Taiwan regulators promise greater transparency – AVCJ Forum

"I know some of you are very concerned about some [processing] cases. But we will make some changes so the processes become more transparent and predictable - like today's weather it's very blue," Tien-Mu Huang, vice chairperson of Financial Supervisory Commission (FSC), told the forum.

Acknowledging investors' long-standing concerns about deals being rejected by regulators, Huang noted that investments by private equity in publicly-listed companies are assessed based on industrial policy and the interests of minority shareholders. For privatizations, two thirds shareholder approval is required and the company must seek third-party expert analysis on the fairness of a deal.

The FSC no longer takes into account issues such as the impact an acquisition would have on domestic capital markets and supply chains, Huang added.

The exception to the rule in terms of lighter touch scrutiny is financial services, for which the FSC will look into the acquirer's ability to pay, its funding sources, operational capabilities and how the deal might impact employees. For investments in the insurance industry specifically, the regulator will also examine the PE investor's long-term commitment to the company's management.

Speaking on a separate panel, Julian Wolhardt, China regional leader at KKR, said that Taiwan's guidelines for regulating private equity activity are clearer and simpler than in China, but application has been problematic. A number of deals have been blocked - including KKR's attempted acquisition of Yageo in 2011 - despite being in compliance with the rules.

"We have to make sure that we have a ‘can do' attitude - that is the fundamental issue," he said. "We have to make sure the investment environment in Taiwan is encouraging for private equity."

Wolhardt added that the regulators should make it easier for foreign capital exiting the market as well as entering it. He sees flaws in the public markets, for example the requirement that private equity investors tell market insiders they plan on selling shares before doing so.

Alex Ying, managing director at The Carlyle Group, also made comparisons between investing in China and Taiwan. He noted that in China sentiment towards private equity is generally positive and so getting regulatory approval for deals is usually not a huge concern. In Taiwan, he noted, the media and public are more suspicious of the asset class, and do not necessarily appreciate the value creation element.

C.Y. Huang, president of private equity advisory firm FCC Partners, added that private equity can play a leading role in the industrial consolidation process in Taiwan, with a view to boosting operational efficiency. PE investors are also able to leverage their global networks and support overseas acquisitions by portfolio companies.

"A lot of PE firms go to China to find deals, but they don't realize that Taiwan is the best place to invest. There are a lot of first-generation entrepreneurs retiring and the second generation doesn't want to carry on with the business. In other cases, they aren't able to respond to changes in the overall business environment," Huang said. "If we don't create a transparent regulatory environment, foreign capital can't come in."”

This issue was touched upon by Shih-Chao Cho, deputy minister of Ministry of Economic Affairs (MOEA), who also gave a keynote address at the forum. He highlighted the challenges Taiwan faces in terms of potentially being marginalized in the regional economic integration process at a time when domestic companies are under pressure to diversify their businesses and address narrowing profit margins.

Cho said the government wants to facilitate development in these areas by lowering barriers for foreign investors. He cited clean techology, biotechnology, medical technology, tourism and agricultural business as particularly attractive industries.

"The MOEA has created a friendly environment for private equity and fully understands that private equity funds have faced barriers and challenges in terms of government policies and regulations," Cho added. "We have arranged several meetings and consulted with major representatives from trade and investment organizations to lower investment barriers and create a more liberalized regulatory regime."

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• Topics
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