Western strategic partnerships ‘lead to conflict’

"We have mixed feelings about strategic partners," he said. "There tend to be a lot of fights when Western companies become involved [in private equity-backed companies]. It's because best practice in the US, for example, might not be best practice here in China,"

Tang spoke of the lack of understanding between Clear Water, a major US advertising firm, and a Fountainvest-backed Chinese outdoor advertising agency in 2000. "Clear Water tried to get the company to change its bus advertising billboards from the back of the bus to the sides of the bus, because that's how it works in the US. They didn't appreciate that in China, there are so many pedestrians, which is why the billboards are how they are."

However, Mark Qiu, CEO and managing director of China Renaissance Capital Investment (CRCI), believes that trade partners can provide a ready-made exit route - but intervention is often necessary for that to happen. His firm recently managed the marriage between a local entrepreneur and a German company, before fully exiting the business itself.

"We realized that if the German firm had to deal with the entrepreneur, he would rip them apart," Qiu said. "It wouldn't work for a group of German executives to travel unaccompanied into the Chinese countryside to deal with the firm's village factories."

Another advantage of an industrial co-investor, according to Qiu, is having a back-up plan "We don't know how to make shower heads, after all," he said. "So if you need to kick the owner out, the industrial player can pick up the slack."

The PE Leaders' Summit and Limited Partner Summit, both of which took place on Tuesday, form part of the AVCJ Forum 2011 and Private Equity Week - Asia. It continues today with the Investment Summit. For more information, please visit http://www.avcjforum.com. You can also follow events as they unfold via Twitter @AVCJ (hashtag #avcj and #avcjforum).

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• Topics
• Greater China
• China
• China Renaissance Capital Investment
• FountainVest Advisors
• Co-investment