2018.04.18 Wu Liangliang Views:
In Anhui Province, the PE fund has played an increasingly important role in raising the proportion of direct financing and boosting the healthy development of the multi-level capital market, thus becoming an important force to support the real economy. Attracted by Anhui’s sound industrial development environment, a domestic PE firm CoStone Capital comes to invest in Anhui. By connecting “capital and industrial resources”, it continuously enlarges the amount and scale of the investments to cultivate and support start-up companies. And that continues to yield results.
In Anhui Province, the PE fund has played an increasingly important role in raising the proportion of direct financing and boosting the healthy development of the multi-level capital market, thus becoming an important force to support the real economy. Attracted by Anhui’s sound industrial development environment, a domestic PE firm CoStone Capital comes to invest in Anhui. By connecting “capital and industrial resources”, it continuously enlarges the amount and scale of the investments to cultivate and support start-up companies. And that continues to yield results.
EFORT managed to acquire W.F.C. Group
In late March, W.F.C Group, a subsidiary of EFORT Intelligent Equipment Co., Ltd. (688165.SH), successfully won the bid for welding production line projects of General Motors (GM.N) and Volkswagen (VOWG). The contract is worth nearly 70 million euros, under which more than 400 robots are expected to be integrated. The bid can further demonstrate Anhui enterprises’ strength to directly participate in the international competition in the high-end robot system integration market.
W.F.C Group, an Italian automotive equipment and robot system integrator, was once well-known in Europe. On September 28, 2017, Italian time, EFORT acquired W.F.C Group. That was EFORT’s fourth overseas M&A, to which PE firms have made a great contribution.
In the middle of last year, some strategic institutional investors led by CoStone Capital, a famous domestic PE firm, decided to jointly increase the capital of EFORT and carried out close cooperation with it to further improve the distribution of industrial chain, domestic and overseas market expansion, and capital operation. Acquisition of W.F.C Group was a significant step afterward. "The scale of this overseas M&A target is beyond EFORT 's capabilities. And completion of that M&A through PE has promoted corporate influence and competitiveness of EFORT to a new level," said Dr. You Wei, Executive Director and Chief Engineer of EFORT.
CoStone Capital founded Pharmplus in Ma’anshan City, Anhui Province in 2016
In 2016, CoStone Capital founded Pharmplus Investment Management Co., Ltd. in Ma’anshan City, Anhui Province, and now Pharmplus has come to the forefront of the retail pharmacy field. Pharmplus has more than 1,500 pharmacies, generating a turnover of 4 billion RMB. The two-year-old company is committing itself to build a modern pharmacy service system that integrates pharmacy entities, pharmacy services, B2C, and PBM, in an attempt to build a new pharmacy business form of "product + service".
On November 19, 2015, CoStone Capital was chosen to be the manager of the Anhui Industrial Upgrading Fund of 10 billion RMB. Since then, CoStone Capital has been vigorously cultivating and supporting emerging industries in Anhui, taking good advantage of capital and industrial resources. Nowadays, it has nearly 20 billion RMB fund under management here, and its accumulated tax payment reaches nearly 100 million RMB. It is estimated that the total tax payment of CoStone in Anhui from 2018 to 2019 will exceed 200 million RMB. So far, it has invested in 8 major portfolios here, with a total investment of nearly 7 billion RMB, giving rise to a sharp increase in corporate incomes and industry status of certain companies after the investment.
"It has always been our goal to support Anhui enterprises and serve the real economy." Zhang Wei, Chairman of CoStone Capital, believes that Anhui has been in a critical period of industrial upgrading. It can be complementary with European and American countries, which have greater technological advantages in the advanced manufacturing industry but with saturated markets. "We will integrate domestic and foreign industrial resources for the benefit of Anhui enterprises through equity investment, mergers and restructuring, cross-border M&A, and private placement, in order to improve the core competitiveness of relevant companies and industries."
Zhang Wei concludes the four models CoStone Capital has developed to serve Anhui companies as follow:
Firstly, the new method of attracting FDI – under the guidance of global perspective and strategic thinking, CoStone encourages the most outstanding domestic companies to settle in Anhui with the help of the capital market.
Secondly, CoStone makes full use of such financial tools and financial means as private placement and M&A to support the transformation and upgrading of the existing listed companies in Anhui into strategic emerging industries.
Thirdly, the 2.0 version of mixed ownership reform working along with asset integration and restructuring – which means vertical or horizontal M&A of competitive business portfolios or high-quality assets, and careful distribution of denotative and connotative expansion, to improve the efficiency of Anhui's traditional competitive industries.
Fourthly, CoStone combines the shutdown of outdated production capacity with the “vacating the cage for birds” strategy, that is, introducing strategic emerging industries to replace old growth drivers in the listed companies’ resources with new ones.
In May last year, the Anhui government issued documents concerning the promotion of the concentrated development of PE funds. A variety of domestic and foreign PE firms were encouraged to settle or be established there. As a successful example of investors representative for its investment operation in Anhui, CoStone Capital was introduced in detail by the official media Anhui Daily on its investment strategies.
This is part of the article on Anhui Daily. For the full transcript of the original interview, please refer to http://stonevc.com/news_view.aspx?Fid=t2:5:2&Id=689&TypeId=5&IsActiveTarget=True
Rewritten by Xu Xinru, Edited by Du Zhixin, Li Yunzhen
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
