AVCJ China Awards: PE Exit of the Year – Beijing Leader & Harvest

This will have clear knock-on effects for certain industries. New energy and materials, energy saving and environmental protection, biotechnology, advanced machinery, IT, and new energy cars account for less than 5% of China's GDP. By 2015 it will be 8% and by 2020, 15%.

Beijing Leader & Harvest Electric Technologies is one example of a firm whose fortunes have been transformed by the changing political winds. As one of China's leading producers of medium-voltage variable frequency drives, Beijing Leader is a smart play on demand for energy efficiency products. Affinity Equity Partners and Unitas Capital didn't want for buyers when they decided to exit the firm last year.

"The company represents a very important segment of a very large industry," says Jim Tsao (pictured), a partner at Unitas. "It is the missing piece of a large puzzle."

The investors bought Beijing Leader in 2009 with a view to holding it for 5-6 years, but growth was faster than expected. "Five years earlier no one cared about this company, but suddenly the industry became a national priority and the market for energy efficiency products opened up," according to a source familiar with the transaction.

Affinity and Unitas opted for a dual track IPO and trade sale process but the lure of a full acquisition of a large Chinese company - the PE firms held 94% - meant strategic players were willing to pay a premium. A total of 10 prospective buyers from the US, Europe and Asia entered the bidding process, with Schneider Electric eventually overcoming ABB.

Affinity and Unitas sold the company for $650 million, giving them a 3x return on an investment of $200 million. The transaction won Trade Sale of the Year at the 2011 AVCJ Asia Awards and added the Private Equity Exit of the Year honor at the 2012 AVCJ China Awards. The prizes were recognition for a rare China buyout by a foreign private equity firm, followed by an equally rare trade sale exit.

Schneider's bid is said to have been received favorably not only due to the price, but also because it added relatively few pre-conditions for closure. As a result, arrangements were concluded swiftly and smoothly. "When we put it up for sale in June, someone said to me, ‘See you in 9-12 months,' but we closed it in four months," the source adds.

The deal was originally sourced by Affinity, which then sold on a 23% stake to Unitas, keeping 71% for itself. Company management held the remaining 6%. The private equity firms brought in a new CEO and CFO and set about turning the company around - no small task given that it hadn't drawn up a formal budget in 12 years.

During their tenure, Beijing Leader saw annual growth of 20%.

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• Topics
• Performance
• Greater China
• Exits
• China
• AVCJ Awards
• Unitas Capital
• Affinity Equity Partners
• Trade sale
• Exit