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Captive Conundrum Axiom Asia’S Managing Partner Chihtsung Lam What Does the Emergence Corporate-Backed Funds Mean for China PE? Page 7 Page 15 Asia’s Private Equity News Source avcj.com January 28 2014 Volume 27 Number 04 EDITOR’S VIEWPOINT Know your entrepreneur Page 3 NEWS Accel, CICC, Everstone, Primavera, Vertex Page 4 DEAL OF THE WEEK FirstCry targets online and offline shoppers Page 12 Equis, Partners Group bag Japan solar deal Page 12 FUNDS Irish start-ups eye China Page 13 CDH to close at $2.55b Page 14 EQT’s expanded mandate Page 14 LP INTERVIEW Captive conundrum Axiom Asia’s managing partner Chihtsung Lam What does the emergence corporate-backed funds mean for China PE? Page 7 Page 15 FOCUS DEAL OF THE WEEK Debuts down under Welcome deliveries Australian IPOs return, PE firms plot exits Page 10 VCs back RedMart’s online grocery option Page 13 HAPPY HOLIDAYS TO ALL OUR READERS! AVCJ WILL RETURN FEBRUARY 11, 2014 11th Annual Private Equity & Venture Forum Australia & New Zealand 2014 5-7 March, Four Seasons Hotel, Sydney Leading the way in a changing market avcjausnz.com Join the leading private equity in Australia, discover new industry opportunities The public market sale increase in total exit in 2013 29% Australia Australasia - Capital Under New Zealand Management in Private Equity 53% US$million 29,268 30,400 27,727 of investments 24,782 made in 2013 were allocated to infrastructure 2,455 2,601 3,011 3,100 2010 2011 2012 2013 Total PE Investment Made in Number of deals Australasia Since 2011 TOP 10 PE INVESTMENT IN 2013 US$million 11,952 11,101 9,744 FROM US$189m 192 187 126 UP TO US$5,272m Gross Domestic Australia - Gross Domestic Product Product (GDP) vs. Private Equity Invesment % PEI/GDP 2011 2012 2013 US$million 1,490,521 1,541,797 1,487,971 PE-backed firms employ 0.69 0.60 0.61 262,000 workers in Australia, making it a larger 2011 2012 2013 employer than the automotive * GDP data refers to fiscal year (April 1-March31) and Private Equity Investment data or banking industries refers to year-ended on December 31 The International Monetary Fund PE Contribution to Australia GDP Source: AVCJ Research, IMF and AVCAL represents +0.69% in 2013 Contact us Registration: Pauline Chen T: +852 3411 4936 E: [email protected] Sponsorship: Darryl Mag T: +852 3411 4919 E: [email protected] Featured in Lead Sponsors Co-Sponsors Exhibitor avcjausnz.com 11th Annual Private Equity & Venture Forum EDITOR’S VIEWPOINT Australia & [email protected] New Zealand 2014 Managing Editor 5-7 March, Four Seasons Hotel, Sydney Tim Burroughs (852) 3411 4909 Staff Writers Andrew Woodman (852) 3411 4852 Leading the way in a changing market avcjausnz.com Mirzaan Jamwal (852) 3411 4821 Battles averted? Winnie Liu (852) 3411 4907 Join the leading private equity in Australia, Creative Director Dicky Tang Designers discover new industry opportunities Catherine Chau, Edith Leung, Mansfield Hor, Tony Chow Senior Research Manager The public market sale increase NO ONE EMERGED FROM THE DEBACLE AT up in scale or product sophistication can only be Helen Lee NVC Lighting Technology looking particularly achieved though a substantial capital investment Research Manager in total exit in 2013 good. and the introduction of more management Alfred Lam 29% Research Associates Tensions came to a head in May 2012 when expertise. Herbert Yum, Isas Chu, Jason Chong, Kaho Mak Australia Australasia - Capital Under Changjiang Wu, the CEO and chairman of the Assuming control, at board or shareholder New Zealand Management in Private Equity Hong Kong-listed lighting company, resigned. level, doesn’t necessarily make investments any Circulation Manager US$million Investors had accused him of making related- easier. As the NVC case illustrates, a deposed Sally Yip 53% Circulation Administrator 29,268 30,400 party transactions and presiding over a culture of chairman can still exert influence over the Prudence Lau 27,727 of investments weak corporate governance. The chairman’s allies business (he has deep-rooted supply chain Subscription Sales Executive 24,782 Jade Chan claimed that his departure was part of a plan relationships, if nothing else) why a disaffected made in 2013 formed by international investors, led by SAIF middle management can be unmanageable. Manager, Delegate Sales Pauline Chen were allocated to Partners, to take control of the board. Many China private equity investors take Wu was replaced as chairman by Andrew Yan, every opportunity to stress their value creation Director, Business Development 2,455 2,601 3,011 3,100 Darryl Mag infrastructure SAIF’s managing partner, and shortly afterwards credentials but bring about meaningful change 2010 2011 2012 2013 Manager, Business Development a war of words between the two found its way the incumbent staff must buy into the value Anil Nathani, Samuel Lau onto Sina Weibo. NVC’s workers demanded the proposition. In this context, choosing the right Total PE Investment Made in Sales Coordinator reinstatement of their leader, suppliers refused executives to bring in is crucial. Number of deals Australasia Since 2011 TOP INVESTMENT IN 2013 Debbie Koo 10 PE to business with the company, and there were As one GP put it to AVCJ recently, the US$million Conference Managers 11,952 executive-level departures. transition is the most difficult part. “Once you Jonathon Cohen, Sarah Doyle, 11,101 Profit warnings ensured due to the disruption bring in people they must have new ideas and Zachary Reff 9,744 FROM US$189m Conference Administrator and, deedless to say, NVC stock took a hit. systems and you have to blend the existing Amelie Poon 192 187 By September, a compromise appeared to and the new,” he said. “The risk of bringing in Conference Coordinator UP TO US$5,272m have been thrashed out, with Wu appointed professional management is they require hands- Fiona Keung, Jovial Chung 126 head of a temporary operations committee on experience of executing strategy in private Publishing Director Allen Lee Gross Domestic Australia - Gross Domestic Product tasked with day-to-day management of NVC. He companies and the people below them are not Product (GDP) vs. Private Equity Invesment returned to the role of CEO in January 2013 and MIT and Yale graduates.” Managing Director Jonathon Whiteley % PEI/GDP Yan resigned as chairman four months later. The second stage of the transition involves 2011 2012 2013 1,541,797 US$million 1,490,521 1,487,971 “They should have settled it earlier and in a understanding how to incentivize these quieter manner,” one LP observed to AVCJ when people. If the founder retains a minority the tensions were at their height. stake in the business, what role – if any – can PE-backed firms employ Conflicts between entrepreneurs and PE be accommodated for him in day-to-day Incisive Media 0.61 0.69 Unit 1401 Devon House, Taikoo Place 0.60 investors are not unknown in China’s personality- management in order to ease the handover of 979 King’s Road, Quarry Bay, workers Hong Kong 262,000 driven economy – corporate governance issues power? As for the middle management, do they T. (852) 3411-4900 are often cited, but so too is a basic failure to want equity in the business or are they looking F. (852) 3411-4999 in Australia, making it a larger E. [email protected] 2011 2012 2013 ensure that interests remain aligned. for something else? URL. avcj.com In 2011, Lan Zhang, founder of restaurant Establishing key performance indicators employer than the automotive * GDP data refers to fiscal year (April 1-March31) and Private Equity Investment data Beijing Representative Office refers to year-ended on December 31 The International Monetary Fund franchise South Beauty, told media that one of is part of every business plan but it must No.1-2-(2)-B-A554, 1st Building, or banking industries No.66 Nanshatan, the company’s biggest mistakes was selling a be complemented by more empirical man Chaoyang District, Beijing, PE Contribution to Australia GDP stake to CDH Investments, which took a minority management. This includes establishing clear People’s Republic of China T. (86) 10 5869 6203 position alongside China International Capital guidelines for all stakeholders as to what is F. (86) 10 5869 6205 Source: AVCJ Research, IMF and AVCAL represents +0.69% in 2013 Corporation in 2008. Expansion plans failed to required of them. E. [email protected] come to fruition, which may explain the discord. An effective investment professional doesn’t Contact us Registration: Pauline Chen T: +852 3411 4936 E: [email protected] Last year CVC Capital Partners acquired majority have to dirty his hands with boardroom or control of South Beauty, facilitating the exit of the shop floor arguments; wherever possible, he The Publisher reserves all rights herein. Reproduction in whole or Sponsorship: Darryl Mag T: +852 3411 4919 E: [email protected] in part is permitted only with the written consent of existing backers. anticipates them before they happen. AVCJ Group Limited. Featured in If NVC represents the worst case scenario ISSN 1817-1648 Copyright © 2014 in GP-entrepreneur relations, then the South Beauty buyout arguably reflects where private Lead Sponsors Co-Sponsors Exhibitor equity in China is going next, with founders Tim Burroughs gradually becoming more willing to cede control Managing Editor to third-party investors. In many cases, that step Asian Venture Capital Journal avcjausnz.com Number 04 | Volume 27 | January 28 2014 | avcj.com 3 NEWS AUSTRALASIA CICC, Qianhai Financial PE firms to bid for China launch $3.3b PE fund Huarong stake CHAMP Ventures plans IPO China International Capital Corporation (CICC) A group of around 20 investors are said to be has teamed up with Qianhai Financial Holdings, a preparing to submit first-round offers for a for SG Fleet wholly-owned unit of the Administrative Bureau minority stake worth $2 billion in China Huarong CHAMP Ventures is seeking to exit its 42% of Qianhai, to launch a private equity fund, Asset Management ahead of the non-performing stake in Australian vehicle leasing and fleet targeting RMB20 billion ($3.3 billion).
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