Where’s the Exit? New Opportunities in China for Private Equity Firms

July 01, 2015

It has long been a well established exit route in developed markets for a private equity firm to sell its interest in a portfolio company to a listed company in exchange for shares in that listed company. Until recently, this was not a route that was used by acquirers that are listed on the local Chinese stock exchanges, and with more than 2,700 companies listed on such stock exchanges this has effectively shut out a financing route for many potential acquirers. A key reason for this relates to the weaker capital markets in China, which meant that this was not necessarily an attractive route for private equity sponsors. However, with a deepening of China’s A-Share market this has become a more attractive route, although, it has been unclear how, on account of regulatory constraints, this could be achieved for foreign sellers. A recent transaction has thrown interesting light on this issue.

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