Jintai Business Report: Jiuding Capital’s Species Upgrading
2013-08-02
China’s PE investors are nervous and confused. After the nine months’ suspension of IPO, a number of PEs are now in an odd situation. Dismiss and solo leave are the foreshadows of the premature senility of this elite industry.
Jiuding Capital is destined to the benchmark of the industry with each and every move being watched by the market. The leave of a professional manager brought Jiuding Capital under the spotlight, even though it was not really something big in the industry.
Instead of concerning about the timing of Bo YU’s departure for starting business on his own, which was a critical moment for all PEs, the market was more interested in how Jiuding Capital would subvert and break through. In fact, there have been well-known “Big Guys” of PE withdrawn from the industry in various forms yet went quiet soon with no exception.
There is a large dispute over Jiuding Capital. It was even tagged with “PE Factory”. Pessimists remarked that the work flow of Jiuding Capital was under major challenges and the leave of Bo YU somehow intensified this speculation.
Objectively speaking, the department of Bo YU, an investment manager experienced in pharmaceutical sector and equipped with a large deal of networks, inevitably carried certain impact, yet no to the level as to shake the stable management structure and professional team of Jiuding Capital. There are some exaggerations and sensationalizations in the market. Over the eight years of vigorous growth of Jiuding Capital, there were professional managers or more senior management leaving, yet Jiuding Capital rose rapidly despite these adverse effects via its particular inner strength.
The grass-root Jiuding Capital has been subverting the rich and handsome image of PE sector all the time. Printed with royal demeanor of Sichuan, it is adventurous, rational and fast with resolute moves and courageous innovation. In Jiuding Capital, there is no gene of individualistic heroism but teamwork and cooperation. In fact, the impression of Jiuding Capital on others is not one or several investment stars to be remembered but the whole integral team.
The absolute focus on teamwork is also seen in its investment decision-making mechanism. There are seven members in Jiuding Capital’s investment decision-making committee, not including Mr. Bo Yu and only those who win five votes or above can get the fund. It is worth mentioning that of the seven members, no one has the veto power or deciding vote, which is different from many other PE firms whose founding partners are endowed with such power.
Before Bo YU’s depature, the investment in pharmaceutical sector has been led by Mr. Wu Qiang, Jiuding Capital’s co-partner, and it’s from this that Jiuding Capital accomplished a trial of transformation to M&A in pharmaceutical field. As the IPO exit is currently closed, Jiuding Capital achieved its exit from Shanghai RAAS’s merging with the pre-IPO Banghe Pharmaceuticals and helped Tianhua Pharmacy with the acquisition of a pharmaceutical enterprise, which was a classic case of equity investment through M&A.
This merge was an attempt of pharmaceutical sector and more M&A moves shall be taken based on it. Many good stocks are in the pharmaceutical sector and more pharmaceutical enterprises are developing through M&A. The mergers and acquisitions in the industry currently is just a beginning. With more opportunities and capitals coming in, the valuation of M&A targets shall be greatly elevated. It is to some extent similar to rising mobile game market. It is learned that many PEs have set up their pharmaceutical investment funds in succession and Jiuding Capital, with no doubt, is one step ahead to the leading position.
Jiuding Capital is going through a Species Evolution to cater to the environment. Its transformation is agreed and determined internally with the direction of promoting industrial capital capacity while sustaining PE’s original attribute of financial capital.
China’s PE investment has come to a critical turning point. The whole industry is now in a phase of adjustment with shuffles and consolidations and presenting a new look, namely the return of value investing, diversification of competitions and enhancement of policy guidance. In the consensus of Jiuding Capital, a PE firm should have its investment direction more specialized with a forwarding focus and steady moves while participating in the industrial consolidation and grasping the massive opportunities in industrial mergers and acquisitions.
Invest an enterprise, support an industry and revitalize it. As part of the transformation, Jiuding Capital also has new scheme and blueprint in M&A and bond funds as well as securities investment funds.
Facing difficult exit and fund raising, it is undeniable that China’s PE firms are enduring temporary troubles. However, it is in no way declining with bright and broad prospects. China’s capital market is still young with tremendous growth space.
Measuring the present with the perspective in thirty years and paying little attention to the short-term loss and gain, Jiuding Capital aims high. Just as Xiaojie HUANG, its co-partner, remarked in an internal meeting, there is a large gap in scale as the scale of China’s largest asset management institution is just over ten billion comparing to the equity scale of tens of billions of US dollars commonly seen in internationally recognized asset management enterprises. In a fully market-oriented industry, it is OK for PE to make mistakes. The price of asset shall change with time and environment, and failures in transaction just accounts for the release of partial risk of financial market. The PEs deserve more time and patience.