Study: European private equity investors show growing interest in China Competition for best target companies / IPO is most popular exit channel

22 November 2011

Private equity investors are taking a growing interest in entering China, but competition for the most promising target companies is increasing too. This is the result of a joint study by Deutsche Börse and CMS Hasche Sigle to be presented today as part of the German Equity Forum in Frankfurt.

“The private equity and venture capital industries are the driving engines for the private sector in China. Every year, USD 50 billion of new capital are raised, USD 25 billion are invested and there are about 200 venture-backed IPOs per year in China,” said Gavin Ni, CEO of Zero2IPO, a leading platform for Chinese private equity.

“It is pretty obvious that we will see European asset owners and asset managers allocating more funds to the Chinese private sector economy as opportunities are outweighing the risks,” said Volker Potthoff of CMS Hasche Sigle. “Moreover, it makes a lot of sense that European venture capital and private equity firms jointly explore cooperations with their Chinese counterparts due to the know-how and network on both sides that are perfectly complementary.”

The study also concludes that China will remain attractive in the long term for PE investors, although many of them believe that the country still needs to catch up, particularly on the issue of corporate governance.

Private equity investors in China see IPOs as the most important exit channel. Companies focussed on China are considering Chinese stock exchanges with this objective in mind, according to the results of the study. Those who seek international growth look for a foreign IPO. Deutsche Börse would be the first choice for many European investors in this respect.

“Investors see Germany as a central gateway to Europe, and they also value the fact that it is home to the world leaders in the green energy, engineering, chemicals and automotive sectors,” said Barbara Georg, Head of Listing & Issuer Services at Deutsche Börse. “The efficient listing processes and high corporate governance standards are also seen as exemplary.”

The study shows that venture capital and private equity must join forces with the best partners in order to be successful in China. Trusted partners and sound networks are prerequisites.

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