Bain secures China leasing buyout

A Chinese conglomerate agreed to sponsor the nascent Lionbridge but then decided to reduce its sector exposure. The leasing business was among those put up for sale and last week Bain Capital acquired an 80% stake for an equity investment said to be more than $200 million.

Lionbridge remains an independent but getting there has involved a spin-out and now a carve-out. When the firm was set up in 2012 it focused on medical equipment leasing - credit analysis was easier, lending to hospitals was safer than lending to drivers, and less infrastructure was required. Nevertheless, Lionbridge is now among the top three heavy duty vehicle leasers in China, having leased about 10,000 trucks.

"When they founded the business they had a lot of experience and relationships and a good understanding of how to manage these kinds of small lease relationships," says Jonathan Zhu, managing director at Bain. "That's why they were able to grow it in an effective way."

Lionbridge focuses on four verticals: heavy duty vehicles, medical equipment, manufacturing equipment and agriculture equipment. Heavy duty vehicles account for 40% of total leased assets while agricultural equipment, a newer business line, is on 10%. These two verticals are expected to make up 60-70% of leased assets in the future.

Every participant in China's RMB3 trillion ($490 billion) leasing industry serves as an alternative source of capital for SMEs that contribute 60-70% of GDP but only receive 37% of total financing. A leasing company is able to offer cheaper credit in relative terms because the lending is secured: it knows where the leased assets are located and can repossess them if repayments are not made.

But Zhu says Lionbridge seeks to go that little bit further. "They are trying to combine financial leasing with operational assistance. The company leases equipment and at the same time offers ancillary services like fuel purchases, repair and maintenance, and spare parts purchases," Zhu explains.

The services extend to capacity assistance. An truck driver from Beijing might carry a load to Shanghai but return empty because he is unfamiliar with the local market. Lionbridge leverages its network of 170 offices nationwide and sources goods in multiple locations. This information is shared with drivers that lease its vehicles.

"It gives them the chance to utilize their equipment fully and get better cash flow," Zhu says. "It makes people more likely to want to lease from us and it also protects our own credit because if they have better cash flow they have better ability to repay."

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• Topics
• Greater China
• Buyouts
• China
• Financial Services
• buyout
• Bain Capital Asia