China deals

Private equity wrestles with China’s slowdown

China’s economic slowdown is prompting the world’s private equity firms, Carlyle, KKR and TPG, to search for ways to juice returns by pushing banks to offer more leverage and control of companies. KKR inks its first control deal in China.
TPG invested in Shenzhen Development Bank, which as a bank has a highly geared balance sheet because it makes loans as a business.
TPG invested in Shenzhen Development Bank, which as a bank has a highly geared balance sheet because it makes loans as a business.

China’s economic slowdown is prompting private equity firms to change their tactics to maintain returns in the country, with one suggestion being to push banks to provide more leverage, finance recapitalisations and to take more control of portfolio companies themselves to push through changes.

“With the slowdown in economic growth, being a passive minority investor in an unlevered company is a pretty hard way to make private equity level returns,” said Stephen Peel, co-head in Asia for US private equity firm TPG, at the SuperReturn Asian 2013 conference in Hong Kong last week.

KKR announced its first majority-owned investment in China on Tuesday. The US...

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