International private equity faces challenges raising public awareness is fundamental

The International Private Equity Fund (PE) is facing a major challenge from two levels in China. The first is from the market. First, China's current glut of capital has triggered a series of consequences, one of which is asset price upward adjustment. Secondly, for international PE fancy some local projects, from the system, the terms of the deal, and so on, more by the seller-led situation. The second comes from policy. Now the government has a lot of consideration, which increases the difficulty of approving approval.　　For example, the restrictions on foreign exchange controls and some of the more important industry policies are stricter than those of previous years-which has become a more prominent problem for international PE in China. The ups and downs of the market can happen in any market in the world. But for PE industry, there are still basic rules to deal with these market challenges. The first is to firmly grasp their strengths, to lock in the industry particularly good, through investment to create additional value. As far as MBK is concerned, although the real estate industry returns very high, because it is not our forte, we will not be involved.　　We just have to keep the areas we can do well: financial services, telecoms media and consumer industries. Second, the project to be able to choose, can also give up. There are so many opportunities in China that, in many cases, the problem is not where to find the project, but how to pick the project. The first thing to do is to pick out industries and companies with good prospects, but not enough, and ask yourself-if you're a shareholder, can you give the company a special value? If the answer is not, you cannot bid, you must abandon it decisively. Some time ago we found a cement company, the company is good, the cement industry itself in China now also has a good prospect. But we decided not to waste time on this project. Why?　　We think that the cement industry will be integrated, other cement companies will be interested in the company, other already involved in the cement industry will be interested in the company, we are not very likely to win, it is more logical to give up early. You can do something before you do it. After choosing a good project, PE's own strength becomes the key to win. The mainland's manufacturing industry has developed rapidly, and the capital and technical personnel have, what is missing? Corporate governance and regulatory systems. These are not like a hot-selling product can have immediate effect, but for a want to do a big company most important.　　Can let the partner feel PE to bring a lot of added value, will have a bigger chance of success. The best way to improve corporate governance and regulation is to gain control. In China, it is not easy to find some holding investment, which requires international PE to remain flexible on the issue of holding and equity. For example, if there is no controlling power, there is a need for greater protection when exiting.　　One approach is to agree that large shareholders will buy back their shares. Some might argue that these mature market rules are useless in mainland China! I think in the short term, the biggest opportunity for China is that its market is imperfect. For example, a project in the European and American markets will usually be tender, PE is facing a lot of competitive pressure. But in China, the market mechanism is notVery mature, "trust" more important. If you can build trust with the target company, you will get the project.　　Of course, there are drawbacks to such rules-like seeing someone else running a good project, you can't compete to win. The fourth principle is about pricing. Only by market price to invest, is not an international PE the most important way of investment.　　Individual investors may be very sensitive to short-term price fluctuations, but as medium-and long-term investors, they should consider the situation of the target company in the most pessimistic circumstances. For international PE itself, the biggest problem now is the lack of public awareness. PE is not to buy low sell high to make money, but by raising the value of the company to obtain profits. In addition, Governments need to be made aware of the differences between PE and strategic investors. After being bought by a strategic investor, the Chinese company disappears and becomes a department of strategic investors, and PE is bought to sell, and after a few changes, the company may return to the Chinese hands. The Xugong project has caused a lot of controversy in China. But I think protectionism is not the best way for a country to develop. There is no need to be afraid of others to acquire assets.　　China has slowly become a foreign exchange importer from the past, and should be more responsive to global mergers and acquisitions, and see what valuable assets abroad are worth China's acquisitions. PE before some mysticism, not to allow the public and the media to understand the way they create value, this lesson needs to be filled as soon as possible.