Asia’s Private Equity 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 China? 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 VENTURE CAPITAL 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, Hong Kong 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, The Carlyle Group agreed to sell Ta entry and exit. Chong Bank to Yuanta Financial Holdings for around $300 million. Hong Kong Headquarter Unit 1401 Devon House, Taikoo Place Carlyle also exited Natural Beauty Bio- 979 King’s Road, Quarry Bay, Technology, a Hong Kong-listed business of Tim Burroughs Hong Kong T. (852) 3411-4900 Taiwan origin, through a management buyback Managing Editor F. (852) 3411-4999 E. [email protected] (relations with the Taiwanese founder are said to Asian Venture Capital Journal URL. avcj.com Beijing Representative Office Taiwan private equity exits No.1-2-(2)-B-A554, 1st Building, No.66 Nanshatan, Chaoyang District, Beijing, 3,000 People’s Republic of China T. (86) 10 5869 6203 2,500 F. (86) 10 5869 6205 E. [email protected] 2,000 1,500 US$ million 1,000 The Publisher reserves all rights herein. Reproduction in whole or 500 in part is permitted only with the written consent of AVCJ Group Limited. 0 ISSN 1817-1648 Copyright © 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD Source: AVCJ Research 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 investment banking 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 Private placement 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.