Blackstone pins down China's Xinrong

VC and PE investors have long been aware of the opportunity, providing a much-needed source of capital to companies looking to grow their operations and the climb the value chain in an increasingly competitive domestic market. The Blackstone Group's recent decision to take a significant stake in Xinrong Best Medical Instrument suggests there is still plenty of low-hanging fruit.

Set up in 2000, Xinrong claims to be the leading domestic manufacturer of orthopedic implants for trauma, spine, and joint applications. The company has a portfolio of products licensed under the China Food and Drug Administration (CFDA), which it sells to hospitals across the country through third-party distributors.

"We have been looking for a Chinese company in this sector for a while," Yi Luo, a managing director with Blackstone in Shanghai, tells AVCJ. "There has already been quite a bit of M&A activity in the space, so we were looking for the remaining leading independent companies that we could help grow."

The deal -which took just six months to close - is the first of its kind for Blackstone in China but still represents familiar territory; the GP previously led a consortium in the acquisition of US device manufacturer Biomet in 2007 and also bought orthopedic products specialist DJO in a $1.3 billion bolt-on deal the same year.

Xinrong's story is a familiar one in China. The founders have built a strong business sells high-quality products through a solid network of distributors nationwide, but they lack the networks and capital needed to take it to the next level. "There have been a lot of early-stage opportunities in this space but increasingly we are seeing more mature companies that can use Blackstone's help in terms of international market access , management transformation and governance improvement," says Luo.

The PE firm's first move will be to upgrade Xinrong's management by bringing in a team of senior Chinese managers with international experience that the company might otherwise have struggled to recruit. Another area of focus will be the company's sales and marketing strategy, with a view to boosting overseas sales.

Further growth will come from the Chinese orthopaedic implant market itself, which is projected to be worth $4.1 billion in 2020, up from $1.3 billion in 2013, according to Boston Consulting Group. "As demand for better healthcare grows in China, Xinrong is well placed to help meet those needs by providing low cost and high quality products," says Luo

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• Topics
• Healthcare
• Greater China
• Expansion
• healthcare
• China
• The Blackstone Group
• Growth capital