Taiwan: Back from the brink

The Taiwan government promised to revise rules on foreign investment and facilitate the inflow of PE capital. It gave impetus to quiet lobbying of the regulators by the Taiwan M&A and PE Council (MAPE) and AmCham's private equity committee.

At last year's AVCJ Taiwan Forum, the minister of economic affairs stressed that the government sees private equity as an important contributor to local economic development. He highlighted draft legislation that promises to ease the deal approvals process. Several months later, Taiwan's cabinet approved the first amendments to the territory's Business Mergers and Acquisitions Act in nearly a decade, including a provision that raises the level of shareholder support required for a take-private transaction to go through.

The nadir of 2012 has not been revisited. Private equity investment came to $134 million in 2013 and it stands at $309 million so far in 2014. However, virtually all this capital has been deployed in growth and pre-IPO, PIPE and early-stage deals. According to AVCJ Research, Taiwan has not seen a buyout of any discernible size since 2010, when EQT Partners teamed up with the CEO of Gala TV to buy the business from MBK Partners for around $190 million.

This confirms that the efforts to regain private equity investors' faith in Taiwan as a buyout market are not yet complete. Industry participants are adamant that any move to change the rules must be accompanied by consistent application of said rules. They want a more transparent approvals process include calls for publication of guidelines on investment criteria, the release of a list of sectors and companies in which foreign PE investment is unwelcome, and detailed as explanations from the regulator as to why particular transactions are being rejected.

Even if all these requests are granted, private equity investment in Taiwan is unlikely to recapture the boom period of 2006-2008 when $11.1 billion was deployed in a mixture of predominantly financial services and media assets. Like many other Asian markets, in the absence of severe distress it is difficult to see PE investors building up commanding positions in the banking sector.

However, private equity deal flow can still be significant, although its magnitude may not be fully reflected in the data. There have already been a handful of buyouts involving Chinese businesses ultimately owned by Taiwanese entrepreneurs.

As these founders approach retirement - perhaps without natural successors in place - and as Taiwan businesses become ever more entwined with the mainland as a production and a consumption market, there will be more buyouts. But they may well be categorized as China deals.

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• Topics
• Greater China
• Buyouts
• Regulation
• China
• Taiwan (China)
• regulation
• buyout