8/25/24, 11:58 PMTop private equity firms put brakes on China dealmaking

Chinese business & financeTop private equity firms put brakes on China dealmaking
Activity dries up amid Beijing’s listings crackdown and planned US investment curbs

China’s slowing growth has deterred investors, as have planned US restrictions on private equity investment in some Chinese
technology © Qilai Shen/Bloomberg

Kaye Wiggins in Hong Kong 12 HOURS AGO

Most of the world’s biggest private equity firms, including Blackstone, KKR andCarlyle, have put the brakes on deals in China this year as geopolitical tensions riseand Beijing exerts tighter control over business.
Dealmaking in the world’s second-largest economy has slowed significantly, withjust five new investments — mostly small — by the 10 largest global buyout firms
this year.
The figures underscore how quickly overseas investors’ enthusiasm for China, once
a hot market, has waned in recent years. The same 10 firms collectively made 30
investments in the country as recently as 2021 and similar numbers in earlieryears, but the numbers have fallen every year since then. This year, seven of the 10
have made no new investments at all, the figures from Dealogic show.

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Top private equity firms put brakes on China dealmaking“China has been a roller coaster for investors, with geopolitical tensions, regulatory
unpredictability and economic headwinds,” said Kher Sheng Lee, Asia-Pacific cohead for the Alternative Investment Management Association.
While the country’s rapid growth had fuelled a “gold rush” in the past, “today, it’smore like panning for gold with a magnifying glass and tweezers”, he said.
For much of the past decade, firms rushed to gain exposure to a large and fastgrowing market, buying stakes in Chinese companies that could later list in the US
and netting their investors a large windfall.
But since the ride-hailing app Didi Chuxing’s troubled New York initial public
offering in 2021, Beijing has cracked down on overseas listings, leaving investors
with fewer ways to cash out.
China’s slowing growth has deterred investors, as have planned US restrictions on
private equity investment in some Chinese technology.
“Geopolitical constraints such as outbound investment rules make China
increasingly look radioactive as an investment market despite its opportunities,”
said Han Lin, China country director at consultancy The Asia Group.

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Top private equity firms put brakes on China dealmaking

Dealmaking in China has fallen sharply among the 10 largest
buyout groups
Number of China-targeted M&A deals

Warburg Pincus

Carlyle GroupKKR

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TPG

Bain Capital

EQT AB

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The data covers the 10 largest buyout groups by funds raised for private equity overthe past decade, ranked by Preqin. It excludes those that have done no deals inChina, as well as Vista Equity Partners, which has done just one deal in thecountry. It includes real estate deals.
Dealogic also counts some deals struck by companies that private equity groups
later acquired. Private equity firms do not always disclose their deals, and any
undisclosed investments may be missing from the data.
Warburg Pincus, once one of the most active US private equity firms in China —which has bought stakes in Ant Group and classifieds site 58.com — has not done adeal in China this year and struck just two in each of the previous two years, downfrom 18 in 2017 and 15 in 2018.

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Top private equity firms put brakes on China dealmaking

With the exception of a small proposed deal this year to boost its stake in awarehouse portfolio, Blackstone, whose founder and chief executive Stephen
Schwarzman is among the most well-known foreign dealmakers in China, has notdone a private equity deal in the country since 2021, according to the Dealogic
figures.
Private equity dealmaking has slowed globally as rising rates have made theindustry’s debt-fuelled model more expensive. But the number of deals struck by
the 10 firms has fallen more sharply in China than globally in recent years.
Apart from Blackstone’s warehouse deal, Advent and Bain are the only firms
among the 10 to have agreed deals in the country this year, according to the data.
Advent invested in Shanghai-based conference and exhibitions group VNU
Exhibitions Asia and Seek Pet Food, a Chinese pet food manufacturer.
Fedrigoni, a packaging products group in which Bain owns a stake, did theremaining two of this year’s five deals, buying stakes in Quzhou paper mill owner
Arjowiggins and radio-frequency identification (RFID) company BoingTech.
A Bain spokesperson said the firm had “conviction in our core themes in China,
including industrials, renewables and consumer services” and that “attractivevaluations and the need for growth capital offer additional opportunities”. The
other firms declined to comment.
Jean Salata, chair of EQT’s Asia business, told the Financial Times in June that the“bar is high” for investing in China.
The pace of offshore listings of Chinese companies has slowed since aninvestigation into Didi after its IPO and new mainland rules governing listings.
“The IPO market’s deep freeze has left many fund managers in China stranded,”
Lee said. “When you can’t float your company, you’re looking at other exit routes,
which are often less lucrative . . . maybe trade sales or mergers will gain traction,
but the absence of a robust IPO market will probably weaken returns.”
Last year, US President Joe Biden signed an order to restrict US investment in
China’s quantum computing, advanced chips and artificial intelligence sectors inan effort to cut the flow of US capital and expertise to the Chinese military, a movethat has hit investors’ appetite.

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Top private equity firms put brakes on China dealmaking

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