Mandarin gains 2.2x from Italy-China deal

The cross-border private equity firm has sold pharmaceutical manufacturing company IMA after helping establish its presence in the Chinese market.

Mandarin Capital Partners has sold its 7.57 percent stake in Italy’s IMA in a deal worth €53 million, according to a company statement. 

The firm exited the investment via the Milan stock exchange and realised a 2.2x multiple and 27 percent IRR from its original acquisition in December 2009, a source with direct knowledge of the matter told Private Equity International. 

IMA is a pharmaceutical manufacturing company based in Italy. The company moved into China to serve a new client base of local consumers seeking better quality drugs and to bring down production costs for its international customer base, according to Alberto Forchielli, founder of Mandarin. 

“There is a tremendous need for better quality and better safety in China’s pharma [sector]. In order to get US Food and Drug Administration approval, all Chinese pharmaceutical companies need to upgrade to safe and top-of-the-range [manufacturing] machines,” he explained.

Keeping the level of product quality high in China was not an issue, but IMA faced intellectual property protection issues with Chinese companies trying to clone its products and machinery.

Alberto Forchielli, founder, Mandarin Capital Partners

“IMA moved some of its best technology into China, started serving its Chinese customers and was also serving its international customers by manufacturing in China.”

However, while Forchielli explained that keeping the level of quality high in China was not an issue, IMA faced intellectual property protection issues with Chinese companies trying to clone its products and machinery. He said the dispute is close to resolved, although the company had been forced to involve high-levels of the local government. 

MCP also reported that it is on track with fundraising for its second private equity vehicle, Mandarin Capital Partners II, which has a target of €500 million. It made a first close on €110.5 million in July 2013, with 12 out of 25 investors re-upping to the fund, PEI’s source said.

Mandarin’s first vehicle has now returned 70 percent of its capital to investors, with more exits expected in the near future, the firm said.

Established in 2006, Mandarin Capital Partners is a Chinese-European private equity fund aimed at facilitating European companies' expansion into China and vice versa. Other firms with similar strategies include Fosun Capital and A Capital. In September, PEI reported that Fosun had raised $525 million for its cross-border vehicle, which is targeting $1 billion.