1、Private Equity in Developing Countries WHYHOWWHATof1LoadingWHYPrivate EquityDeveloping CountriesChina&India123of2Why Private EquityAttractive ReturnMitigate RiskBusiness UncertaintyHard-to-value AssetsInfo Asymmetriesof3Exhibit 1Why Developing Countries“Economic growth remains the primary driver of

2、increasing emerging market private equity commitments. Source: ”Exhibit 2Higher growthLower leverageHigh rate of job creation Support for smaller company4Why Developing CountriesEU 36% 26% Asia/Oceania 27%15% Exhibit 3For 2010 & 2011, Asia/Oceanias share is higher than both the EU15 and the USA5Why

3、Developing CountriesEmerging markets increaseUS one of countries that declined fastestExhibit 4 & 5The index measures: size of gov, expenditures, taxes, enterprises, legal structure and security of property rights, access to sound money freedom to trade internationally regulation of credit, labor, a

4、nd business6Why Developing CountriesExhibit 6 & 7Both the Breadth and the Quality of the Emerging Market Private Equity Opportunity have Improved Since 2000.7Why Developing CountriesRestructure external debtBoost economic healthIncrease investor confidenceLower tax on capital gainsEncourage equity i

5、nvestment & stock market growthLower investing costsDiminish info asymmetriesof8Why China&IndiaEmerging Asian markets NO.1 attractive destinations for global investorsChina No.1 investment target for 9 consecutive yearsIndia No.2 investment targetRising Middle ClassUrban MigrationIncreasing Market D

6、emand10Why China & India111980sForeign direct investment allowed: 4 economic zones (1990 every city)19901st stock exchange2001Join WTO20042nd board for SMEsliquidity for 29.3m SMEs(contributes 75% workforce, 51% GDP 2004Legalized the ownership of private property gave corporation an infinite life200

7、6Bankruptcy lawframework of bankruptcy in private and state-owned enterprises, clear procedures for insolvent enterprise to restructure or exit allotment option on IPOs, one year lockupLoadingHOWFundraisingInvestingExiting12314How Fundraising Fund StructureLimited liability partnershipUnder the old

8、Partnership Law, only unlimited liability partnerships were permissible.Legal person partnersThe amended Partnership Law allows both legal persons and individuals to invest in partnerships19How Fundraising Capital SourceInstitutional InvestorsWith the exception of investments targeted towards infras

9、tructure, regulations dont permit conventional sources of PE capital like insurance companies and pension funds in India to participate in PE.Domestic PE firms are limited to raising fund from non-financial institutions.Individual InvestorsDomestic PE firms are limited to raising fund from affluent

10、individual investors.21How Fundraising Capital SourceNew PE player in developing countryUS foreign aid (eg., USAID), UN, World Bank, IIC, CDCGov. investment arm: EBRD, DEG, FMO, Norfund, Quasi gov corp. (eg. OPIC)Multilateral financial institutions (eg.IFC)2 fold roleInvest in Funds as direct grant/

11、LT loanProvide guarantee22How Fundraising Capital SourceWhy Local Based Fund languagelocal networksexperience at top US-based institution24For any of the large private-equity firms in the West to be a real player in China, you probably should have a RMB-dominated fund. “”- David RubensteinHow Invest

12、ing: Types of Investment27How Investing: Types of InvestmentPrivatizationsImprove the productivity of SOE (10% of sharesRussian : an ambitious program to generate revenues.A wave of nationalizations may happen. Truth: gov interventions mainly in developed countries, primarily as a temporary rescue,

13、not a permanent takeoverThe legal and institutional framework remains in placeRegulatory and corporate governance reforms in response to the crisis33How Investing: Types of InvestmentInfrastructure Funds : Macro NeedsExhibit 16Macro needs of infrastructure funds.42How ExitingIPOStrong link between h

14、ealth of IPO market and the fund raising ability of PE fundsM&ATrade Sale or financial InvestorShare SaleOtherWrite-off, buy-back and put back to company or seller46Exhibit 17Exit channels in China and India, 2000-2010LoadingWHATOpportunitiesChallenges12352What Opportunities54Clean tech, e.g.: renewable resources, recycling and pollution-control equipment. Conversations around water