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US buyout giant looking at potential investments in China
(China Daily/Agencies)
Updated: 2009-10-12 08:01
US buyout giant Carlyle sees more deal opportunities in Southeast Asia than in India and is ready to make more investments in the next 20 months as the regional economy recovers, a senior executive said. X.D. Yang, a managing director for Carlyle's buyout fund in Asia, said in late September that China remained a regional deal focus for Carlyle, although he acknowledged difficulties in doing controlling deals in China.
"It seems easier for Indian companies to do IPOs in the local market, so private equity investment to them is like an option and many Indian entrepreneurs are unwilling to sell their business ownerships," Yang said. "You need to hire the people, put them in the company and change the (company) culture so you can have better information flow," he said, referring to key factors to make a buyout deal successful. Yang made his reputation in the global private equity industry for making Carlyle's landmark deal with China Pacific Insurance (Group) Co, China's No 3 life insurer, which is seeking a listing in Hong Kong. US-based Carlyle has been actively making deals in China in recent months. Yang said this reflected that valuation levels have became attractive again after sharp declines in equity prices worldwide late last year. Carlyle has announced two deals in the past month. On September 20, Carlyle said it had bought a minority stake in Yashili, a leading Chinese infant formula maker.
The leveraged-buyout deal model in Asia might not be as popular as in the West due to the different business culture and the lack of access to leveraged financing in some Asian nations, Yang said. In some countries such as China, where many foreign investors have complained that rules for leveraged buyouts remain unclear, Yang said a 50 percent stake purchase in a Chinese company would be a good buyout-like deal. "I think the (deal) market in China is not buy-out, but buy-in," Yang said, referring to buying a non-controlling stake in a Chinese company. "It's not a timing or size issue. The problem is whether we can work together and anticipate some problems," he said. Yang noted that Carlyle has helped its portfolio companies in Asia hire more than 40 industry experts during the past five years to join these firms to improve their businesses. "You have to have people to spend time with them (entrepreneurs) or have your team there. At least, you should get somebody there," he said. (For more biz stories, please visit Industries)
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Buyout opportunities for private equity firms among Indian companies are limited, because Indian firms find it easy to list on the domestic stock market and many family businesses are not up for sale, Yang told Reuters on the sidelines of the SuperReturn Asia Conference.
