of the pillar to redefine markets through landmark deals, related deals over the next 5-10 years. China industries in China’s latest five-year plan, which and for private equity investors targeting needs local content to fit into the taste of local outlines the government’s economic priorities. investment opportunities in these markets, it is consumers and domestic content creation will be Support for the domestic sports was also a consumption-driven game. China’s disposable benefit from learning overseas experiences and the subject of a State Council guideline that income per capita reached RMB21,966 in 2015, production techniques.” envisaged creating an industry worth RMB5 with year-on-year growth consistently in the Establishing a grip on the media value trillion by 2025. Wanda and CMC are not the high single digits. This increasing capacity chain – and maximizing the revenue generated only private sector players to unveil headline- for discretionary consumption translates into by consumers subscribing to content and grabbing deals in this space. stronger demand for services and a greater advertisers that pay to reach those consumers in And as with television and movie production, willingness to pay a premium for quality. new, engaging ways – has therefore never been there is an element of soft power to China’s more important. Private equity strategies vary efforts to bolster sports. Through its investments, A consumer story and certain groups will no doubt find success by CMC wants to improve the standard of domestic Media and entertainment is a logical beneficiary targeting specific niches in the ecosystem. For football, bringing more foreign professionals into of this trend. China box office revenues hit a CMC, though, mobile and internet technology a league that is still weak by global standards, record $6.8 billion last year, up 49% from 2014, area the primary focus, but flexibility is the key. while Wanda is said to be eying a potential according to the State Administration of Press, Much like the strategic players, the firm wants Chinese bid for the football world cup. Publication, Radio, Film and Television. The to leverage consumer activity at multiple points, “When it comes to football, there is a lot of country will soon overtake the US and become from sofa to cinema to amusement park. national pride – success in the world cup would the leading global market by movie ticket sales. “The traditional model won’t go away – be far better than winning table tennis medals Wanda expects sport to follow a similar growth people will still dine out and go to the cinema, at the Olympic Games. China wants to become trajectory. On closing the WTC deal, Wang noted instead of staying home and watching videos a leading global power, not only economically that the US has a population of 300 million and on their iPads. But technology is bringing new but also in knowledge terms. Its ‘soft power’ has a sports industry worth $500 billion per year. In business models to every sector, everywhere, and historically lagged behind developed countries China, annual revenues currently stand at just changing consumer behavior,” says LKF Capital’s such as the US and it is now trying to catch up $10 billion. Ip. “As a result, the media industry will see through support for films and sport,” says Mark “As the economy matures, the pursuit enormous change. Thirty years from now, reading Dreyer, a Shanghai-based sports commentator of ‘spiritual consumption’ will become more the news on an iPad might be considered old- who runs Chinasportsinsider.com. significant. It is similar to the US 50 years ago,” fashioned. Who knows?”

The most widely used online directory for private equity investors in Asia

The Asian Private Equity Online Directory is the most comprehensive online directory on private equity and venture capital in Asia. It is easy to navigate, enabling access to a listing of around 4,200 Asian private equity firms and over 11,000 professionals.

For a free trial, please visit asianfn.com/VCDemo.

To subscribe, call Sally Yip at +(852) 2158 9658 or email [email protected]

For a free trial, please visit asianfn.com/VCDemo. avcj.com FOCUS [email protected] Formula for success Despite the rapid growth of the Chinese pharmaceutical industry, corporate venture capital so far has not built a large presence. Industry participants say this shows the market, though booming, is still immature

PHARMACEUTICAL GIANT ELI LILLY WAS Research’s records show steady growth in overall The dearth of corporate venture arms is looking for a partner to collaborate with on deal value, with a large rise – up to $4.5 billion more confusing in light of the energy of those new cancer treatments for the China market. – last year following a slump to around $500 that are active in the sector. WuXi Healthcare Innovent Biologics – a portfolio company of its million in 2013 and 2014. This has come while the Ventures, the captive investment division of affiliated venture arm, Lilly Asia Ventures (LAV), number of deals has first risen, from 10 in 2005 contract research outsourcing (CRO) giant WuXi that had already been seeking cross-border to 47 in 2008, and then fallen, from 55 in 2010 to PharmaTech, is one notable exception, as is opportunities with a view to marketing its drugs 24 in 2015. The rising investment corresponds to TigerMed, a Hangzhou-based CRO firm. Both outside China – seemed to be the perfect fit. The growth in China’s healthcare sector overall, fueled have made several venture investments, often two firms agreed last March to develop products by rising incomes and reforms. alongside larger dedicated or generalist funds. potentially worth more than $456 million. In A new breed of specialist healthcare- Now an independent affiliate of Eli Lilly, LAV October the deal was expanded to $1 billion. focused funds has emerged to capitalize on also has its roots in the corporate venture world, “It’s a win-win, because from the Lilly this opportunity, including Ally Bridge Group having launched in 2008 as a captive fund before perspective, they need a domestic face, they and HighLight Capital, adding to the efforts spinning out five years ago. Eli Lilly continues need to have local knowhow, and that’s what of existing Sino-US players Vivo Capital and to be a significant LP in its funds, and although Innovent brings to the table,” says Judith Li, OrbiMed Advisors. These GPs seek to invest in investment decisions are made independently, partner at LAV. “But at the same time it has to be entrepreneurs in China’s healthcare space.; local the connection with the former parent offers considerable attraction to potential investees. “They like to take investment from a fund PE investent in inas iotec an ara sector like ours – which has almost a dual branding, 5,000 60 we’re seen as both a pure-play fund and with the backing of a multinational – in order to attach 4,000 50 themselves to a strong international brand,” 3,000 40 says LAV’s Li. “In the long run it helps them with everything from recruiting the right talent, all the 2,000 30 Deals way to selling their drugs.” illion The attraction to a start-up of associating 1,000 20 with a well-known global brand is undeniable, 0 10 as are the benefits for a global player of backing 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 an original idea in a booming economy. Yet No. of deals Amount (US$m) successful multinational companies are so far not ource A esearch significantly involved in China’s pharmaceutical and biotech research sector, beyond M&A deals. GPs who watch the sector identify a few international standard. So that’s where they’re firms also seek opportunities outside China. reasons for this lack of corporate participation in learning from each other.” “On the one hand we’re helping Chinese the start-up world. For one thing, the explosion For Li, Eli Lilly’s collaboration with Innovent companies to globalize their R&D and bring in investment size belies the fact that the space is is a textbook example of the potential for world-class technologies to China,” says Frank Yu, still immature compared with other markets. collaboration between a start-up and an founder and CEO of Ally Bridge. “At the same time “It is changing a little bit, we see more and established industry figure. It also demonstrates we invest in global companies, especially US and more Asian participation,” says Dr. Karen Liu, a the benefits a corporate player can derive with European technology companies, to help them founding partner of 3E Bioventures. “But what is an affiliated outpost in a key developing market. accelerate their entry into China.” often stressed is that it takes industry experience However, funds like LAV are rare in China’s and industry accumulation. For start-ups and healthcare investment sector. Despite a boom in Notable absence entrepreneurs, I won’t invest in someone who is investment opportunities for pharmaceutical and Due to the key role that corporate venture funds fresh out of school with no relevant background biotech companies, participation by corporate have played in other developing sectors in China, or experience.” venture entities, both captive and independent, most notably the technology, media and telecom In addition, Chinese companies have yet to continues to be low. Hopeful corporate players space, one might expect them to be prominent build up a strong track record of innovation. may need to wait while the market matures. in healthcare as well. However, industry players Outsourcing models like CRO and contract The past decade has seen a concentration say there has been little notable activity of this manufacturing outsourcing (CMO) are still more of PE and VC investment in biotech and kind, even from multinational pharmaceutical common than genuinely innovative research. pharmaceutical development in China. AVCJ players that have been active in other markets. Though some investors feel that this situation is

12 avcj.com | March 01 2016 | Volume 29 | Number 08 FOCUS [email protected]

changing, currently too few companies are doing GPs express little surprise that corporate VC does “This is a phenomenon that’s becoming more research that a larger firm would want to invest not make up a larger part of the ecosystem. prevalent, which is that global companies seek in, rather than acquiring the company outright. However, the activity that does occur is viewed help from someone like WuXi to get into China.” The immaturity of the market also means positively. TigerMed and WuXi are seen as Corporate investors can also be useful for that there has been little chance for homegrown offering local expertise while following an conventional GPs, which may see portfolio corporate venture investing to take off. Most international standard; several GPs have invested companies as candidates for future investment. Chinese entrepreneurs so far lack the experience alongside them. However, industry participants point out that the the corporate parent, which might be thinking in strategic rather than financial terms, could What is often stressed is that it takes industry influence a captive fund’s investment decisions. experience and industry accumulation. For start- Changing times Though China’s healthcare sector may not be ups and entrepreneurs, I won’t invest in someone developed enough yet to attract corporate who is fresh out of school with no relevant venture investors, some GPs feel this is likely to change. The first specialist healthcare funds are background or experience – Karen Liu less than a decade old, and need time to build up a healthy market with expertise beyond outsourcing. In this light it is understandable that and capital to be able to invest on their own. Ally Bridge, which participated in the overseas corporate funds are still reluctant to dip “In other countries, you may have people who privatization deal for WuXi Pharmatech, later their toes in the water. have been successful in building one business invested with WuXi Healthcare Ventures in San “I think they’re still trying to learn about and taking it to IPO, and then come back to do Diego molecular diagnostic company AltheaDX. collaboration, and what is the best model for another start-up. But in China you don’t have that Yu believes that Chinese corporate partners will them to expand their reach into China, and then cycle yet,” says Jenny Yao, the head of healthcare be more attractive as China’s market grows. whether or not it takes too long for this particular at KPMG. “And even the first round of people are “WuXi has a lot of China knowhow, and, at the collaboration to grow into something that’s still kind of testing the roads to see whether they same time, they play by global rules and operate significant,” says Nisa Leung, a managing partner can be successful.” on world-class standards, so they are trusted by at Qiming Venture Partners, which has invested In light of these limitations, China-focused Chinese and international partners alike,” says Yu. both in and alongside TigerMed.

Wider reach to everyone in your organisation

avcj.com site licence allows everyone in your organisation to have instant access to in-depth analysis, real-time news and information on private equity in Asia and beyond. Sign up for an avcj.com site licence now and empower your team with critical information and data to soar above your competitors in Asian private equity.

How does it work? We will arrange online access for your employees to avcj.com, either with individual passwords or by general access through IP address recognition.

How much does it cost That depends on how much access you want, but we can customise cost-effective packages to all firms, regardless of size. For more information, contact Sally Yip at +(852) 2158 9658 or email [email protected]..

avcj.com Building funds in China for 25 Years 25年来竭诚协助中国基金管理人创设基金

© 2016 Cooley LLP, IFC - Tower 2, Level 35, Unit 3510, 8 Century Avenue, Pudong New Area, Shanghai, 200120, China +86 21 6030 0600 ANALYSIS [email protected] Strategic rationale Building funds in Chinese outbound investment in advanced technology assets is soaring, but the patchy nature of deal flow underlines the gulf in class between those that aspire to do deals and those that get them done

China for 25 Years WHEN CITIC CAPITAL INVESTED IN more than doubled year-on-year to $14.9 For those seeking technology, the Mittelstand Stackpole International and Henniges billion. In the first two months of 2016 alone, – small and mid-size German, Swiss and Austrian Automotive Holdings, it was not expecting exits investment stands at $49.1 billion, although one companies – is a rich hunting ground. But to Chinese strategic players. The PE firm’s typical of the 15 deals announced accounts for more ChemChina and Weichai are exceptions to the 25年来竭诚协助中国基金管理人创设基金 approach for international deals has been to than 90% of the total: the proposed acquisition rule in corporate China: strategic investors with identify an asset with an underexploited China of Switzerland’s Syngenta by China National the talent to close cross-border deals. Others are angle and then team up with a US-based GP Chemical Corporation (ChemChina), corporate not as far along the curve. to make the acquisition. If everything went China’s largest-ever outbound deal. In Germany particularly, Chinese appetite for according to plan, the asset would be sold to a “Clearly the government is encouraging Mittelstand exposure is not as enthusiastically multinational keen to boost its China exposure. the transformation of Chinese manufacturing reciprocated by the companies themselves. Then last August, Canadian auto parts from labor intensive to more high-value-added Alberto Forchielli, managing partner at Mandarin supplier Stackpole – acquired two years earlier through the acquisition of overseas advanced Capital Partners, which has participated in in conjunction with Crestview Partners – was technology companies. And because of this numerous Europe-based deals with a China acquired by Hong Kong-listed Johnson Electric. support, companies have access to financing, angle, observes that the German M&A market is The following month majority shareholder with a lot of outbound transactions supported by expensive and highly competitive. This is largely Littlejohn & Co. and CITIC sold Henniges to a joint Chinese banks,” says John Gu, a partner at KPMG. because family owners are not willing sellers. venture between Aviation Industry Corporation “A third factor is currency. The consensus view is It is a view echoed by several industry of China (AVIC) and BHR Partners, a Chinese PE that the renminbi may devalue over time and so participants, with the addendum that when firm that targets cross-border transactions. it might make sense to buy a company while the assets do become available prospective Chinese “We did these deals in 2011 and 2012 and currency is still strong.” buyers rarely prevail in competitive situations. we didn’t really start seeing Chinese strategics The Syngenta deal says everything about Longstanding obstacles such as a reluctance to going overseas until 2014 and 2015, so that kind these cross-border ambitions. A global leader participate in auction processes – due to fears of exit was not something we underwrote on going in,” says Boon Chew, a senior managing director at CITIC Capital Partners. “But if you If you buy a company and half the engineers, look at the cross-border deals we’ve done, we self-select ourselves into businesses that have floor managers and manufacturing leaders leave, the technology, knowhow and footprint to be that’s a problem – you just have blueprints and relevant to the Chinese market. Chinese strategic investors are looking for the same things.” you have to figure out how it is done – Waikay Eik Given the surge in Chinese M&A globally, the changing identity of the likely buyers for CITIC- backed businesses comes as little surprise. At the in agribusiness with $15.1 billion in revenues in that deals will become too expensive – and same time, these transactions say much about 2014, half of which came from emerging markets, an inability to make quick decisions if they do how private equity can tap into this trend as a it is the stuff of dreams to Chinese corporates: participate have yet to be overcome. Many partner for companies going overseas – two of rich in technology and knowhow that can be Chinese companies also fail to communicate the bidders for Henniges were Chinese strategics used to offset the impact of slowing domestic effectively with their targets. with PE co-investors – and as a seller to them. economic growth by carving out a defensible “There is a gap between what they are and sustainable market position. However, the looking for and what the owners of the European A rising tide transaction also underlines the gulf in ability companies are looking for,” says one transaction Outbound M&A by Chinese companies reached between best in class and rest of the class in advisor with experience in China and Germany. $99.2 billion last year, with 313 deals announced, outbound M&A. “A Chinese group might be more interested in close to twice the volume seen in 2013 on both Shortly before the Syngenta deal, ChemChina capital arrangements where they can arbitrage counts, according to Mergermarket. Already this teamed up with Guoxin International the difference in P/E (price-to-earnings) ratios year, 49 transactions have been agreed worth a Investment Corp. and AGIC Capital to acquire between the target and the Chinese stock combined $69.6 billion, higher than the full-year KraussMaffei Group, a Germany-based machinery market. It is difficult to make these approaches figure for 2014 with 10 months still to go. manufacturer, for EUR925 million ($1.01 billion). work because there is a misalignment of interest.” The industrial sector is playing an increasingly It was at the time the largest direct Chinese significant role in this deal flow. A total of 71 investment in Europe, topping the EUR738 Value-add opportunity transactions were announced in 2015, up from million Weichai Group paid for a stake in forklift Successful investments in mid-market family- 51 the previous year, and the capital committed truck maker Kion in 2012. owned Mittelstand businesses tend to emphasize

© 2016 Cooley LLP, IFC - Tower 2, Level 35, Unit 3510, 8 Century Avenue, Pudong New Area, Shanghai, 200120, China +86 21 6030 0600 Number 08 | Volume 29 | March 01 2016 | avcj.com 15 As one of China’s most premier full-service law firms, Han Kun has placed itself at the forefront of the legal profession in China by specializing in cross-border and domestic transactions, and is particularly well-known in areas such as investment funds/asset management, private equity/venture capital, , technology, media and telecommunications (TMT), healthcare, competition law, and capital markets, among others. Han Kun has been consistently ranked as a Tier 1 PRC law firm in the areas of private equity, mergers and acquisitions, Investment Funds, TMT and Healthcare by authoritative international legal rankings, such as Chambers and Partners, Legal 500, ALB, Euromoney and the Asian-Mena Counsel. Han Kun employs more than 150 lawyers at our four offices, strategically located in each of China’s major commercial centers, Beijing, Shang- hai, Shenzhen and Hong Kong. Our lawyers come from a variety of educational and professional backgrounds. Most of our lawyers have worked with other first tier PRC and international law firms or multinational corporations.

汉坤律师事务所（“汉坤”）为中国最领先的综合性律师事务所之一，专注于跨境和境内交易，始终处于中国律师行业的 最前沿。汉坤尤其以投资基金/资产管理、私募股权/风险投资、并收购、电信、媒体和科技（TMT）、医疗、竞争法以及 资本市场领域的法律服务著称。汉坤连年被国际权威法律媒体钱伯斯、legal 500、ALB、Euromoney和Asian-Mena Counsel等评为亚太区投资基金、私募股权/创业投资、并购、TMT及医疗等领域的顶级中国律所。汉坤目前拥有超过150 名律师，分布于中国几个主要商业中心城市，北京、上海、深圳和香港。汉坤的律师拥有不同的学历背景和工作经验，他 们中的大部分曾在国内和国际一流的律师事务所或跨国公司工作过。

北京 上海 深圳 香港

中国北京市东长安街1号 中国上海市静安区南京西路1266号 中国广东省深圳市福田区中心四路1-1号 东方广场办公楼C1座906室 恒隆广场一期5709室 嘉里建设广场第三座21层03室 香港中环夏悫道10号和记大厦 邮编：100738 邮编：200040 邮编：518048 20楼2001-02室 电话：(86 10) 8525 5500 电话：(86 21) 6080 0909 电话：(86 755) 3680 6500 电话：00852 2820 5600 传真：(86 10) 8525 5511 / 5522 传真：(86 21) 6080 0999 传真：(86 755) 3680 6599 传真：00852 2820 5611 Email：[email protected] Email：[email protected] Email：[email protected] Email：[email protected]

www.hankunlaw.com ANALYSIS [email protected]

the strategic angle – starting as minority interests, Higher value components continue to be As such, prior to working with a Chinese building trust and creating a longer alignment manufactured in Europe, or manufacturing is corporate on an outbound deal, a private equity between investor and investee. While Chinese transferred from China to Europe, where greater firm might carry out as much due diligence on groups increasingly appreciate these nuances, it productivity offsets a heavier wage burden. its partner as on the potential target. For some, As one of China’s most premier full-service law has yet to manifest in substantial deal flow. Meanwhile, all the lower value manufacturing these arrangements remain a challenge despite firms, Han Kun has placed itself at the forefront of For AGIC, which stands for Asia-Germany is relocated to China, taking advantage of progress made in recent years. CITIC has yet to the legal profession in China by specializing in Industrial Promotion Capital, helping Chinese economies of scale and relatively lower costs. do this and Chew says it would be considered on companies get transactions over the line Throughout this process, people are moving two conditions: the partner must be well known cross-border and domestic transactions, and is justifies a dedicated fund. The GP is targeting $1 back and forth: Chinese managers will spend at and trusted by the GP; and the asset should offer particularly well-known in areas such as investment billion and reached a first close of $550 million least six months in Europe learning the processes, strong strategic value, with clear synergies. funds/asset management, private equity/venture last October with China International Capital then European engineers will come to China Mandarin Capital has worked with Zoomlion capital, mergers and acquisitions, technology, Corporation (CIC) as an anchor investor. to ensure the substance of the lessons is being Heavy Industry Science & Technology on a few media and telecommunications (TMT), healthcare, “A lot of Chinese companies are interested applied. People are the key to these synergies. deals but Forchielli says partnerships are rare. “It competition law, and capital markets, among in going to Germany but it’s not easy,” Henry “The value is often deeply embedded in the slows us down,” he explains. “Co-investment with Cai, chairman of AGIC, told AVCJ after the systems but behind that it is all about people. Chinese groups is burdensome. They say, ‘We can others. Han Kun has been consistently ranked as a KraussMaffei deal closed. “First, there is a different Tier 1 PRC law firm in the areas of private equity, culture and investment philosophy. Then you hi outoud idustri sector s oer mergers and acquisitions, Investment Funds, TMT have to deal with German companies’ concerns and Healthcare by authoritative international legal about patent protection and whether the 100,000 350 Chinese investor is going to shut all the plants rankings, such as Chambers and Partners, Legal 300 in Germany. We know how to get access in 80,000 500, ALB, Euromoney and the Asian-Mena Counsel. Germany, this is unique knowhow and IP.” 250 Han Kun employs more than 150 lawyers at our The fund will focus on companies specializing 60,000 four offices, strategically located in each of 200 in intelligent production and automation, es 40,000 China’s major commercial centers, Beijing, Shang- medical equipment and healthcare technologies, miio 150 hai, Shenzhen and Hong Kong. Our lawyers come and high-end systems and components. Check 20,000 100 from a variety of educational and professional sizes, for minority and control positions, will be in the $20-100 million range, suggesting AGIC will 0 backgrounds. Most of our lawyers have worked 0 spend most of its time with smaller groups than 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD with other first tier PRC and international law firms ChemChina on smaller deals than KraussMaffei. Industrials - no. of deals Industrials (US$m) or multinational corporations. BHR sees itself playing a similar role, as do Total - no. of deals Total (US$m) numerous other middle-market private equity ource ereraret firms in China. However, their value-add is not necessarily limited to sourcing and execution. Post-deal integration is the area in which If you buy a company and half the engineers, come in,’ but then the torture starts. You have to 汉坤律师事务所（“汉坤”）为中国最领先的综合性律师事务所之一，专注于跨境和境内交易，始终处于中国律师行业的 previous acquisitions have often gone awry. “It floor managers and manufacturing leaders leave, deal with people at the top and further down 最前沿。汉坤尤其以投资基金/资产管理、私募股权/风险投资、并收购、电信、媒体和科技（TMT）、医疗、竞争法以及 is tempting to think that moving up the value that’s a problem – you just have blueprints and explaining everything 10 times. In 2008 it would chain simply means acquiring technology, but so you have to figure out how it is done,” says Eik. take five meetings and five conference calls. Now 资本市场领域的法律服务著称。汉坤连年被国际权威法律媒体钱伯斯、legal 500、ALB、Euromoney和Asian-Mena many things need to happen within a company’s “Quality is all about that intangible element, it is down to four meetings and four conference Counsel等评为亚太区投资基金、私募股权/创业投资、并购、TMT及医疗等领域的顶级中国律所。汉坤目前拥有超过150 manufacturing ecosystem for technology to be how you select suppliers, decide how much calls; it is not one and one.” 名律师，分布于中国几个主要商业中心城市，北京、上海、深圳和香港。汉坤的律师拥有不同的学历背景和工作经验，他 adopted effectively,” says CITIC’s Chew. refinement you want, and how much testing Although pursuing deals independently When switching in an automated process should be done. It is in culture and knowhow.” and exiting to a Chinese strategic can be just as 们中的大部分曾在国内和国际一流的律师事务所或跨国公司工作过。 for one guided by the human hand, the margin Private equity firms can help instill the painful, several GPs have done so successfully for error is very small. Successful integration is required discipline. As investors sitting in with industrial businesses. Stackpole and contingent on having engineers and line workers between strategic players they are positioned to Henniges are not isolated incidents – if an asset who can operate the machinery, as well as identify paths through bureaucratic and political has achieved significant enough scale, it might upstream suppliers and downstream customers chaos. This may involve maintaining stability by fall within the scope of the country’s more who operate at an equally high level so the costs convincing each party of the other’s merits. sophisticated outbound investors. Germany is saved or value created through automation is not once again a reference point. lost elsewhere in the chain. A process that works Weichai bought its stake in Kion from KKR 北京 上海 深圳 香港 The other side in Germany might not be as effective in China Equally, they may see integration opportunities and Goldman Sachs, while the ChemChina because there is a different mindset. that cannot be realized within a private equity consortium bought KrassMaffei from Onex Corp, 中国北京市东长安街1号 中国上海市静安区南京西路1266号 中国广东省深圳市福田区中心四路1-1号 In some industries, integration patterns are holding period. “It’s nice to think that new the investment group that prevailed over an 东方广场办公楼C1座906室 恒隆广场一期5709室 嘉里建设广场第三座21层03室 香港中环夏悫道10号和记大厦 well established. Waikay Eik, partner and head technology will bring a paradigm shift in how unnamed Chinese player when purchasing the 邮编：100738 邮编：200040 邮编：518048 20楼2001-02室 of the deal value and M&A integration practice these companies operate, but it will probably not asset – from another PE owner – nearly four years 电话：(86 10) 8525 5500 电话：(86 21) 6080 0909 电话：(86 755) 3680 6500 电话：00852 2820 5600 for Greater China at PwC, describes starting with happen so quickly,” says CITIC’s Chew. “You are earlier. And when, a few weeks later, the mantle 传真：(86 10) 8525 5511 / 5522 传真：(86 21) 6080 0999 传真：(86 755) 3680 6599 传真：00852 2820 5611 careful analysis of where the Chinese company’s waiting for an ecosystem to catch up and there is of China’s largest direct investment in Germany Email：[email protected] Email：[email protected] Email：[email protected] Email：[email protected] technology trails the European counterpart, with nothing a private equity firm can do about that. changed hands again, as Beijing Enterprises particular emphasis on different functions in All you can do is identify which sectors are at an Holding agreed to buy EEW Energy from Waste, terms of productivity and cost. inflection point and which are not.” the seller was EQT Partners. www.hankunlaw.com

Number 08 | Volume 29 | March 01 2016 | avcj.com 17 STRONG IDEAS NEED STRONG GLOBAL PARTNERS TO UNLEASH THEIR POTENTIAL.

GE Ventures provides small businesses, startups, and entrepreneurs with access to its global network of business units, partners and customers, and to its world-class training resources. All working to identify, scale and accelerate ideas that can advance industries and improve lives. Learn more at geventures.com. Imagination at work. JONATHAN LI & XIN WANG | INDUSTRY Q&A [email protected]

STRONG IDEAS NEED STRONG GLOBAL Crest of a wave PARTNERS TO UNLEASH THEIR POTENTIAL. BHR Partners was set up as an extension of Bohai Industrial Investment Fund to support Chinese companies going overseas. CEO Jonathan Li and Managing Partner Xin Wang explain the strategy GE Ventures provides small businesses, startups, and entrepreneurs with access to its global network of business units, partners and customers, and to its world-class training Q: Bohai Industrial Investment Q: There are two main WANG: A lot of it is optics as well. Q: Where do investments in resources. All working to identify, scale and accelerate ideas that can advance industries Fund (Bohai Capital) has been investment angles – cross- Just by virtue of being an SOE internet-related companies and improve lives. in existence for 10 years. How border and state-owned there is the perception that like Didi Kuaidi and Tuniu did BHR come together? enterprise (SOE) reform. What there will be some cross-cultural come in? Learn more at geventures.com. JONATHAN LI: I became the CEO led to the introduction of the issues. Having us and our global WANG: We have two key themes in Bohai Capital in 2009 and latter angle? resources there to serve as a and of the $1.75 billion we Imagination at work. conceived the idea for BHR two LI: BHR was originally set up solely years later. It took almost three for cross-border investment, years to get it set up. I wanted but then the Sinopec Marketing diversified ownership, including transaction came along. I both Chinese and foreign approached them as Bohai but partners, to make the firm more they advised me to use BHR; international. On the foreign in their eyes BHR represents a side, I spent two years talking to mixture of private enterprise large financial institutions before and SOE – the kind of mixed- we ended up with RST, which ownership structure advocated includes Rosemont, a boutique by the government’s reform real estate and TMT PE firm, and initiatives. Given that BHR was Jonathan Li Xin Wang Thornton Advisory, a US advisory not designated for SOE reform, firm specializing in Sino-US we set up a special vehicle for conduit can facilitate the deal. have invested, 60% has been in relations. On the Chinese side, that deal. We feel the strategy cross-border and 30% in SOE along with the Bohai lineage, we makes a lot of sense and so we Q: To what extent is Henniges reform. The remaining 10% is in lined up a subsidiary of Harvest are looking at new transactions typical of the sectors BHR is a third bucket, which operates Fund as our second partner. As from the same angle. targeting? more on an opportunistic basis one of the largest mutual fund LI: Industrial technology is one for growth-stage investments companies here, Harvest is able Q: So there doesn’t have to be a area we are interested in. We in the likes of Didi Kuaidi. We to reach industrial players in cross-border element to SOE want companies with good look to do more of these deals China. Meanwhile, Bohai itself investments? technology and a strong this year. China’s consumption has connections with large WANG: Not necessarily, but we international sales network and mentality is changing away from Chinese financial institutions. do try to cross-fertilize our management team. Working product-based to experience- different investment units. with strategic partners, we can based consumption. Didi Kuaidi Q: How do you feel the firm is For example, as we invest in help them tap China’s market enhances an experience that differentiated from other PE SOEs with private capital we facilitates everyday life. investors looking at cross- envisage opportunities to work Q: You set up dedicated funds for border opportunities? with companies in overseas the Sinopec Marketing and Q: Are valuations a concern in XIN WANG: As early birds in cross- endeavors. Henniges investments. Is this these investments and do you border M&A, we have first-mover LI: Henniges [an automotive BHR’s standard approach? get downside protection? advantage. In addition, BHR equipment manufacturer WANG: As of the end of 2015 we LI: Downside protection is not an offers the best of the Chinese acquired last year] is our typical have achieved aggregate assets imperative, as we focus on the private equity world and the business model. We set up a under management of $1.75 fundamentals of the target. Western private equity world. joint venture with AVIC for the billion, much of which has been Neither is valuation the biggest Bohai Capital has a state-owned acquisition. AVIC has industry invested through dedicated concern – we focus more on the background, with Bank of China experience, operates in China, funds. We also operate blind target’s potential for growth and and China Development Bank and knew Henniges well. As pool funds but find that, for large synergies with Chinese strategic Capital, and then we have a a financial investor, we use transactions, dedicated deal partners. However, we do ask global network. The combination our international network and funds allow flexibility in funding, for downside protection, and of Sino-US ownership, a professionalism. AVIC has done execution and exit strategies. depending on the investment diversified, market-oriented team international acquisitions, but One of the key objectives for we may or may not get it. If there and global resources brings some Chinese companies don’t 2016 is to diversify our LP base. is no downside protection and multiple dimensions to our have that experience and may We are hoping to build a US and we like the company then we decision making. appreciate what we offer. a European fund this year. will still invest.

Number 08 | Volume 29 | March 01 2016 | avcj.com 19 FOCUS [email protected] Operation good guys The rapid growth of online finance technology has turned China into a hotbed for illegal fundraising, with local PE fund managers drawn into the mess. Can new regulation restore investor confidence?

IT TOOK JUST 18 MONTHS OF AGGRESSIVE “The regulators studied US and European The scale of illegal activity and resultant advertising for Ezubao to emerge as one of regulatory models before coming out with these public outcry alerted regulators to the problem. China’s largest peer-to-peer (P2P) lending new rules,” says James Wang, a partner in the Last year, the State Council set up a special platforms. The company, which claimed to match investment funds group at Han Kun Law Office. committee and called upon local governments investors with potential borrowers, promised “They are trying to distinguish the good guys to investigate illegal fundraising activities, annual returns of up to 14%, well beyond the from the bad guys, and drive the bad guys out of particularly those involving online investment rates offered by traditional banks. It facilitated the industry.” products. In Beijing, the authorities responded by RMB70 billion ($11 billion) worth of transactions suspending domestic PE investment registration. between July 2014 and December 2015. Trigger point Any proposals that included wording such But the sums didn’t add up. Ezubao was a Over the course of 2014 and 2015, online lending as project investment, equity investment, Ponzi scheme: instead of distributing returns proliferated in China. As of the end of last year, investment management and financial leasing from revenue from real projects, it paid existing about 2,600 P2P lending platforms were in were banned. Local authorities in Shenzhen, investors with money deposited by new ones. operations, up from 1,600 in 2014, according Shanghai and Tianjin followed suit. Then in January, the China Security Regulatory Commission (CSRC) announced that hi remii udrisi at least 27 private fund managers would be fined 40,000 300 or placed under administrative supervision due to suspected violations. They included high- 250 30,000 profile names such as Shanghai Gopher Asset 200 Management and China Science & Merchants 20,000 Investment Management Group (CSC Group). 150 uds AMAC has since followed up by saying it will miio 10,000 revoke the registrations of new private fund 100 firms – including private equity, venture capital 0 50 and hedge funds – if they fail to launch a product 2010 2011 2012 2013 2014 2015 within six months of registration. Those that have No. of funds Amount (US$m) been registered for more than one year must ource A esearch issue new products by May 1, while those with under one year’s tenure have until August 1. AMAC replaced the National Development About 95% of borrowers were fictional, Xinhua to industry tracker Online Lending House. Total and Regulatory Commission (NDRC) as the News Agency reported after the arrest of outstanding loans came to RMB439 billion in registration agency for domestic private equity Ezubao’s founder. Over 900,000 investors lost an 2015, compared to RMB104 billion in 2014 and managers in January 2014. It does not require estimated RMB50 billion ($7.8 billion), potentially RMB26.8 billion in 2013. managers to hold a license in order to set up a the biggest financial fraud in China’s history. Many of these platforms serve a positive private fund, but registration is compulsory. Despite its scale, Ezubao represented only purpose, connecting lenders to small and As of the end of January, there were 25,841 a small portion of the fraud perpetrated in the medium-sized enterprises, many of which cannot private fund firms registered with AMAC. However, booming but unruly online finance industry. The get funding from traditional banks. But several more than two thirds had no real fund investment malfeasance extends to private equity, with a have been the cause of sizeable scandals, as in operations. Rather, they were operating on the large number of local managers recently exposed the case of Fanya Metals Exchange. wrong side of the law – in , for engaging in illegal fundraising activity online. “As China’s economy slows, investors can no P2P lending, , private lending and Deceit is hardly a new phenomenon in longer generate good returns from traditional providing loan guarantees. AMAC certification is this field, but the extent to which managers investment channels. They become opportunistic often used to inflate these firms’ credibility and used the internet to run small-scale scams and so they are drawn to online finance mislead investors. As such, the association will is unprecedented. The Asset Management platforms that promise much higher returns. no longer issue registration certificates for new Association of China (AMAC) – an industry body Some domestic fund managers have entered entrants. Its ultimate goal is to reduce the number set up by the Chinese securities regulator – this space by packaging private equity funds as of registered private fund managers. responded with predictable force: registration wealth management products and raising capital “AMAC is very clear on what it wants to requirements for private fund managers have from public investors. They are taking advantage supervise. Firstly, it removed P2P and other online been tightened up and tougher fundraising rules of regulatory loopholes,” says Raymond Wang, finance activities from its scope of supervision, are set to follow. managing partner at law firm Anli Partners. because they are irrelevant to private equity.

20 avcj.com | March 01 2016 | Volume 29 | Number 08 FOCUS [email protected]

It wants to get rid of those ‘shell company’ CEO at Principle Capital. opportunities are growing much faster than registrations. Once they are de-registered, fund The next step involves issuing new those offshore, in part driven by increased managers can re-register with AMAC again fundraising rules – currently in the consultation anticipation for A-share listings. At the same provided they comply with the rules,” says Ning phrase – that address information disclosures time, there is a deepening pool of institutional Zhang, a Beijing-based partner at Orrick. and fundraising reporting on an ongoing basis. investors, such as pension funds and insurance Zhang adds that the purpose of new In addition, managers will only be able to use companies, looking to deploy capital in the asset regulations is to improve the quality of industry qualified distributors to raise private equity funds, class. These LPs are essential to the long-term practices, rather than add pressure to business operations. Indeed, AMAC now requires senior executives employed by investment fund firms – Once they are de-registered, fund managers including legal representatives, general managers and risk control managers – to take a written can re-register with AMAC again provided they exam to qualify for registration. comply with the rules – Ning Zhang The longer view The crackdown will make life harder for first-time which lead to higher to higher fundraising costs. sustainability of the class and regulators want to renminbi-denominated fund managers that have “At present the threshold for setting up a keep unsophisticated retail investors out. already registered with AMAC, because they wealth management firm to distribute private Han Kun’s Wang compares the situation in must launch their funds before the deadline, but equity products is very low. The regulators want China now with the tighter regulation introduced industry participants are generally supportive. to change that. Under the proposed rules, almost in the US and Europe after the global financial “There is an urgent need to regulate the 70% of distributors will not qualify because they crisis. However, the comparison works only up industry because it’s in a state of chaos. Everyone aren’t licensed by the CSRC,” says Sandra Lu, a to a point. “The investing public remains very nowadays could claim to be a private equity fund partner Llinkslaw. “Some industry participants unsophisticated and can easily fall victim to manager in order to raise capital. They launch have strong opinions on the proposed change, unscrupulous managers. There are only a small massive marketing campaigns and pay pop stars because it raises the bar for private fundraising to number of sophisticated institutional investors, to mislead ordinary people – who believe in the a standard applicable to retail fund distribution, which is very different from the US where registration certificate and so invest. The new which is not often seen globally.” individual investors invest in private equity rules will reduce unnecessary competition and Nevertheless, overall renminbi fundraising is through funds of funds or other institutional benefit established managers,” says Lin-Lin Zhou, not expected to slowdown. Domestic investment investors rather than in their own capacity.”

Reliable intelligence on Asian private equity? AVCJ is your solution

The AVCJ Private Equity & Venture Capital Reports offer an in-depth view of private equity and venture capital activity in Asia Pacific, as well as, in major countries and regions including Australasia, China, India, North Asia and Southeast Asia. These reports are used by the leading private equity firms in Asia and across the globe. Australasia 2015 AVCJ private equity and venture capital report

11th annual edition

Each AVCJ Report includes the latest statistics and analysis, delivering insights on investments,AVCJ Group Ltd. Unit 1401-03, Devon House, Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong Tel: (852) 3411-4900 Fax: (852) 3411-4999 capital raising, sector-specific activity. The reports also feature information on relevant leadingEmail: [email protected] Website: avcj.com companies and business transactions. Learn more at asianfn.com/journal_regionalreports.aspx.

For more information, please contact Sally Yip at +(852) 2158 9658 or email [email protected]. China 2015 AVCJ private equity and venture capital report

11th annual edition

AVCJ Group Ltd. AVCJ - your Asian private equity information source. Unit 1401-03, Devon House, Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong Tel: (852) 3411-4900 Fax: (852) 3411-4999 Email: [email protected] Website: avcj.com

Southeast North Asia Asian Private Equity and Asia 2015 2015 India 2015 Venture Capital Review AVCJ private equity and venture capital report AVCJ private equity and venture capital report AVCJ private equity and venture capital report 2015

11th annual edition 11th annual edition 11th annual edition 11th annual edition

AVCJ Group Ltd. AVCJ Group Ltd. AVCJ Group Ltd. AVCJ Group Ltd. Unit 1401-03, Devon House, Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong Unit 1401-03, Devon House, Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong Unit 1401-03, Devon House, Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong Unit 1401-03, Devon House, Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong Tel: (852) 3411-4900 Fax: (852) 3411-4999 Tel: (852) 3411-4900 Fax: (852) 3411-4999 Tel: (852) 3411-4900 Fax: (852) 3411-4999 Tel: (852) 3411-4900 Fax: (852) 3411-4999 avcj.com Email: [email protected] Website: avcj.com Email: [email protected] Website: avcj.com Email: [email protected] Website: avcj.com Email: [email protected] Website: avcj.com The place for private equity

Guernsey is a premier private equity location with more than 50 years’ experience of servicing private and corporate clients from around the world:

• Access to European capital markets: LSE listings global leader • International promoters and LPs • AIFMD solutions: dual regulatory regime • Global cross-border distribution • Innovative asset classes • Fast track regulatory approval capability

T: +44 (0) 1481 720071 E: [email protected] guernseyfinance.com PRIVATE EQUITY DATA FILE | AVCJ RESEARCH The place for private equity [email protected]

PRIVATE EQUITY IN CHINA

China (PRC) Guernsey is a premier private Year No of Deals Amount (US$m.) equity location with more than 2006 513 10,847.4

50 years’ experience of servicing 2007 807 16,500.1 private and corporate clients 2008 680 16,707.4 from around the world: 2009 556 15,761.2 2010 965 27,475.1

2011 1,110 34,055.4 • Access to European capital markets: 2012 818 27,277.3 LSE listings global leader 2013 878 21,271.3 2014 1,030 39,209.6

• International promoters and LPs 2015 1,071 64,192.5 • AIFMD solutions: dual regulatory regime TOP FIVE PE INVESTMENTS IN CHINA IN 2015 • Global cross-border distribution Qihoo 360 Technology Co. Ltd. (Qihoo. A PE consortium led by Management members of Qihoo 360 Technology Co. Ltd. $7,140mln Innovative asset classes com/360.cn) • Country China Deal Brief Sector Information technology NASDAQ listed Qihoo 360 Technology has received a non-binding offer from a consortium consisting of chairman Hong-yi Zhou, CITIC Securities, Golden Brick Capital Private Equity Fund I, China Renaissance and Sequoia Capital China I, to acquire • Fast track regulatory Founded 2005 all of the outstanding not owned by the consortium for $51.3 per ordinary share, at $77 per ADS. Based on the 185.1 million approval capability Date June 2015 shares issued, the offer would values the company’s equity as a whole at approximately $9.5 billion. Later in December 18, 2015, with a few new investors joining, the consortium has entered into a definitive agreement that values the company at $9.3 billion, inclusive the redemption of approximately $1.6 billion of debt. Based on the latest filing, the founders and affiliated group hold a 27.5% target interest as of Dec 18, 2015.

China Internet Plus Holding Ltd A PE consortium led by Tencent Holdings Ltd. $3,300mln (Meituan-Dianping) Country China Deal Brief Sector Information technology China Internet Plus Holding, a newly founded JV followed by Meituan and Dianping merger, has raised a funding round of $2.8 billion for approximately 15.6% stake. An undisclosed internet giant has committed $1 billion, DST has committed Founded 2015 $350 million, Sequoia $150 million; CICC, Capital Today and other undisclosed investors $1.3 billion. Dated Jan 19 2016, Date Dec 2015 the deal is co-led by Tencent, DST and Trust Bridge, with participation from China Development Bank Capital, Capital Today, Temasek, Baillie Gifford and CPPIB.

WuXi PharmaTech Co., Ltd. (WuXi A PE consortium led by Management members of WuXi PharmaTech $3,119mln AppTec) Country China Deal Brief WuXi PharmaTech, also known as WuXi AppTec, has completed a MBO lead by chairman Ge Li and funds, including Boyu Sector Medical Capital, Hillhouse, Ping An Life, Temasek, Ally Bridge, Yunfeng Capital, Sequoia Capital, Legend Capital, and an investment Founded 2000 entity connected to Shanghai Pudong Development Bank. On the date of announcement, the buyer parties in aggregate Date Aug 2015 hold about 4.6% stake in the company, which was valued at approximately $3.3 billion with a $46 per ADS.

Momo Inc. (Beijing Momo Technology Matrix Partners China $3,029mln Co.,Ltd.) Country China Deal Brief Momo, a mobile social networking platform in China, has received a non-binding going private offer from a consortium Sector Computer Related consisting of CEO Yan Tang and Matrix Partners, Sequoia and Huatai Ruilian Fund. The offer is priced at $18.9 in cash Founded 2011 per ADS which values the company at more than $3 billion. The buyer group and their affiliates beneficially own an Date Jun 2015 aggregate of 47.8% stake in Momo.

T: +44 (0) 1481 720071 E: [email protected] guernseyfinance.com Number 08 | Volume 29 | March 01 2016 | avcj.com 23 Financial and Services

FTI Consulting is a global business advisory firm dedicated to helping organisations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. We have over 20 years of experience in the PRC supported by our 150 professionals based across our three offices in Beijing, Guangzhou and Shanghai. Our dedicated Financial and Institutional Investors team in the PRC provides a range of services, including:

OUR SERVICES

PRE-LENDING REVIEWS ORGANISED WIND DOWNS n Financial due diligence n Creditor/employee management n Reputational due diligence n Interim management/cash monitoring n Experienced operational expertise n Asset realisation and distribution n Fundamental analysis of the underlying business BUSINESS VALUATION NON-PERFORMING LOAN REVIEWS n Evaluation of equity investments in loan n Portfolio reviews portfolios n Individual debtor reviews n Assessment of business viability n Compliance reviews requested by regulatory authorities n Business valuation and due diligence for mergers and acquisitions ONSHORE DEBT RESTRUCTURING ADVISORY n Assessment of divestment strategy and n Fraud and financial investigations implementation/negotiation n Independent onshore advisor to syndicate lenders and n Resolving shareholder disputes investors n Provision of expert/independent opinions for n Development and execution of exit strategies that litigation maximise value n Foreign Corrupt Practice Act compliance reviews INTERIM MANAGEMENT n Independent and experienced onshore legal representatives, directors, CFOs, controllers n Turn key management solutions n Post-acquisition integration support n Crisis management

To find out how FTI Consulting can help your business, please visit www.fticonsulting.com

CRITICAL THINKING AT THE CRITICAL TIME™

FIIS 1602.indd 1 16年2月24日 下午5:41 17th Annual Private Equity & Venture Forum Financial and Japan日本 2016 Institutional Investor 22-23 June 2016, Conrad, Tokyo

SIGN UP Services NOW! AND GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY SAVE FTI Consulting is a global business advisory firm dedicated to helping organisations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. US$400 (until 25 MAR only) We have over 20 years of experience in the PRC supported by our 150 professionals based across our three A land of industry opportunities in offices in Beijing, Guangzhou and Shanghai. Our dedicated Financial and Institutional Investors team in the times of uncertainty PRC provides a range of services, including: Mark your calendars for June 22 & 23 as the 17th Annual AVCJ Private Equity and Venture OUR SERVICES Capital Japan Forum returns. The AVCJ Forum is the premier international alternative investments conference and offers the opportunity to meet with over 200 Japanese PRE-LENDING REVIEWS ORGANISED WIND DOWNS institutional investors looking to commit capital to private market across the globe. n Financial due diligence n Creditor/employee management n Reputational due diligence n Interim management/cash monitoring n Experienced operational expertise n Asset realisation and distribution Benefits of attending: n Fundamental analysis of the underlying business Network with over 200 institutional investors that are looking to meet GPs BUSINESS VALUATION 1 and advisors from across the globe and commit capital to private markets NON-PERFORMING LOAN REVIEWS n Evaluation of equity investments in loan n Portfolio reviews portfolios Discover the industries and sectors that will be in demand over the next n Individual debtor reviews n Assessment of business viability 2 decade in Japan n Compliance reviews requested by regulatory authorities n Business valuation and due diligence for mergers and acquisitions Debate the future macro outlook and the risk and opportunities presented by ONSHORE DEBT RESTRUCTURING ADVISORY n Assessment of divestment strategy and 3 uncertainty in the global stock markets and China n Fraud and financial investigations implementation/negotiation n Independent onshore advisor to syndicate lenders and n Resolving shareholder disputes 4 Find out how to select the right partners and geographies for infrastructure investors n Provision of expert/independent opinions for investments n Development and execution of exit strategies that litigation Uncover the pipeline and opportunity for large cap deals and maximise value n Foreign Corrupt Practice Act compliance 5 reviews corporate carve-outs INTERIM MANAGEMENT Identify strategies for fundraising and how you differentiate yourselves to LPs n Independent and experienced onshore legal 6 representatives, directors, CFOs, controllers Registration Enquiries: Sponsorship Enquiries: n Turn key management solutions Anil Nathani T: +852 2158 9636 Darryl Mag T: +852 2158 9639 n Post-acquisition integration support Enquiry n Crisis management E: [email protected] E: [email protected]

Simultaneous translation between Japanese and English will be available throughout the event To find out how FTI Consulting can help your business, please visit www.fticonsulting.com Co-Sponsors

Scan this QR code with your Join your peers mobile phone to review the event #avcjjapan avcjjapan.com latest updates CRITICAL THINKING AT THE CRITICAL TIME™

FIIS 1602.indd 1 16年2月24日 下午5:41