Gregory Puff Discusses Private Equity Funds in China Business Law Journal
China Business Law Journal, in its article “PE Metamorphosis,” extensively quoted Akin Gump Asia practice head and Hong Kong partner in charge Gregory Puff on Chinese private equity funds.
On the topic of cooperation between China funds and qualified international funds, Puff sees opportunities coming from the overseas funds, noting “They don’t really want to take all the equity risk on their own, [so] they would like others to take some of the risk alongside them. They may also have a Chinese private equity fund investing alongside them, helping them with access to the China market for other deals.”
In M&A deals in which the PE fund would be a minority shareholder, Puff, speaking on the difficulties for the fund to successfully sell the whole company, said, “That’s always a delicate situation. If the founder of the business has an interest in continuing to run the business, it may be impossible to persuade him to sell the company.”
In fact, he notes, regarding the founder, “even if you have the legal right to force the chairman [founder] to sell his shares, as a practical matter that can be very delicate. A buyer oftentimes wants the current management team to continue to manage the business. A lot of buyers see value in the management team. If the chairman is not co-operating and he doesn’t want to be part of this, the buyer might feel very reluctant to enter into that deal.”
Regarding the future of the PE market, Puff is optimistic: “There has been a lot less investing over the last two or three years from the two or three years prior to that. That means there are a lot of companies looking for capital that have not yet found it, and from my perspective that means there are good opportunities coming up for PE and VC investing.”