JD Capital Invests in Huari Communication
2013-10-18
The year of 2013 was a hard year for equity investment industry due to limited exit channels and decreased financing and investing data. How to break away from the situation should be faced by entire equity investors.
The reporter was learned that JD Capital has made an investment in Chengdu Huari Communication Technology Co., Ltd. Talking about Huari, JD Capital's Emerging Industry Investment Director Chang Bin said, “We never took such a long time in one project.”
Huari, a leading enterprise among China's radio spectrum monitoring industry located in Chengdu of Sichuan Province, specializes in the R&D, production and sales of radio detector equipment and management systems, with strong strength and higher shares in civilian and military markets.
The change of current equity investment market requires investors to update their businesses, which has been deeply realized by Chang Bin. He said: “The project took us a long time. It also took us about one year in scheme and commercial discussion. Unlike venture capital (VC) investment, private equity (PE) firms seldom took such a long time in one mature project before investment.”
“The current equity investment market has changed a lot and the nation-wide Pre-IPO era been ended up. At present, invested companies require more value-added services from investors rather than financial support,” said Chang Bin.
He said Huari has become an industrial leader in the past five or six years and encountered growth bottlenecks in the development of private enterprises. "Private enterprises need to optimize their management structure, management modes and incentive systems to adapt to the fast development in terms of the main business and scale." Like most private enterprises, some of non-core businesses and assets of Huari have impacted on the centralization of its resources and needed to be restructured. Obviously, financial support is not enough.
After detailed analysis about Huari and communication with its executives about key corporate problems, JD Capital proposed feasible measures in the improvement of equity structure and the optimization of management structure, and provided solutions in executive team incentive, non-core asset stripping, and reorganization of listing structure.
"Lots of detailed works should be done. In addition, we should involve and provide support to implement many works. It seems we have begun to do the after-investment jobs before we invest. Generally speaking, investment firms would provide value-added services after investment, but we have to do that ahead, and it shall become normal in future," said Chang Bin.
"JD Capital did what we cannot do, which is its value. During the cooperation, we get down to the price in the end because we care more about the answers given by investors," Mo Jingyou, President of Huari told the reporter.
JD Capital's Partner Lei CAI pointed out in a corporate training conference themed by "Survival & Evolution" that equity investment has been turned into an awkward situation. If PE firms cannot set up competition barriers, its ROI would be decreased considerably. "We think the ROI of PE firms will depend on the increase of the values of an enterprise and the rate of arbitrage return will be reduced gradually. Investors and investees can achieve the win-win cooperation by selecting suitable industries and enterprises, enhancing the ability of value creation and involving in one industry for a long time," said Lei CAI.