Succession, global expansion drive Taiwan deal flow - AVCJ Forum

Speaking at the AVCJ Taiwan Forum, Vivian Zheng, a partner at Advantage Partners, highlighted the case of Shihan Farm, a 40-year-old specialist egg producer located in Kaohsiung. “The farm represents the highest level of food safety and animal welfare in Asia," Zheng said.

Advantage spent two years negotiating with the founder, who is in his 70s, before completing an acquisition. The regulatory approval process was time-consuming - it took 11 months and required engagement with multiple government departments - but the private equity firm also said to the founder that it could scale up the business. 

“What he cares about most is how we as a PE firm can develop his life's work and do it even better than him,” said Zheng, adding that entrepreneurs in Taiwan are generally more open to buyouts than their mainland China counterparts.

Cornell Capital has also been active in Taiwan buyouts and is currently in the process of acquiring a cosmetics company that serves as a supplier to many well-known brands. This is part of a plan to build a global operator in the space. It started with the purchase of the largest cosmetics original equipment manufacturer in the US and there have since been bolt-on acquisitions in France and the UK, as well as in Taiwan.

“They are very excited about being part of a global flagship," Joyce I-Yin Hsu, a partner at Cornell, said of the Taiwan company. "As a small player, you need to ally with others to become a first-tier player. We plan an IPO the next year.”

However, she observed that family-owned businesses in Taiwan often suffer as a result of founder autocracy. One individual has the last word on all decisions and subordinates don't dare challenge him. It is up to private equity to bring a better balance to the management team and change the corporate culture.

Offering international know-how is a frequently used tactic in winning over such founders. Vincent Chang, president of deal advisory and head of private equity for KPMG in Taiwan, noted that many mid-cap companies lack the resources to develop their businesses overseas. Private equity expertise is therefore of greater value to them than to large corporates.

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• Topics
• Greater China
• Buyouts
• Taiwan (China)
• Advantage Partners
• Cornell Capital