More private equity (PE) funds in China are engaging in merger and acquisition (M&A) deals and even seeking control of their target companies amid slack IPO activity in the domestic capital market, an industry expert said Tuesday.
Previously, investors were satisfied with just being financial investors and holding stakes of 20 percent to 30 percent, but the trend is to seek larger stakes, said Effie Yang Hui, a partner at PwC China.
But to play a more active role in running a post-acquisition company, PE investors need expertise in the industry specifically and management generally, Yang said. More firms now meet those criteria, noted Yang.
A total of 246 M&A deals in the consumer and services sectors were completed in 2015 in China, with a combined value equivalent to $10.08 billion, the Beijing-based newspaper China Economic Herald reported on Saturday.
Chinese PE funds can be roughly divided into those with international backgrounds and those established by domestic investors, according to Yang.
"Indigenous yuan-denominated funds are more oriented toward the 'quick in, quick out' style of investment that favors pre-IPO projects," Yang told the Global Times Tuesday, noting that domestic funds with global backgrounds have more patience in seeing their invested companies grow.
