Asia’s News Source avcj.com November 17 2015 Volume 28 Number 43

EDITOR’S VIEWPOINT Taiwan PE exits could hit a record high in 2015, but uncertainties remain Page 3

NEWS Accel, CDH, CITIC Capital, Formation 8, Golden Gate, IFC, Lyfe, Providence, Sankaty, Source Code, Temasek Page 4

ANALYSIS Draft rules for PE-backed take-privates are met with cautious optimism Page 13

INDUSTRY Q&A CDIB Capital’s Paul Yang Secret ingredients discusses differentiated cross-border strategies Can private equity help Taiwan consumer brands find success in ? Page 7 Page 15

FOCUS FOCUS

A political football The next big things Cross-strait M&A still presents a challenge Page 10 Taiwan tries to forge a start-up ecosystem Page 12

PRE-CONFERENCE ISSUE AVCJ PRIVATE EQUITY AND FORUM TAIWAN 2015 Anything is possible if you work with the right partner

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

Managing Editor Tim Burroughs (852) 3411 4909 Associate Editor Exit issues Winnie Liu (852) 3411 4907 Staff Writer Holden Mann (852) 3411 4964 Creative Director Dicky Tang Designers THREE TIMES IN THE PAST FIVE YEARS, have been strained). This doesn’t appear in the Catherine Chau, Edith Leung, the sale of Taiwan-based cable television Taiwan data, but should the PE firm sell Eastern Mansfield Hor, Tony Chow provider China Network Systems (CNS) has been Broadcasting – an asset it bought for $1.3 billion Senior Research Manager announced. On two of those occasions it failed in 2006 – before the end of 2015, that would Helen Lee to go through – first the regulator nixed an significantly boost the annual total. Research Associates acquisition by Want Want China Holdings, then The activity is significant because, for some, Herbert Yum, Jason Chong, Kaho Mak Ting Hsin International Group’s bid was derailed getting money out of Taiwan has been just by a tainted cooking oil scandal that has set back as hard as getting money in. Carlyle is already Senior Marketing Manager its entire business. responsible for the second-largest exit on the Sally Yip Circulation Administrator Assuming it will be third time lucky and Taiwan all-time list, after the CNS deal, but it was Prudence Lau Morgan Stanley Private Equity Asia and Far a hard-won victory. The PE firm eventually sold Subscription Sales Executive EasTone Telecommunications’ $2.3 billion Kbro, another cable TV company, to Dafu Media Jade Chan purchase of CNS goes through, it will be a in 2010, having seen a previous exit attempt Manager, Delegate Sales profitable and much-desired exit for MBK blocked by the regulators. Pauline Chen Partners. It will be good for the private equity Ownership of media and financial services Director, Business Development industry too. assets – another historical problem area for Darryl Mag AVCJ Research catalogues investments private equity exits – is a sensitive issue in most and exits based on date of announcement. jurisdictions, and perhaps more so in Taiwan. To Manager, Business Development Anil Nathani, Samuel Lau Furthermore, a number of Taiwan deals inevitably a certain extent, the onus is on PE investors to slip through the categorization cracks, falling into think out their exit options and consider where Sales Coordinator Debbie Koo the China or Hong Kong buckets because that they may run into obstacles. is where a Taiwan-owned operating business is At the same time, given the soul-searching Conference Managers located. And Taiwan is a shallow market in which taking place in certain sectors over long-term Jonathon Cohen, Sarah Doyle, Conference Administrator a handful of very large transactions really move development strategies, and the role that China Amelie Poon the needle. and PE investors may play in these, uncertainty Conference Coordinator Therefore, the 2015 exits figure should be doesn’t help. When private equity firms look at Fiona Keung, Jovial Chung viewed with caution – it reads $2.6 billion, opportunities in Taiwan, the question is often, Publishing Director but still the biggest annual total on record. In “I like this asset but how much time am I going Allen Lee addition to CNS, which accounts for the bulk to waste over it?” This may well apply equally to of the total, agreed to sell Ta entry and exit. Chong Bank to Yuanta Financial Holdings for around $300 million. Hong Kong Headquarter Unit 1401 Devon House, Taikoo Place Carlyle also exited Natural Beauty Bio- 979 King’s Road, Quarry Bay, Technology, a Hong Kong-listed business of Tim Burroughs Hong Kong T. (852) 3411-4900 Taiwan origin, through a management buyback Managing Editor F. (852) 3411-4999 E. [email protected] (relations with the Taiwanese founder are said to Asian Venture Capital Journal URL. avcj.com

Beijing Representative Office Taiwan private equity exits No.1-2-(2)-B-A554, 1st Building, No.66 Nanshatan, Chaoyang District, , 3,000 People’s Republic of China T. (86) 10 5869 6203 2,500 F. (86) 10 5869 6205 E. [email protected] 2,000

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Number 43 | Volume 28 | November 17 2015 | avcj.com 3 NEWS

Formation 8 founder US dollar-denominated fund and a parallel GLOBAL renminbi-denominated fund worth RMB555 launches Asia VC firm million ($88 million). The GP targeted $150 Placement agent Eaton Brian Koo, co-founder of Formation 8, has million and RMB300 million, respectively. agrees sale to Stifel launched a new venture capital firm that will invest in a smaller portfolio of Asia-focused Temasek, Hillhouse lead Placement agent and advisory firm Eaton companies with a view to accelerating growth Partners has agreed to be acquired by Stifel through deep operational involvement. The new round for Aiwujiwu Financial Corp. US-listed Stifel wants to tap into entity, Formation Group, is said to have already Aiwujiwu, a Chinese rental and second-home Eaton’s relationships with PE firms, hedge funds, received $200 million in commitments from LPs listings portal, has raised $150 million in a Series family offices and institutional investors as it looks towards a target of $400 million. It will follow E round of funding led by Temasek Holdings and to grow its platform and Hillhouse Capital. Existing investors Morningside high net worth private client business. Venture Capital, Banyan Capital, Shunwei Capital Partners and GGV Capital also participated. ASIA PACIFIC CDH-backed Dali Foods seeks $1.3b HK IPO PE value-add still at early Chinese food and beverage manufacturer stage in Asia Dali Foods Group, which is backed by CDH PE firms are increasingly aware of the importance Investments, has launched a Hong Kong IPO of value creation in Asia, but their programs with a target of HK$10.4 billion ($1.3 billion). Dali have yet to reach maturity, according to an will sell about 1.7 million newly-issued shares at AlixPartners survey. Only 37% of GPs consider HK$6.15 apiece. their programs to be mature – compared to the original vision for Formation 8’s Asia special 58% last year – with nearly half describing their purpose vehicle and leverage connections in NDF joins round for scooter programs as early stage. AlixPartners said this is Silicon Valley and Asia. “perhaps an indication that they’re becoming The move comes as Formation 8’s founders manufacturer more aware of where they’re falling short or that decided against raising a third fund and to Taiwan’s National Development Fund (NDF) has they recognize the scale of the task at hand.” go their separate ways. The split is said to be participated in a $130 million Series B round amicable and the team will continue to manage of funding for Gogoro, a local electric scooter First Avenue opens Hong portfolio companies from Funds I and II. manufacturer. The round was led by Dr. Samuel Koo’s strategy, described as “venture capital Yin, chairman of Ruentex Group, with Panasonic Kong office 2.0,” involves shepherding a smaller number of Corp. also taking part. Gogoro has raised more agent and advisory firm First investments through multiple stages. “Given than $180 million since it was founded in 2011. Avenue has opened an office in Hong Kong. It the middle class growth happening in Asia and will be led by Michael Henningsen, previously a what I call the new economy wave - industries China second-hand car managing director at Park Hill Group. Henningsen have to go through a paradigm shift because will serve as co-head of Asia alongside Martin people are looking for something different, platform raises $50m Donnelly, First Avenue’s Sydney-based partner. something better, something with mobile Haoche51, a C2C second-hand car trading internet - it doesn’t make sense to work with platform, has raised $50 million in a Series B round 20-30 companies at once in the hope that one led by Source Code Capital and Fenghuang AUSTRALASIA or two of them will do well,” Koo said. “This is the Xiangrui Fund. Finance site 9fbank and existing time when we should focus more.” backers Matrix Partners China, Chengwei Capital Australia’s Atlassian files and FutureCap also participated. for US IPO Holdings is seeking to list on the National Wenzhou Kangning Atlassian, an enterprise software company Equities Exchange and Quotation, also known founded in Sydney by two Australian as the New Third Board. The listing entity mainly Hospital targets $88m IPO entrepreneurs, has filed for a NASDAQ IPO. Accel focuses on PE investments and management, Wenzhou Kangning Hospital, a private psychiatric Partners is the most significant VC investor in the including CITIC Capital’s new renminbi fund-of- specialty care service provider in China, has business with a 12.5% stake. funds business, its renminbi PE funds, and its “one priced its Hong Kong IPO to raise up to HK$681 belt, one road” infrastructure fund. million ($88 million). It is offering 17.6 million GREATER CHINA shares at up to HK$38.70 apiece. PE backers Lyfe closes debut include GL Capital and CDH Investments. healthcare fund at $298m CITIC Capital to list on New Tencent leads $31m round Healthcare-focused PE firm Lyfe Capital has Third Board closed its debut China fund at $298 million. The for online grocer Chinese firm CITIC Capital fund comprises two vehicles - a $210 million Tencent Holdings has led a RMB200 million ($31

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million) for Miss Fresh, a Chinese online grocery Sankaty to buy GE backed by Warburg Pincus and Tiger Global retailer. Domestic VC Zhe Shang Venture Capital Management, has bought a majority stake in also participated. The new capital will be used to commercial loans portfolio online automotive sales platform CarWale from source agricultural products, improve cold chain Sankaty Advisors, the global credit affiliate of German media conglomerate Axel Springer. Axel logistics systems and for marketing. Bain Capital, has agreed to buy GE Capital’s Springer holds a 91% stake in CarWale. commercial lending and leasing portfolios in Sailing supports securities Australia and New Zealand. The portfolios have IFC to invest $7m in CL in excess of A$2 billion ($1.5 billion) of exposure JV in FTZ across debtor finance, corporation aviation Educate Sailing Capital, a PE firm backed by Shanghai finance, leveraged finance, equipment finance The International Finance Corporation (IFC) International Group, will invest in a joint venture and asset-backed lending. There are over 500 will invest $7 million in India’s CL Educate, an securities company based in the Shanghai Free borrowers. Deutsche Bank is serving as co- education services company backed by Gaja Trade Zone. There are 15 backers in total, each of investor, financier and advisor. Capital. IFC’s investment will support operations which will commit RMB350 million ($54.9 million) Sankaty’s significant break in the region came across India, with the goal of increasing the to the new venture and take a 10% stake. with the acquisition of J.P. Morgan’s Global Special organization’s reach among Indian students and Opportunities Group last year at a valuation of providing employment opportunities. Vision Knight-backed Zhong Ao launches HK IPO SAIF in $6m round for China-based property manager Zhong Ao Home Chef’s Basket Group is looking to raise up to HK$459.2 million SAIF Partners has participated in a $6 million ($59.2 million) through a Hong Kong offering. Series A round for Indian start-up Fizzy Foodlabs, The company plans to sell 224 million shares at which operates the Chef’s Basket packaged food a price of up to HK$2.05 apiece. Vision Knight brand. The firm will use the capital to expand its Capital invested $20 million in the business in product lines and distribution channels. April and holds an 11.25% interest. SOUTHEAST ASIA Sequoia, Medtronic establish medtech fund $1.3 billion. Before that, the firm paid more than Vertex launches $200m Sequoia Capital has partnered with global $300 million for a portfolio of performing and medical equipment manufacturer Medtronic stressed corporate loans from Lloyds in Australia. fund for SE Asia, India to form a China-focused medical technology This year in Australia, Sankaty has recapitalized Vertex Venture Holdings, the VC arm of investment fund worth $60 million. The vehicle mining services company Imdex, and provided Singapore’s Temasek Holdings, has launched a has received funding both Medtronic, Sequoia, mezzanine finance to the PE-backed acquisitions $200 million captive fund for investments in India and Suzhou-based incubator BioBay. of VIP Pet Foods, Affinity Education and the and Southeast Asia. This represents a separate acquisition of GE’s consumer finance business. fundraise from the $600 million that Temasek The latter transaction saw KKR, Värde Partners committed to Vertex last month. NORTH ASIA and Deutsche Bank buy GE Capital’s consumer lending unit in Australia and New Zealand for an Golden Gate commits $4m Rakuten launches $100m enterprise valuation of A$8.2 billion. to six start-ups global fintech fund Singapore-based early stage investor Golden Japanese e-commerce giant Rakuten has NBFC is sponsored and managed by KKR and has Gate Ventures will commit more than $4 million launched a $100 million fund for investments in GIC Private as a lead investor. to six Southeast Asian start-ups. Three of these financial technology start-ups worldwide. The are based in Indonesia, including online health fund will target early to mid-stage start-ups that Providence ups stake in information portal Alodokter, for-profit social are innovative and strategically relevant, and that enterprise platform Ruma, and B2B e-commerce offer attractive return potential. India’s Hathway marketplace Indotrading. The other two start-ups Providence Equity Partners has paid INR2.4 billion are in Thailand and Malaysia. SOUTH ASIA ($36.4 million) for a 6.35% stake in Indian cable TV operator Hathway Cable and Datacom held Convergence agrees by Macquarie Bank. Providence bought the 52.8 partnership with Baidu Townsend backs KKR’s million shares, boosting its holding to 17.2%. Macquarie now has about a 3.1%. Convergence Ventures, an early-stage venture India real estate NBFC capital firm based in Indonesia, has agreed KKR has signed up another partner for its PE-backed CarTrade buys to a financial and strategic partnership with India-focused real estate non-banking finance Chinese search and web services giant Baidu. company (NBFC), with US-based investor The rival CarWale The partnership will allow for both sides to trade Townsend Group agreeing to commit capital. The CarTrade, an Indian online used car portal technical resources and expertise.

6 avcj.com | November 17 2015 | Volume 28 | Number 43 COVER STORY [email protected] Dining out Various PE firms have found success supporting Taiwan consumer brands in mainland China. But the food and beverage segment is an example of how picking the team, theme and time can make all the difference

STARTING FROM A SINGLE STORE IN they never have flavors that are too strong, - not partner at GGV Capital. They agreed a technology Taipei in the 1970s, restaurant chain Din Tai too salty, not too spicy,” he says. transfer deal with Cloud 9 and got the recipes to Fung has taken its brand across Asia and into This combination of taste and service helped core dishes. The chain that emerged under the the US. Shanghai is home to one third of the the likes of Tingyi Holding get traction in the operating company YPX Cayman was a modified 18 mainland China outlets. In carving a niche 1990s. More recently, in the casual dining space, version of the original Taiwanese format, in terms in that city, the company has done what some it formed the basis of investments by Actis and of menu and store layout. doubted was possible – sell xiaolongbao, a soup General Atlantic in the now-listed Xiabu Xiabu, by Following Qiming’s initial $5 million, YPX dumpling closely associated with Shanghai, to Actis again in Bellagio, and by Headland Capital received three more rounds of funding worth a the Shanghai people. Partners in 85C Bakery Café. Given mainland combined $51.5 million. When the Series D came “When they first went there I didn’t think they China’s fast food market was worth $120 billion in in 2014, the Cloud 9 network had grown to 40 could be successful,” says Susan Lin, managing 2014 – 33 times larger than Taiwan’s – according outlets and the company was building scale by partner at EverYi Capital, a China consumer- to Euromonitor International, winning a small creating sub-franchises to complement its self- focused GP that spun out of AEA Investors. slice can mean a huge pay off. owned restaurants. “Xiaolongbao is like mom and pop store food – it These investments fell between 2008 and Nevertheless, talking to Tay and Tung, there is sold everywhere at one third of the price of Din 2012. During this period, Chris Tay was looking is a clear sense of then versus now. While Tay Tai Fung. But go into the restaurant in Shanghai for another brand to fill the space in between recently left YPX, Tung remains an investor in a today and the majority of customers are locals.” fast food and fine dining. He settled on Taiwan personal capacity, and he admits the move into Din Tai Fung is not a private equity story, over Southeast Asia, in part because the thought fast casual dining was very much of its time. but an object lesson in how a Taiwan consumer the mainland wasn’t quite ready for a Southeast “The investment thesis was that Chinese brand can establish itself in China. The company Asian player. economic growth was 10% a year, so in an offline picked the right price point to leverage rising “The barrier for Taiwan brands to get into sector that was fast-growing you could do 20% a domestic consumption, and persuade customers China at that time was low,” Tay adds. “The year, and if you are among the category leaders that it worth paying a premium to eat a quality product, served by attentive wait staff, in a Fast food market size - Mainland China vs Taiwan pleasant environment. “For historical and geographical reasons, 120,000 Taiwan has a much better service mindset than 100,000 mainland China, and this is what differentiates Taiwanese restaurants,” says Ken Chen, a partner 80,000 at LEK Consulting. “But it’s also a challenge. 60,000 Individual stores do well because the owner is US$ million 40,000 there. Once you develop a chain, though, it is hard to maintain that level of service.” 20,000 Plenty of Taiwan consumer brands have 0 established themselves in China, in the food and 2009 2010 2011 2012 2013 2014 beverage (F&B) space and beyond. Private equity China Taiwan sees an opportunity in helping them realize these Source: Euromonitor International ambitions. It is, however, never easy to get the best management team into the most attractive market segment, at the right time. China’s concept, the genre, the food type and pricing you might be able to grow 40% a year. You didn’t consumer sector is evolving almost as fast as the were acceptable to the local Chinese consumers, have to be in internet back then, and you could ideas shaping it. but it was also a little bit foreign, so they were also pick up assets relatively cheaply,” Tung says. willing to pay a premium for it. At the time, if you “What has become more obvious over the past Local resonance looked at most of the local brands, they weren’t five years is the impact of e-commerce on the James Roy, associate principal at China Market charging high prices.” offline economy.” Research Group, notes that mainland consumers Tay, who had previously worked for a string of As such, the earlier model no longer applies. most readily associate Taiwan with electronics Chinese F&B groups, received some seed capital If China’s “new normal” is 5% annual GDP and snack foods. “In food services and food retail, from Qiming Venture Partners and went to growth, Tung suggests, a consumer brand they tend to have fresher ideas that are suitable Taiwan to talk to brand owners, accompanied by that outperforms its category might expand to Chinese palettes all over the place because Hans Tung, then of Qiming but now a managing at a rate of 20%, but there is unlikely to be a

Number 43 | Volume 28 | November 17 2015 | avcj.com 7

COVER STORY [email protected]

discount on entry. Venture capital investors are Chen estimates that a quick service restaurant could be raised for further expansion. obviously drawn to the larger potential returns of chain needs to reach 200-300 outlets before it Fast forward to the present, and the e-commerce and online-to-offline (O2O) services. is large enough to withstand the undercuts of immediate costs, in terms of real estate and Most offline retailers, irrespective of their these smaller players and have the power to labor alone, are far higher. Local brands have territory of origin, have been hit by the rise of dictate terms to the O2O platforms. deeper on-the-ground networks and insights, e-commerce. Shopping malls now have greater Taiwanese food and beverage brands retain while international consumer brands enter with food and beverage representation than before numerous advantages – “their local market seemingly limitless marketing budgets. The as consumer goods retailers struggle, but LEK’s is small and competitive, so if you are not greater capital requirements come hand-in- Chen notes that rental rates for these premises innovative you end up in a price war,” says Y.R. hand with a more substantial time commitment; have yet to fall. Restaurants are seeing reduced Cheng, a partner at China mid-market mainland expansion is rarely a strategy that can foot traffic but little moderation in cost. firm Lunar Capital – and several continue to be coordinated from Taipei by remote control. They must also cope with two specific O2O thrive within China despite the challenges “Six years ago, the bar for investing in a threats. The first is online food delivery platforms facing the industry as a whole. If Din Tai Fung is Taiwanese food and beverage brand was a lot that take ownership of the consumer relationship an example of success at a higher price point lower and people would pay more. Now that through free delivery and loyalty programs. The then Xiabu Xiabu is the mid-range poster child; China is maturing you have to up your game,” second are listings and group-buying sites that as of June it had 499 restaurants and six-month Lin adds. “If an entrepreneur says, ‘I have a great also insert themselves between the consumer revenue was up 10% year-on-year at RMB1.12 brand, I can be successful; just give me the and the restaurant. “It’s less damaging to the billion ($175.7 million) with net profit increasing money and don’t worry about the rest – I’m restaurant because you still get to see the 42.7% to RMB117.5 million. going to a small city to open up a shop and try it customer, but you have to pay for discounts and However, not all brands are suited to a private out,’ that is not enough for me. They need to be promotions,” Chen says. “Parts of the value chain equity-backed mainland expansion strategy. Paul open-minded enough to sit down with us and are being disrupted.” Yang, chairman of CDIB Capital, identifies two work out a strategy.” key factors. First, he believes that most Taiwan Tay, for his part, lays some of blame with the Cutthroat competition consumer brands are light on franchise equity PE firms for investments failing to deliver. He says None of these pressures faced Xiabu Xiabu, – i.e. their ability to change consumer behavior there is a tendency to hire executives from the 85C or Bellagio when they arrived in China, but – and those that are not often don’t have a large big fast food chains in China, who come into an digitally-enabled disruption is just one challenge enough addressable market. “There are some “ex-family run business and immediately try to presented by a modernizing mainland consumer famous pineapple cake brands in Taiwan, but systemize it and change everybody.” Rather, PE sector. Customers that Tay concluded were not how big is that industry?” he asks.v firms should target ex-entrepreneurs or people ready for Southeast Asian cuisine in 2009 are Second, Taiwan entrepreneurs are not who have experience of smaller, localized now spending increasing amounts of money necessarily open to the value-add that private companies as well as large operators. on a wider variety of dining options. “It’s hard to equity can bring, being of the opinion that they This underlines not only the challenge to be loyal to one brand when you have so many have the language skills and cultural affinity find the right management team, but also the choices,” Tay observes. to crack the mainland market on their own. traditional venture capital credentials – a bet on The commercial environment is therefore Yang and EverYi’s Lin are united in identifying an entrepreneur with an idea – of the original highly competitive and Taiwan brands no longer an operational gap between Taiwanese and YPX deal. have as much of an edge in terms of appeal to international brands in this respect. Most PE investors that spoke to AVCJ local taste buds or service standards. Caught up EverYi recently invested in Belgian chocolate expressed reservations at the prospect of rolling in a battle between stronger local brands and the brand Pierre Marcolini with a view to helping it out a greenfield business. Strait Capital, for growing number of international players entering access China’s middle class consumer market. The example, almost exclusively targets companies the market, they also face a chicken-and-egg company has a systematic approach to entering that were set up by Taiwanese entrepreneurs in conundrum when trying to build scale. new markets, honing in on its target segment China. Jack Lee, a partner with the firm, says he Most fast casual dining business models have and drawing up plans to build exposure across values management teams’ experience dealing at their core the concept of a central kitchen: multiple channels. with local governments and suppliers. Expanding serving a string of outlets, it delivers economies “Many Taiwanese entpreneurs don’t think that a Taiwanese brand in China when there is no pre- of scale and allows greater consistency in food way,” Lin explains. “Mid-cap companies tend to existing footprint involves a high execution risk. quality and service. According to research look at China the same way they look at Taiwan, Similarly, Lunar’s Cheng notes that Tingyi conducted by LEK, the regulatory requirements which is a key mistake. They are often reluctant Holding, best known for the Master Kong instant in Taiwan make a central kitchen economically to spend money on branding, marketing and noodle brand, was founded in Tianjin by four viable only once a chain crosses the 50-outlet promotion, and that is the one area that is very Taiwanese brothers who had no existing business threshold. In mainland China, with its allegedly different if you want to come to China.” in their home territory. Lunar’s preference is more lax regime, the threshold is 8-10 locations. for strong existing brands in China – in the It makes it harder to squeeze smaller players Then vs. now consumer goods space rather than restaurants out of the game and gain sustainable market Again, comparisons are drawn between the – and most of the sellers are inevitably mainland share. These mom-and-pop establishments are China of 10 years ago and the China of today. founders. said to compound their advantage by ignoring Brands used to feel their way into the market “Some Taiwan-based brands overlap with tax obligations. A private equity-backed group by picking a city – perhaps because a friend our focus, but we have to consider how easy it is that is ultimately targeting an IPO or trade sale was willing to offer them a cheap deal on rental to take them into China. These days the cost of has no such luxury, which means lower margins – opening a shop and seeing how consumers expansion for consumer products is very high,” and much less margin for error. responded. If the response was favorable, capital Cheng says.”

Number 43 | Volume 28 | November 17 2015 | avcj.com 9 FOCUS [email protected] Strait deals For the past six years, capital has flowed relatively freely from Taiwan to China while deals going in the opposite direction have faced close regulatory scrutiny. Can wider economic realities redress the balance?

TSINGHUA UNIGROUP HAS BIG money will flow back into Taiwan,” says Dennis amount committed between 2009 and 2015 ambitions: it wants to become the world’s Chiang, head of merchant banking in Taishin is approaching 60 times as large. A lot of this third-largest chipmaker. To achieve this goal, the International Bank. “There will be a lot of interest activity is likely driven by Taiwan investors Chinese company – whose state-owned parent is from Chinese companies in select Taiwan engaging in M&A with Taiwan-owned companies responsible for managing the commercial assets industries that possess advanced technology, in the mainland. of Tsinghua University – has pledged to spend such as semiconductors and integrated circuits, “I haven’t seen any relaxation in the rules and RMB300 billion ($47 billion) over the next five and they will be supported by the Chinese regulations regarding mainland Chinese capital years. government.” investing in Taiwan over the past few years. Every Weiguo Zhao, chairman of Unigroup, outlined case is still under review by the regulator,” says his objectives in a recent interview with Reuters, Red capital fears Sonia Sun, a partner KPMG Law Firm. adding that another US-based acquisition could The cross-strait dynamic so far has seen Taiwan, Taiwan has two different sets of rules for be on the way. feeling threatened by China, block the so- foreign and mainland Chinese investors. The The company’s buying spree has so far been called “red capital” flowing across its borders. former can invest in any industry apart from a wide-ranging. It privatized US-listed Spreadtrum Conversely, China opened the door to Taiwanese limited number that appear on the so-called Communication in 2013 and then purchased a investment much earlier, recognizing that “negative list.” These typically involve national majority stake in Hewlett-Packard’s China data entrepreneurs could provide the capital and security and environmental protection. networking business for $2.3 billion in May. Five expertise it lacked. Chinese investors, meanwhile, can only invest months later there was a first foray into the US Since Taiwan opened its markets to Chinese in the industries on a dedicated “positive list,” with the acquisition of a 15% stake in Western capital in 2009, the Investment Commission, an with everything else out of bounds. About 97% Digital (WD) for $3.78 billion. agency under the MOEA, has approved inbound of Taiwan’s manufacturing sector and 51% of WD is now said to be negotiating a possible investment just over 700 investments worth services and infrastructure are currently open takeover of chipmaker SanDisk Corp, competing for the deal with another chipmaker, Micron Cross-strait investments approved by Taiwan’s government Technology. Earlier in the year, Unigroup reportedly offered $23 billion for Micron but 15,000 1,000 the bid was rejected over US national security concerns. And then this month, it spotted a 12,000 800 semiconductor target in Taiwan, agreeing to pay $600 million for 25% of Powertech Technology. 9,000 600 Not long after the deal was announced, 6,000 400 US$ million Taiwan’s Ministry of Economic Affairs (MOEA) Investments reminded the two parties that it had yet to 3,000 200 receive an investment application. The regulator said it would take Unigroup’s global purchases 0 0 as well as the potential impacts on Taiwan’s 2009 2010 2011 2012 2013 2014 2015 YTD semiconductor industry into consideration when Investments (Mainland China to Taiwan) US$ million (Mainland China to Taiwan) examining the transaction. Investments (Taiwan to mainland China) US$ million (Taiwan to mainland China) Meanwhile, Unigroup called on the Source: Ministry of Economic A airs Taiwan government to further open up its semiconductor industry and openly expressed an interest in backing local player MediaTek. For its a cumulative $1.3 billion. In recent years there to mainland players. There is also a blanked part, MediaTek said it is willing to join forces with has been a big step up in deal value. The total restriction that prevents any Chinese-registered Chinese peers to explore growth opportunities. topped $300 million in 2012, 2013 and 2014, entity holding more than 30% of a Taiwan-listed This series of events highlights the potentially and if Unigroup’s investment in Powertech goes company. Every investment must be approved conflicting priorities of business and government through, the 2015 figure would be significantly by the Investment Commission. – the former increasingly willing to reach out larger. In certain industries – typically those that are across the Taiwan Strait and the latter wary of the As for deals in the other direction, the most sensitive, such as semiconductors, financial implications of doing so. numbers are patchy – the peak years were services and telecom – there are caps on foreign “It’s a natural evolution of two markets. Over 2010-2011 – but operate from a much higher ownership. For example, Taiwan’s semiconductor the past three decades, there has been more base level. There have been nearly six times industry is the second-largest in the world and investment into China from Taiwan. Now the as many investments and, at $75.3 billion, the there are residual fears that the likes of Unigroup

10 avcj.com | November 17 2015 | Volume 28 | Number 43 FOCUS [email protected]

will try and steal it away. Therefore, Chinese “Unigroup has done it very properly. It isn’t “Ten years ago the foreign private equity investors can have exposure to testing and seeking to take over a Taiwan company, but came to Taiwan to make investments. It’s the packaging, but not control; they can also take acquire 25% through a mutual agreement. It also time for them to exit. China-based private minority stakes in the integrated circuit segment, agreed to appoint only one person to the board,” equity firms could form a new wave of investors, but not the design area. says Huang. “But Unigroup is so high-profile in its alongside strategic players,” says Taishin’s Chiang. The distinguishing factor is that much of acquisitions. Sometimes a strong arm may work, “That’s going to be the trend. The private sector testing and packaging is downstream work and pushing the Taiwan government to change mind. will keep pushing and the government will the technology is less sophisticated than for But equally it might not work. Then the investor become more open-minded. It’s a slow process.” integrated circuits. However, even in these lower has to bear the consequences.” Industry participants agree that there risk areas, not every investment is approved, PE firms have also been accused of acting will be more M&A activity driven by Chinese according to Janice Lin, a partner at law firm Tsar as proxies for red capital. When MBK Partners investors among listed small and medium-sized & Tsai. announced this year it would sell cable TV enterprises in Taiwan. Companies with market Earlier this month, China chip tester Jiangsu provider China Network Systems (CNS) to capitalizations below $500 million from less Changjiang Electronics Technology (JCET) bought Stats ChipPac, the world’s fourth-largest provider of chip packaging and testing player, “Sometimes a strong arm may work, pushing from Temasek Holdings for $780 million. It is the largest-ever overseas acquisition by a Chinese the Taiwan government to change its mind. But semiconductor company. equally it might not work. Then the investor has Stats ChipPac is based in Singapore and has manufacturing sites in South Korea, China and to bear the consequences” – Jack Huang Taiwan. The Taiwan subsidiary – in which the parent held a 52% stake – couldn’t be part of the sale due to Chinese ownership restrictions. It was Morgan Stanley Private Equity Asia (MSPEA) and sensitive industries such as food and beverage spun out instead. Far EasTone Telecommunications, a Taiwanese transportation, manufacturing, entertainment There are also circumstances in which legislator observed in parliament that sovereign and lifestyle are expected to be the initial targets. sensitivities over ownership trigger public wealth fund China Investment Corporation Another subset of companies, particularly discontent. bought a stake in Morgan Stanley during the those in the technology space, are keen to go Last weekend, Taiwan saw the first large- global financial crisis. He questioned whether private with a view to re-listing in mainland scale demonstration in its history as more China therefore had influence over MSPEA. China. A group that is trading at less than a 10x than 3,000 employees of packager and tester An earlier attempted sale of CNS to Want price-to-earnings (P/E) multiple on the Taiwan Siliconware Precious Industries (SPIL) protested Want China Holdings was unable to proceed bourse might be able to achieve twice or even against what they see as an attempted hostile in part due to concerns about its founder’s five times that valuation in the mainland market. takeover by chipmaker Advanced Semiconductor supposed pro-Beijing sympathies. Private equity investors could play a role in this Engineering (ASE). SPIL asked the government to These situations often reflect a general and perhaps even Chinese players as well, if they re-examine the deal due to suspicions that ASE discomfort with private equity involvement in use offshore vehicles to work around the 30% was using mainland Chinese capital to finance it. certain sectors. In financial services, for example, ownership cap in the public markets. “Whether it is Chinese investors coming to regulators are highly selective as to what types Against this backdrop, the presidents of China Taiwan, or vice versa, there are rules stating which of investors can participate. They don’t welcome and Taiwan, Xi Jinping and Ma Ying-Jeou, recently sectors they can invest in and how much they the private equity because they are afraid that met in Singapore. Their public handshake can own. But sometimes it is difficult to predict the ultimate investors in these funds are hard to represented the first formal interaction between because the regulators consider things on a verify and could be backed by Chinese players, the leaders of the two territories in 66 years, and case-by-case basis,” says Jack Huang, a partner at according to Tsar & Tsai’s Lin. fuelled speculation of a closer cross-strait bond. Jones Day and chairman of the Taiwan Mergers & “There are regulations but they give the However, the political reality is that Ma’s Acquisitions and Private Equity Council (MAPE). authorities a fairly large degree of power to Kuomintang will likely be replaced at next year’s This was also an issue in 2009 when make their own interpretations. Even if you are election by the more hard-line Democratic Taiwan relaxed restrictions on its technology perfectly legitimate it doesn’t mean you will be Progressive Party. The prospects for Chinese companies investing in the mainland. United able to invest – the MOEA reserves the right to M&A in Taiwan under the new administration Microelectronics Corp. (UMC) planned to take full have the final say,” says C.Y Huang, president of are unclear, and until then regulators will play it ownership of a Chinese chip maker He Jian, but FCC Partners and founding chairman of MAPE. safe, carefully selecting investments that avoid Taiwanese regulators refused to approve it. controversy. Fears of “red capital” show no sign of abating, Economic realities “I think people in the government have especially in the wake of the brouhaha that The political balance is further complicated by different priorities,” says Paul Yang, chairman of surrounded the still-to-be-ratified Cross-Strait lobbying from Taiwanese corporations. MediaTek CBID Capital. “They aren’t necessarily going to Service Trade Agreement (CSSTA). Indeed, is not alone in suggesting that it would be in make decisions based on what makes sense Unigroup’s Zhao announced that his company its long-term interests to work with Chinese economically; it’s more about what is popular. So would suspend plans to invest in Taiwan investors, as opposed to keeping them out. I am not too optimistic about the market. But the technology companies due to regulatory There is a growing body of opinion that the cross-strait relationship is such a big part of the obstacles. Unigroup will rather focus on the US government should open up industries or risk Taiwan economy now. Having strong ties with market. being marginalized and losing competitiveness. China and the US is a must for Taiwan.”

Number 43 | Volume 28 | November 17 2015 | avcj.com 11 FOCUS [email protected] Marginal gains Taiwan’s government has announced a slew of measures to encourage global venture capital funds to invest in local start-ups. Is it doing enough to create a robust VC ecosystem?

SEQUOIA CAPITAL’S REENGAGEMENT WITH the National Development Council’s (NDC) universities, simply because the local investment Taiwan reflects a broader revival in VC activity – National Development Fund (NDF), which put in infrastructure isn’t ready yet. the island’s technology start-ups are increasingly $13 million. “Seed investing is relatively new in Taiwan and drawing attention from global investors. This was part of the HeadStart Taiwan Project you need a lot of talented people taking part,” Last year, Sequoia committed $6 million to launched by the NDC, in order to boost early- Ma says. “That’s why we launched 500 Rookies Appier, a Taipei-based company that applies stage investments in the island. The NDF agreed program to coach university students. When artificial intelligence to advertising. Last month, to commit up to $84 million to four independent they complete the training they can become the it joined a $9 million round for online design VC funds – AppWorks, plus US-based 500 pipeline of talent for us and other VC firms.” marketplace Pinkoi, and then in the last fortnight Startups, Translink, and a joint venture fund run it participated in Appier’s $23 million Series B. by the Battelle Memorial Institute’s investment Continued momentum? Singapore’s UOB Venture Management, Japan’s unit 360ip and Taiwan’s Industrial Technology While the government is expected to continue Jafco, Silicon Valley-based TransLink Capital, and Investment Corporation. supporting independent VC funds, the NDF Taiwan-based MediaTek Ventures also featured. Venture capital is gaining momentum again, hasn’t made any new investments since the The robust activity is in line with the Taiwan supported by corporate VC funds as well as first half of this year. It has also shifted its focus government’s first serious effort to create an independent players, although the latter are to financial technology and culture-related effective start-up ecosystem. It wants to reduce catching up. Local start-ups received $219 businesses. regulation, provide greater access to early-stage million across 13 disclosed deals in 2014, the There is an irony to this. The industry is highly capital, attract global VC funds and establish regulated, with the government saying it will only physical clusters for start-ups. This is intended allow traditional banks to develop products such to help recalibrate an economy still dependent “The bottleneck is as peer-to-peer (P2P) online lending platforms. on a manufacturing sector that is losing its Its justification is that the disruptive influence of competitiveness. But will the effort work? whether these people online finance will leave many current banking “The impact is still marginal,” says Joseph employees with jobless. It is an attitude that Chan, a partner at local accelerator AppWorks. can put into the puzzles VC industry participants. “Taiwan has a lot of private capital but it isn’t right fund, sector or “The bottleneck is whether these people necessarily being put into start-ups. The main can put money into the right fund, sector and issue is that capital market regulations are not company” – Lucas Wang company. Many of them are coming from the friendly to new industries. Start-ups can only old era,” says Lucas Wang, CEO of local accelerator go for IPOs if they can show a track record of TMI. “I am not saying they are inexperienced or profitability. And LPs won’t invest unless they see highest level in six years, although GIC Private’s unsuccessful, but I don’t think they can fully catch better returns through exits.” investment in KKBOX accounted for nearly half up with the new internet generation, such as the of that. So far this year, there have been seven internet-of-things or fintech.” Loss of interest disclosed investments worth a collective $94 It will take time for the government to In the 1980s and 1990s, there was ample million, compared to $88 million for 15 deals in adapt to the new internet world and Paul Yang, VC funding in Taiwan from multiple sources. 2013 as a whole, according to AVCJ Research. chairman of CDIB Capital, warns venture capital Large PC makers were actively investing so “What NDF is doing is pretty smart. They are investors that they can’t stand around waiting. independent VC players were willing to do the boosting the VC ecosystem because one of the CDIB Capital, a PE unit of China Development same, backing a string of local start-ups. Taiwan key challenges facing local funds is the high cost Financial, now manages three venture capital was even compared to Silicon Valley and Israel as of capital,” says one Taiwan corporate VC. “It is funds in Taiwan, covering technology, media a leading global technology hub. difficult for VC firms to raise money with a 10-year and telecom, healthcare, and culture. They will However, as the ecosystem matured, fund life – it’s usually 5-7 years – and that makes be joined by a late-stage VC fund that will target more VC investors moved to later-stage and it impossible to invest in early-stage companies precision manufacturing such as drones, robotics pre-IPO investments, chiefly in hardware and because it takes 4-5 years for a start-up to and green technology. It will seek third-party semiconductors. Investment dropped from $74 generate revenue. As a result, a lot of capital has capital. million in 2010 to just $8 million in 2012. When focused on later-stage deals, where there is less “Taiwan VC firms can’t just rely on local the world moved on to the internet technology risk and it is easier to get returns.” money, they have to raise it globally, which in 2010, Taiwan’s start-ups got left behind. Rui Ma, Greater China partners at 500 Startups, means proper governance and institutionalized AppWorks, which is modelled after Y echoes this view. With three local staff to help practices. You also have to be specialized, Combinator, was set up in 2010. It raised debut source deals, the GP helps build links between targeting different sectors and stages,” says Yang. $11 million fund two years later and closed its Taiwan entrepreneurs and Silicon Valley mentors. “And stay away from projects with ties to politics second fund at $50 million in March. LPs include It also provides venture capital education in local because you won’t get good returns.”

12 avcj.com | November 17 2015 | Volume 28 | Number 43 ANALYSIS [email protected] Holding pattern Taiwan’s Financial Supervisory Commission has put forward guidelines intended to make the approvals process for PE-backed take-privates more transparent. Industry participants are cautiously optimistic

HAVING SAT NEAR THE FOOT OF THE and Acquisitions Act offered cause for optimism. ambiguity that we have inquired about,” says Asian PE investment rankings in 2012, ahead They say that take-privates can go through Bryson. AmCham would like to see an auto- of only Pakistan, Taiwan is on course for a more if endorsed by third-party expert analysis, approval mechanism as stated in the Fair creditable seventh this year. The jurisdiction is approved by an independent committee, and Trade Law, whereby an application is “deemed currently comfortably ahead of eighth-placed accepted by at least two thirds of shareholders. approved” if the regulator does not respond Singapore with $2.39 billion in announced deals. While the new guidelines on reviewing within a specified timeframe. It should be noted, though, that most of investment applications from overseas Chinese this went to one deal: Morgan Stanley Private and foreign parties appear to be an attempt to Mixed feelings Equity Asia and Far EasTone Telecommunications’ offer more clarity, industry participants are wary Huang of Jones Day is generally positive about acquisition of cable TV provider China Network of the broad language and call for more detail. the guidelines, placing them in the context of Systems (CNS) from MBK Partners. For example, the FSC wants to be comfortable a gradual transition from zero transparency to For William Bryson, senior advisor at Global with the source of funding for a deal, its structure something more workable, and a bureaucracy Market Advisors and chairman of the American and financing, and the potential impact on that must take into account the will of politicians. Chamber of Commerce’’s (AmCham) PE committee, this deal is generally encouraging, but Taiwan private equity investment no game-changer in terms of his lobbying efforts. “A foreign-owned asset is being transferred into 5,000 60 the hands of another foreign entity. It happens all the time, albeit not on such a scale,” he says. “As 4,000 50 such, it is not really a litmus test.” Any litmus test would need to involve 3,000 40

the transfer of ownership from local public Deals 2,000 30 shareholders to foreign private investors. US$ million

Persuading the government to introduce a more 1,000 20 transparent approvals process for these deals has been a priority for AmCham and the Taiwan M&A 0 10 and PE Council (MAPE) for the past four years. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD Guidelines recently issued by the Financial Buyout Growth/pre-IPO PIPE Start-up/early-stage Other Supervisory Commission (FSC), while welcomed No. of deals by industry participants, are still somewhat Source: AVCJ Research contentious. “It is an improvement so the PE guys are happier, but there is that famous catch-all – ‘other considerations,’” says Jack Huang, partner- local labor. But would the regulator dig deep Indeed, the FSC expected and has waited for a in-charge of Jones Day’s Taipei office. “What are enough into funding sources to raise questions response from AmCham and MAPE. these considerations? The government says, ‘We about particular LPs in a fund? How much Opinion within the PE community appears can’t tell you what they are right now.’” documentation would be required to provide divided. One view is that the guidelines are assurances as to the viability of a deal structure? simply more of the same – “too objective” – and Wish lists And what is expected in terms of layoffs and progress has been minimal. Others suggest No PE firm has attempted to privatize a Taiwan- compensation that might arise from a buyout? that the government would welcome the listed company since 2011 when a KKR-backed Other omissions are more glaring, with opportunity to approve a deal in order to of Yageo was blocked. no reference made to the two thirds voting demonstrate good faith. As it stands, no one is The government cited concerns about the price threshold in protecting shareholders’ rights. The comfortable enough to put it to the test. and protections for minority shareholders, even FSC also adds that applications will be ruled on “There are opportunities – industry though a majority of minority shareholders within one month of a complete submission consolidation, companies that want to be favored the deal. being made, or two months if other agencies privatized, succession planning issues – but AmCham and MAPE want the following: clear must also weigh in on a particular decision. Taiwan is not transparent,” says C.Y. Huang, guidelines on foreign investment criteria; a list This raises the question of what constitutes president of FCC Partners and founding chairman of sectors in which foreign PE investment is not a complete application. “The old technique of MAPE. “Some investors are just waiting. They welcome; deal assessments that follow specific was they would ask for more and more say, ‘Your regulator is making things difficult, timelines; and explanations if investments are documentation so they could argue that the so I will hold on until you are trading at a more rejected. Amendments to the Business Mergers application never was complete. That is an reasonable level.’”

Number 43 | Volume 28 | November 17 2015 | avcj.com 13

PAUL YANG | INDUSTRY Q&A [email protected] Cross-border, cross-strait CDIB Capital, the PE arm of Taiwan’s China Development Financial, recently closed its $405 million debut China fund for China. Paul Yang, president and CEO of CDF, explains how the strategy is differentiated

Q: A captive unit of China also driven by China. Investors which will account for 5-20% of Development Financial (CDF) can benefit from Chinese growth the fund. These are new business since 2006, CDIB Capital without necessarily investing in models such as online-to-offline closed its first fund with third- a Chinese company. Our fund (O2O) services and peer-to-peer party capital this year. What is looking at Korean, Southeast online lending. We invested in was the thinking? Asian and US companies that Chinese online furniture retailer A: We were first allowed to make drive growth through deeper Meilele.com, and we think this direct investments in mainland penetration in China. This doesn’t type of business can go cross- China in 2008. Over the past prevent us from investing in a border. The internet is mainly for seven years, all our transactions Chinese company, but cross- venture investors, but we think were funded by our listed border is an angle through these areas will have tremendous parent in order to build a track which we can add value. We can growth. As a PE fund, we record. However, it is expensive help international companies “Investors typically only get involved in the for a listed company to invest operate in China and also help later stages, although it depends from its balance sheet. If we Chinese companies go overseas. can benefit on whether we can get in at a raise money from third-party We’re a partner on both sides. valuation that suits us. investors, the parent no longer from Chinese has to contribute risk capital. Q: How do you source deals in growth without Q: CDIB Capital has also launched CDF anchored CDIB Capital Asia these different markets? a cross-strait fund. How does it Partners, putting in $100 million, A: CDF has been in Korea since necessarily differ from the main fund? or about 25% of the total, to 1999, and we have some of the A: When we raised CDIB Capital show commitment to the team. best returns among investors investing in Asia Partners, some Asian LPs The contribution will be smaller in that country. CDIB Capital a Chinese said they thought we should for our next fund, allowing us to doesn’t have a physical presence focus on Taiwan-China. I become a pure fund manager. in ASEAN, but we cover the company” responded, ‘Yes, that fund will In that sense, when a customer region from our Hong Kong come.’ CDIB Capital Taiwan comes to CDF, the group can office and we’re going to open of Coffee Bean & Tea Leaf and Partners is a smaller fund – about offer a full-service solution, an office in Singapore. If you with Blue Point Capital Partners $170 million – and it focuses including , securities, look at the group as a whole, on Smith-Cooper International. on a cross-strait strategy. While fixed income, and alternative KGI Securities – which has Asia Partners is a middle-market investments. 350 investment bankers in Q: Which sectors are best-suited growth fund that typically Singapore – is one of the top five to your cross-border strategy? deploys $25-50 million in each Q: How is CDIB Capital’s strategy brokerage firms in Thailand, with A: We’re looking at three buckets deal, Taiwan Partners is going differentiated? 400 people in Bangkok. We can of opportunities. The first to commit $5-10 million to A: China is a large market where leverage the group’s investment is consumer, ranging from each investment. It was almost many strategies can work, such banking team to generate deal consumer products and services oversubscribed from day one as state-owned enterprise (SOE) flow. In addition, we have a four- to specialty retail. Coffee Bean is due to enormous interest from privatization, consumer, or strong team in our San Francisco one example, helping a global Taiwanese investors, but we technology, media and telecom office, where we are part of a brand expand in China. We’re want 20-25% from foreign (TMT), which is now so hot. We large community of mid-size also looking to invest in a fresh investors in order to be more have been doing cross-border PE firms. These counterparts produce specialty retail business institutionalized. Taiwan Partners investments for many years, aren’t like global firms that can in China, which imports a lot is a later-stage VC fund, targeting whereas many China-focused set up a team in Hong Kong or of fruit from Taiwan, and we precision manufacturing. GPs haven’t really needed to Beijing. Sometimes they look are about to acquire an Italian Portfolio companies should be look at these deals because they at acquisition targets that have baby products retailer and smart and green. So anything live happily within the large interests in China, and they need bring it into China. The second concerning robotics, drones, domestic market. But if you look a local partner. We are constantly bucket is high-end processing cloud computing and recycling at Taiwan and Hong Kong, there in discussions with around 20 US and manufacturing. We see no will fit into it. We want to support is already so much cross-border GPs about co-investing in their competition in this space and we Taiwanese companies as they activity. From ASEAN to Australia, deals. We worked with Advent have two deals in the pipeline. set up manufacturing sites in their growth to certain extent is International on the acquisition The third bucket is new services, mainland China.

Number 43 | Volume 28 | November 17 2015 | avcj.com 15 More than 550 persons attended APEF 2015, of which more than half were partners and C-suite executives. APEF 2016 should attract even more participants, with speakers representing limited partners Alpinvest, Asia Alternatives, Church Pension, HQ Capital, HarbourVest, , Partners Group, Ontario Teachers' Pension Plan, Pantheon and Temasek, general partners such as Advantage Partners, Bain Capital, the Carlyle Group, Hony Capital, KKR, L Capital, PAG Asia and SSG, and advisors including Cambridge Associates, Capital Dynamics, First Bridge Strategy, Hamilton Lane, Portfolio Advisors and StepStone. The Asia Private Equity Forum is organized annually by the Hong Kong Venture Capital & Private Equity Association, Asia's oldest and largest private equity industry association. APEF 2016 forms part of the Hong Kong Government's international financial week, which includes the Asian Financial Forum to be held on 18 and 19 January at the same venue. For regular updates on APEF 2016's agenda, please follow us on our APEF website at apef.hkvca.com.hk. Alternatively, contact the HKVCA by email at [email protected].” Opening Keynote Luncheon Keynote Closing Keynote Dr. Fred Hu Daniel Mintz Charles Ong Chairman & CEO Founding Managing Director Co-Chairman and Co-CEO Primavera Capital Group Olympus Capital Asia RRJ Group

Barry Lau Kazushige Kobayashi Hemal Mirani Mounir Guen Mark O'Hare Managing Partner & Managing Director Managing Director Chief Executive Ofiicer Founder and Chief Executive Chief Investment Officer Capital Dynamics HarbourVest Partners (Asia) MVision Preqin (Private Credit) Adamas Asset Management David Tung Chuan Thor Honorio Poblador Lin-lin Zhou Managing Director Managing Director Partner Co-founder Robert Appleby The Carlyle Group Highland Capital Partners Navegar Principle Capital Co-Founder & Chief (China) Investment Officer and Paul Yang Bonnie Lo Motoya Kitamura Chairman of Investment President & CEO Bing Yuan Founding Partner Co-founder & Partner Advisory Committee China Development Financial Managing Director, Member NewQuest Capital Partners ROC Partners ADM Capital Holding Corporation of Management Committee Hony Capital Jun Tsusaka Choy-Soon Chua Taisuke Sasanuma David Lee Managing Partner, Managing Director Representative Partner Partner and Investment Lucian Wu Chief Investment Officer & SEB Investment GmbH Advantage Partners Committee member Managing Director Founding Member China Everbright ReinFore HQ Capital NSSK Lorna Chen Michael M. Camacho Asset Management Partner, Global Asset Principal Joseph Lee Olivia Ouyang Management Group AlpInvest Partners Eric Mason Partner & Senior Managing Director (Hong Kong) Shearman & Sterling Managing Director – Director Ontario Teachers' Pension Han Kim Asia Investments IMM Private Equity Plan (Asia) Kenneth Tan Managing Director and The Church Co-Managing Partner Co-founder Samir Kumar John Lee Southern Capital Group Altos Ventures Joseph Wan Managing Director Partner, Real Estate Group Operating Partner Inventus Orion Partners Edwin Wong Sunil Theckath Vasudevan Cinven HK Managing Partner and Chief Co-founder Asel Umurzakova David He Investment Officer Amicus Capital Partners Robert Petty Head of Product Development Partner & Managing Director SSG Capital Management Managing Partner and JPMorgan Asset Management PAG Asia Capital Jonathan Hulbert Co- founder Taeyub Kim Head of Marketing & Clearwater Capital Partners Vincent Huang Jie Gong Head of Korea / Managing Client Service, Asia-Pacific Founding Managing Partner Partner Director Apollo Management Cyril Noerhadi Juntong Capital Pantheon Ventures (HK) Standard Chartered Private Senior Managing Director Equity Melissa Guzy Creador Nishant Sharma Bastian Wolff Co-Founder and Co-founder & Managing Managing Director, Head Shin Kim Managing Partner Maarten Ruijs Director Private Real Estate Asia Partner Arbor Ventures Managing Partner Kedaara Capital Advisors Partners Group StepStone Group CVC Asia Pacific Rebecca Xu Steven Okun Samuel Chu Dong-IK Lee Co-founder and Gary Doran Public Affairs Director - Asia Managing Partner & Chief Corporate Advisor Managing Director Partner, Restructuring Services Pacific Investment Officer Temasek Deloitte Touche Tohmatsu KKR Phoenix Property Investors Asia Alternatives Management Colin Sau Denis Tse CK Tsang Ravi Thakran Yuji Kimura Managing Partner Managing Partner Consultant Managing Partner Founder & CEO TR Capital Egon Zehnder L Capital Asia Polaris Capital Group Co Asia-IO Advisors David Do Kiki Yang Robert van Zwieten Sandeep Murthy Jonathan English Managing Director Partner President & Partner Managing Director VI Group Bain & Company (Hong Kong) Chief Executive Officer Lightbox Portfolio Advisors EMPEA Ayumi Sakurai Jim Hildebrandt John Huo Representative Partner Managing Director Eric Solberg Director, Private Equity Yukon Capital Partners Founder and CEO Manulife Financial Bain Capital Organiser: Co-organiser: Media Partner: EXS Capital Group Chang Sun Anand Prasanna Founder and Managing Yong Hak Huh Director Partner Founder and CEO Morgan Creek First Bridge Strategy Black Soil Homer Sun Vish Ramaswami Juan Delgado-Moreira CIO & Managing Director Free LP Passes for Pension Funds, , Endowments, Foundations, Family Offices, DFIs and Sovereign Wealth Funds. Managing Director Managing Director Morgan Stanley Private Equity Cambridge Associates Asia Hamilton Lane Asia Register: [email protected] Quote "AVCJHK2016_HKVCA" code to enjoy 20% discount off Information in this leaflet is correct at the time of printing. HKVCA represents the rights to amend (non-member rate) of a ticket for all AVCJ subscribers any details due to unforeseen circumstances

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