FountainVest: Chinese companies ripe for M&A

At the China Everbright Investor Conference, FountainVest Partners chief executive Frank Tang highlighted potential deals in healthcare and advanced manufacturing.

China is ripe for a surge in mergers and acquisitions, even as investors continue to have diverging opinions about Chinese companies, said Frank Tang, chief executive officer of Hong Kong-based private equity firm FountainVest Partners.

Speaking on a panel at the China Everbright Investor Conference in Qingdao, China, Tang said: “The fact that you have many buyers and sellers means now is the time for M&A.”

He pointed to a potential pipeline of deals in industries such as healthcare, upgrading of consumer services, and advanced manufacturing.

“There is no secret sauce when it comes to the key investment industries,” Tang said. “These are megatrends – if you don’t ride along the trend, you won’t be able to seize these opportunities.”

Last month, China-focused FountainVest closed its largest fund to date, securing $2.1 billion of commitments for FountainVest China Capital Partners Fund III. The fund is targeting growth equity and venture capital investments in Chinese consumer goods companies.

“At the moment, China’s slowing growth means it is challenging for investors like us, because there are industries (such as internet and fintech) that are growing at Ferrari speed, some are at tractor speed, and there are some that are growing backwards. Sectors are inherently different, so it’s important we seek complementarity with our partners.”

Tang added that FountainVest’s strategy is to invest as a main stakeholder and work with portfolio companies to identify investment projects together.

When asked about the Chinese government’s push to restructure heavily-indebted state-owned enterprises, Tang said FountainVest will continue to target private companies. “Chinese SOEs could be potentially interesting, but we remain focused on private companies.”

FountainVest manages about $4 billion of assets. Among its recent investments are Shenzhen-listed outdoor advertising firm Focus Media, Beijing-based widescreen film provider IMAX China Holdings, and Michigan-based automotive components company Key Safety Systems.

Investors in the firm’s funds include the Canada Pension Plan Investment Board, Ontario Teachers' Pension Plan, and Temasek Holdings, according to PEI data.