Taiwan returns to the private equity map

In 2005, pretty much from nowhere, Taiwan was logging big private equity investment numbers, with close to $5 billion deployed in both 2006 and 2007. That put it amongst the most active markets in Asia and it appeared to be growing in tandem with the Chinese market. Alas, as is well documented, the sudden barrage of deals made certain regulators anxious and the approvals process became tricky.

Taiwan's private equity nadir undoubtedly came in 2011 with the rejection of KKR's take-private bid for Yageo Corporation. 

KKR and Yageo founder Pierre Chen, offered a 14% premium on the electronic component manufacturer's share price at the time. However, when the Investment Commission - a division of the Ministry of Economic Affairs tasked with reviewing foreign investments - vetoed the deal, it cited the fairness of the offer price. (Yageo has since traded below that level.)
Concern over the company's capital adequacy was on one several other not-very-valid reasons.

Well, let bygones be bygones. After much educating by such foreign investment advocates such as the American Chamber of Commerce in Taipei and the Mergers & Acquisitions and Private Equity Council, Taiwan's government has finally got its act together. It was obvious how the island economy was losing out: it drew $5.6 billion in foreign direct investment in 2012 compared to more than $16 billion for South Korea.

Without going into details, the Legislative Yuan - Taiwan's parliament - has announced plans to relax regulations concerning the entry of overseas private equity funds to Taiwan. It also intends to establish a transparent approval process for acquisition bids.

Local reports suggest that the amendments may come into effect within three months, so it looks like PE may be getting another crack at Taiwan. Does it mean a spike in deal flow? Industry participants I have spoke to are certainly keen, although few are actively looking at deals.

However, PE reforms, combined with increased cross-strait activity, a growing offshore renminbi business and the introduction of T-shares (like Hong Kong's H-shares, which allow mainland-domiciled companies to list), certainly make for an interesting proposition.

AVCJ is organizing a Taiwan event scheduled for September 3 in Taipei. Details at www.avcjtaiwan.com

 

 

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• Taiwan (China)
• AVCJ Events