2020.02.28 CoStone Capital Views:
Seventy-five percent of the success of a project rely on post-investment management. Even though the importance of post-investment management has been universally acknowledged in the field, few is competent to apply. Therefore, funds should be well-positioned to create favorable conditions for enterprises.
EXCLUSIVE: CoStone Capital Tao Tao on How to Empower Enterprises Through Acquisition
Source: Beijing Finance
Acquisitions is the best way to empower enterprises, the “jewel in the crown” for private equities, as Tao Tao puts it. Its significance to corporate value makes it the core business of all private equalities. Buyout funds has been in the center in every equity in foreign markets, accounting for half of the total business. However, China still has plenty of room for buyout funds. Mature buyout funds are equipped with competent, experienced and professional managers and entrepreneurs who excel in management. Yet in China, practitioners are normally financial professionals without much experience in management and industries.
CoStone Capital believes that focused investment, with an emphasis on service, can enable acquisitions to empower enterprises. Instead of investing in as many as possible projects of popular race tracks, like most venture capitals do, CoStone found its own way. Being in business for two decades, CoStone has managed ¥50 billion ($7.721m) AuM of only 130 projects. Nearly ¥1 billion ($154.435m) was invested in every project. 70 percent of the projects received more than ¥50 million ($7.721m) and 75 percent have been in charge by professional executives. More than 10 percent of the members in management team supported the major investment plans. Most projects were led or solely invested by CoStone Capital.
Focused investment, with an emphasis on service, is one of the core investment philosophy of CoStone Capital. It makes funds necessary, possible and competent to empower enterprises.
First, necessity. Large amounts of investment offer funds motivation to deal with post-investment management. With a rare compulsory follow investment mechanism, CoStone is able to ensure managers to maintain the high consistency in the interests of them and other investors and account for corporate performance.
Second, possibility. Funds should possess enough shares to ensure their says in the enterprises, so as to motivate entrepreneurs.
Third, competency. Funds should be able to offer value-added services. To be competent is to be professional. Post-investment managerial professionals are numbered, whose wits should be kept on major projects, so as to take care every detail of the projects, rather than being sluggish.
Seventy-five percent of the success of a project rely on post-investment management. Even though the importance of post-investment management has been universally acknowledged in the field, few is competent to apply. Therefore, funds should be well-positioned to create favorable conditions for enterprises. CoStone’s post-investment management team accounts for more than a half of total employees, most of whom are interdisciplinary talents with years of experience on industrial operation and management.
Above: Excerpt of the interview with Tao Tao from Beijing Finance. Please refer to the link to view the interview in full: http://stonevc.com/news_view.aspx?TypeId=5&Id=796&Fid=t2:5:2
Rewritten by: Luo Xinying, Edited by: Du Zhixin, Wei Yiyi
The year 2019 marks the fortieth anniversary of China’s Reform &Opening-Up, once again, we meet at the turning point of history. What’s the next step for the game, is there any clear guidance? The answer is affirmative.
Our country is enjoying a good momentum of development, which does not come from the Washington Consensus nor the Beijing Consensus. China’s experience has proved that both the visible hand and the invisible hand are crucial: the visible hand, stands for the government-led reform, and would yield benefits for reform and opening up; the invisible hand, stands for the Marginal Power represented by the private sector, and would improve economic efficiency and tax collection, create jobs and employment opportunities.
Provided that we want to protect and expand the benefits form reform, three simple but mandatory agreements are to be made and followed: No.1 Private ownership must be recognized, protected and treated equally with public ownership constitutionally, both ownerships are scared and inviolable;No.2 Make further clarification of the principal position of market economy, “deepen economic system reform by centering on the decisive role of the market in allocating resources”, as President Xi addressed in the third Plenary Session of the 18th CPC Central Committee;No.3 Implement the guiding principles of “comprehensively promoting law-based governance” of the fourth plenum. The rule of law is essential for economic growth, irreplaceable to protect private ownership, and necessary to encourage innovation and entrepreneurship.
Above are three rules for us to avoid falling into the Middle-income Trap. Assuming that we are breaking systematic barriers to private enterprises’ participation in market economy, and boosting innovation and entrepreneurship of our society, then we are heading towards a promoting direction. We are marching in the path of light, regardless of the ups and downs of Sino-US relationship, the drop in GDP growth rate, or the monetary policy.
These principals also apply on knowing how better to run a business: don’t be hedged by rules and regulations at the beginning, pay more attention to your survival, and you’ll learn more when you start your second business.
For many years, Huawei has been the only Chinese company on the list of the Top 50 R&D Spenders. Regardless of the economy and its income, what Huawei has been doing is investing in its future, dedicated to R&D, continuously and resolutely. This provisional work underscores Huawei’s accomplishments, making Huawei anindustry leader.
So, there are standard answers on how to run a company,which could be summarized as concentration and professional dedication, continuous investment on innovation and trying harder in R&D. Entrepreneurship is also important, every single company needs entrepreneurs to push aside all obstacles and difficulties, to implement strategies and ideas. We, as investors, are destined to look for such outstanding entrepreneurs and their companies, invest in them and partner with them.
At this key point of history, a country, a company, or asingle individual, will all need to find the right path. Four decades after the Reform and Opening-up, it’s time to learn from our experience and stop “wadding across