最新完美版Dissertation Aim and Outline_Lin Feng

Private Equity in China - Booming or Dying?

A Comprensive Study of Private Equity Industry in China and its Impact on Firms'

Development

Table Contents

Aim: While growing rapidly in terms of GDP, China’s private equity industry is still a

fraction of the size of larger developed economies. This study seeks to examine the

peculiarities of the Private Equity market in China as well as analyze its impact on the

Chinese firms’ performance, the most important industry in China’s economy.

- Part 1: Introduction

- Review of current activities in China and Europe

- Part 2: Literature Review (only journal paper, official research reports only

government reports and central banks’ reports, common theory as independent

paragraph)

- Part 3: Data and Methodology

- Part 4: Private Equity Business Model and General Concept

• Venture Capital

• Growth Capital

• Buyout Fund

• Mezzanine Capital

• PIPE (Private Investment in Public Equity)

• Others (Real Estate Fund, Distressed Fund, etc)

In this paper, I will focus mainly on the Growth Capital/Buyout Fund/PIPE since these are the main investment forms in China (excl. VC as they are more early stage fund).

The first part will start by introducing the major forms of traditional PE and its

universe definition. It will then be followed by presenting the main PE characteristics

such as investing targets, capital structure, exit options, legal compliance, investors,

etc. Lastly Part One will also introduce the major global PE players.

Additional Case Study – Successful Investments vs. Unsuccessful investment

The case study will study in details two major transactions happened recently and try

to summarise the key points behind the success of a PE investment in Chinese SMEs.

- Part 5: Private Equity in China and its Unique Characteristics

Part two will start by presenting the history and background for the emergence of PE

industry in China. It will then discuss the unique characteristics of PE investment in

China and explain the rationale behind these characteristics:

• Capital Structure (Significantly levered in West V.S Pure equity in China)

• Fund form (Mainly leveraged buyout in West V.S Growth capital in China)

• Exit Options (Much more IPO exit in China)

• Legal & Compliance (More strictly regulated by government in China)

• Investors (Mostly institutional investors such as pension funds, insurance

companies, banks, etc in West V.S Government owned entities or rich

individuals in China)

Lastly part two will also introduce the major Chinese PE players

- Part 6: Comparative Analysis of PE Returns in Chinese and Western European

Part three will analyze the returns (IRR or Cash-on-Cash) for private equity funds in

Chinese industrial sector and compare it with Western Europe. Presumably PE

returns in China will be c. 3-5 times that in West Europe, which justifies the growing

trend of PE investment in China

- Part 7: Impact of PE investment on Chinese Firms’ Performance– A Comparison of

PE Financing Firms with Non-PE Financing Firms

Part four will compare listed PE financing firms with Non-PE financing firms in terms of financial performance as well as stock performance. C. 30-50 samples will be

identified (depending on data availability) in order to conduct the analysis. The

samples will include those who received PE investment after 2002 and have already

exited before end of 2010. Presumably PE financing firms will have a higher growth

rate as well as high profitability ratio comparing to Non-PE financing firms.

- Part 8: Conclusion

• PE firms normally generates a much higher return in Chinese industrial

sector comparing to that in West Europe, which encourages them to

invest further

• Within Chinese industrial sector, PE financing firms usually have a much

better financial performance comparing to Non-PE financing firms, which

creates a significant demand for PE investment within the sector

• Chinese PE market has its own characteristics and this unique feature will not be

changed in the short term

- Part 9: Refreshing

Questions:

- Possibility to conduct interviews (after the data analysis as supplementary)

- Determination of samples (Mergemarket, Dealogic, Factset, Capital IQ, Bloomberg,

Wind, China Venture, Zero2IPO). How to deal with bias/small problems?

- Empirical study/Regression/Correlation

- Enlightening conclusion?