The current environment in China is placing an ever greater premium on top-class management teams – but this kind of talent is in short supply, local GPs suggested at an industry conference in Hong Kong today.
Speaking at the HKVCA's 13th China Private Equity Summit, the panel of practitioners argued that China's slowdown had made it much more difficult for companies to grow, which meant a greater focus was needed on improving revenues and boosting market share.
In addition, the increasing prevalence of cross-border plays – whereby GPs help Chinese companies increase sales outside their domestic market, either through acquisitions or exports – was also placing a greater value on good management.
Equally, the rise in buyout transactions – where a GP might need to bring in an entirely new management team – is also driving this issue up the agenda, they suggested.
“There's a shortage of talent that knows international best practice but also understands how to run the local business,” said Terry Hu, co-founder and managing director at FountainVest Partners. The best manager of a company was usually the founding entrepreneur, he said – which made life difficult for a GP if they left the company on acquisition.
William Shen, senior partner and head of Greater China at Headland Capital Partners, agreed that the “challenges were overwhelming” if a GP tried to install a new management team as part of a buyout.
“I think we take for granted [in developed markets] the depth of the bench of management,” said Paul Yang, chairman and co-founder of CDIB Capital International Corporation. “And good management is 90 percent of the answer.”