PricewaterhouseCoopers has launched a project in Shanghai that aims to match corporate acquirers with the portfolio companies of private equity and venture capital firms, according to David Brown, head of China private equity at PwC.
“The proprietary platform will specifically source both target companies and buyers of portfolio companies [owned by] our private equity clients,” Brown explained. “It’s currently running in Shanghai, though it is still only a pilot program.”
Both buyers and sellers are sourced through PwC's clients and business networks, but the firm will look at others who do not have an existing relationship with PwC.
The project should be attractive to some GPs who have been unable to exit due to the freeze on China’s public listings, which is now more than one-year old.
Even when the listing process resumes, the number of portfolio companies held by private equity firms in China exceed the capacity of the public markets, Brown said.
“You’re looking at 300 PE-backed IPOs per year, but the estimates of portfolio companies that are held are in the thousands. Even with functioning equity capital markets there are too many companies to push out through IPOs.”
Brown added that one limitation is that most GPs hold minority stakes in companies, a position that is difficult to sell to strategics. “If private equity has control, that is clearly more attractive to corporate buyers.”
Nonetheless, if the platform proves to be successful, PWC will extend it across Greater China, he said.