Private Equity In China Top Firms List Salaries Jobs

Private Equity in China

If you would like to build a career in private equity in China, what would be your options? What would be the private equity market like? How much salary can you expect? Would you have any exit opportunities? How easy is it to cross borders and make your mark in China as a foreigner?

If these sorts of questions fill your mind and you’re getting confused, this is the article you should read. We will try to investigate all of the above questions and find some concrete answers.

Overview of Private Equity in China

First of all, the private equity market in China is one of the emerging markets in the world. It has been developing during the last decade. However, as a foreigner, it would be nearly impossible to break into because the Chinese Private equity market is not only the local market. It’s hyper-local. And Private Equity firmsPrivate Equity FirmsPrivate equity firms are investment managers who invest in many corporations’ private equities using various strategies such as leveraged buyouts, growth capital, and venture capital. The top private equity firms include Apollo Global Management LLC, Blackstone Group LP, Carlyle Group, and KKR & Company LP.read more mainly concentrate on local funds.

However, there are also international funds. But if you try to compare local and international funds, there is a 100% difference between the two. In the case of local funds, the team is huge. You can see that more than 100 people are working in one local fund. As a result, the pay is comparatively lower.

On the other hand, international funds recruit small teams, and play is much higher. However, local funds close many deals, and international funds have a hard time closing any deals.

Top Private Equity firms concentrate on diversified deals because the industries in China are very much diversified. You will find every industry in China – from retail to manufacturing, IT to healthcare, and a state-owned enterpriseState-owned EnterpriseA State-Owned Enterprise (SEO) is a business venture with full or partial government ownership.read more to the construction industry. You will also find industries like infrastructureInfrastructureInfrastructure refers to fundamental physical and technological frameworks that a region or industry establishes for its economy to function properly.read more, clean-tech, software, energy, etc.

So, in a nutshell, if you are working in China’s PE firm, make sure it is a local fund., you would have a hard time closing anything, which can ultimately hurt your resume Otherwise. In local funds, you will have no structured training, but you will close more deals, which will help you pump up your resume for prospects.

If you plan to go to the US or UK in the future, it’s better not to work in China because the experience in an emerging market is much different from the experience in a developed market. After working 5-6 years in Private Equity in China, if you would like to switch to the US or UK, it would be quite difficult for you.

Private Equity Services Offered in China

As you already know, Chinese private equity firms (local funds) are very focused on local funds, and they have a set of services they offer to their very local clients. Have a look at the service orientation and the services offered –

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Focus: As local funds, the primary aim is to close as many funds as possible. The target marketTarget MarketA target market consists of different groups of individuals, households, and organizations towards which a company aims to offer its products and services.read more is state-owned enterprises (SOEs) and other private companies in different industries. They also focus on cross-border deals, but the orientation is far less than the local funds.Three important factors: Chinese private equity firms don’t invest in all companies. They first select and see whether the companies they aim to invest in have three main features: whether these companies have long-term growth potential or not; second, whether these companies can provide sustainable competitive advantagesCompetitive AdvantagesCompetitive advantage refers to an advantage availed by a company that has remained successful in outdoing its competitors belonging to the same industry by designing and implementing effective strategies that allow the same in offering quality goods or services, quoting reasonable prices to its customers, maximizing the wealth of its stakeholders and so on and as a result of which the company can make more profits, build a positive brand reputation, make more sales, maximize return on assets, etc.read more or not; third, whether these companies have high-caliber management teams or not. After due diligenceDue DiligenceDue diligence is a thorough examination of information and strict adherence to the applicable rules and regulations. It ensures asset protection as well as the avoidance of malpractices and conflicts.read more, Chinese private equity firms decide to invest in these companies if they find these three factors.Services: In China, the major deals revolve around fundraising, mergers & acquisitions, and advisory. Moreover, these private equity firms also help portfolio companies create ties with big-shot industry leaders. They also help restructuringRestructuringRestructuring is defined as actions an organization takes when facing difficulties due to wrong management decisions or changes in demographic conditions. Therefore, tries to align its business with the current profitable trend by a) restructuring its finances by debt issuance/closures, issuance of new equities, selling assets, or b) organizational restructuring, which includes shifting locations, layoffs, etc.read more and manage IPOs for Chinese enterprises and offer direct investment services.High-caliber management teams: As the approach of working in private equity in the emerging market is much different than the developed market, the management team in these private equity firms has a set of skills that are not very structured yet have great value. They should know about company life cycles, how things work in the Chinese market, transaction structures, and ownership structures to handle restructuring, IPOs, M & M&As, and direct investments.

List of Top Private Equity firms in China

According to China Venture Capital and Private Equity Association (CVCA), here’s a list of top private equity firms which operate in China and as a local PE professional, you can target these private equity firms for future employment –

Accel PartnersAncient Jade Capital Management Co., Ltd.Apax Partners Hong Kong LimitedAscendant Capital Partners (Asia) Ltd.Asia Alternatives Advisor Hong Kong LimitedBank of China Group Investment LimitedBaring Private Equity AsiaBlackstone Group (Hong Kong) LimitedBoyalife Group LimitedBoyu CapitalCapital Today GroupCDH InvestmentsCDIB Capital (International) CorporationCDPQ ChinaCerberus Beijing Advisors LimitedChengwei CapitalChina Post Life Insurance Co. Ltd.China ReinsuranceReinsuranceReinsurance is a tool used by the insurance companies to reduce their claim liability by getting some of it insured by another company. It helps prevent insurance companies from insolvency. The company insuring the claims is called the ‘Reinsurer’ and the company getting insured is called the ‘Ceding company’.read more Asset Management Co. Ltd.CITIC Capital Holdings LimitedCITIC Private Equity Funds Management Co., Ltd.Coller CapitalCPP Investment Board Asia Inc.Darby Asia Investors (HK) LimitedDST Investment Management Ltd.DT Capital Management Company LimitedFountainvest Partners (Asia) LimitedGIC Special Investments (Beijing) Co. Ltd.Goldman Sachs (Asia) LLC.GoldStone Investment Co., Ltd.Gopher Asset Management Co. Ltd.Haitong International Securities Company LimitedHarbourVest Investment Consulting (Beijing) Company LimitedHillhouse Capital ManagementHony CapitalHubei Yangtze River Economic Belt Industry Fund Management Co., Ltd.IDG Capital PartnersJAFCO AsiaJiuzhou VentureKKRKPCB ChinaLegend CapitalLinqi (Beijing) Asset Management Co., Ltd.Magic Stone Alternative InvestmentMaison CapitalNewQuest Capital PartnersNorthern Light Venture CapitalOntario Teachers’ Pension Plan BoardOriza FoFsPAGPrimavera Capital LimitedQiming Venture PartnersSDIC Unity Capital Co., Ltd.SINO IC Capital Co., Ltd.StepStone GroupSVB Financial GroupTemasekThe Carlyle GroupTPGVI VenturesWarburg Pincus Asia LLC

Private Equity Recruitment in China

The recruitment process is what the actual crux of the matter is. Because from this section, you will know how you can get into Private Equity in China.

If you’re a foreigner: If you’re a foreigner and think that China is a great market for working and growing your career in PE, think twice. It may not be the case. If you’re Chinese and went to the US or UK for higher education, you can go back to China and join a PE firm because you would be considered a local only. But if you are born and brought up elsewhere and are trying to find your ground in the Chinese Private Equity market, it would be very tough for you. First of all, you will get little or no opportunity in China unless you know Mandarin at a native level. Second, you would be surprised to know that only 10-15 foreigners have worked in the entire Chinese PE industry. Now, you have two options. First, if you want to settle in China for a long time, you can learn Mandarin and work your way out. Second, suppose your dream is to return to the US or UK PE market in 5-6 years. In that case, you better not go for Private Equity in China because the structure and working style are completely different in developed and developing countries. You wouldn’t be able to add too much value if you leave China and join any US or UK Private equity firm in the future.Experience: If you’re a native Chinese and have experience in finance roles, you would be able to get into Private Equity in China easily. So, instead of wasting any time, try getting some hands-on experience. You can also go for two-three internships in PE firms. If you don’t manage to get into PE firms as an intern, work in finance departments. The idea is to show your potential employer that you have hands-on experience in the finance department.Networking: Networking is required a lot more than you think. You need to play your cards and find creative ways to network with people. You should attend every conference the PE firms conduct, meet every person who comes to the conference to generate leads, and cold-call anyone associated with a PE firm in China for at least a few years. The idea is to get an interview for an internship position or a full-time opportunity.Interviews: You need to be good with team-management analysis because you will be using this to help find out the right industries to invest in. Coming back to the interview, there are two types of interviews you would face. First, there is a type of interview just taken for interns. This type of interview is usually one round. And you would be either sitting with the MD of the PE firm or with the VP. And depending on your experience and knowledge, you will be either chosen for internship roles or shown the front door. The second type of interview is for full-time opportunities where you will be going through 3-4 rounds, and most of the questions would be technical. You will be asked questions on valuation, DCF analysisDCF AnalysisDiscounted cash flow analysis is a method of analyzing the present value of a company, investment, or cash flow by adjusting future cash flows to the time value of money. This analysis assesses the present fair value of assets, projects, or companies by taking into account many factors such as inflation, risk, and cost of capital, as well as analyzing the company’s future performance.read more, accounting, etc. You can also have a look at the top Private Equity InterviewPrivate Equity InterviewEvery top-tier private equity firm categorizes interview questions into two types. The first set of questions is designed to determine whether or not the candidate is a good fit for the company. The second type of question is the tough one, which helps the interviewer separate the best from the rest.read more Questions.Trust: In Private Equity in China, trust is the most important thing. What matters most here are the relationship and the trust between the clients and the PE firms! Legally binding contracts have less value than a person promising to deliver something. So while giving interviews, you should keep this thing in mind.

Private Equity Culture in China

A few things are important in the Chinese Private equity market. First of all, if you want to get into Private Equity in China, you don’t need to have prior experience in investment banking (which is mandatory in a few regions/few firms in countries like the US, the UK, etc.).

Second, you will be working more in local firms and less in international firms. Because in local firms, you would have a lot more funds to work on (at the same time, the number of team members is also huge), and in foreign firms, you wouldn’t know what to close because there wouldn’t be any.

Chinese private equity firms prefer local PE professionals because local entrepreneurs don’t open themselves to foreign professionals. These local professionals can easily get connected to the local business people and convince them for more connections and meetings, which results in the closure of far more deals.

Salaries in Private Equity in China

As mentioned before, local firms pay much less than international firms. According to Mergers & Inquisitions, local private equity firms in China pay around US $90,000 per annum, which is much less than the salary of international firms.

In international firms, private equity associatesPrivate Equity AssociatesA Private Equity Associate assists other senior associates and partners in identifying a well-suited target to invest in and reaping the benefits by selling it at a profit, as well as overseeing due diligence, handling communication, and preparing financial models.read more get around US $150,000 to $250,000 per annum.

There is a specific thing about Private Equity in China. Other than senior partners or MDs, no one gets carried interest, which has been one of the most significant components of the salary of PE professionals worldwide.

Moreover, in China, the tax rate is much higher. In Beijing and Shanghai, the tax rate is around 30-40%, and in Hong Kong, it is 15%. In the last ten years, Beijing and Shanghai have become much more expensive, and that’s why living under the US $90,000 per annum is not an easy thing.

Private Equity Exit Opportunities in China

If you plan to work in private equity in China but, after 5-6 years, want to go back to the US or the UK, there is an exit route you can follow.

You can work in Private Equity in China for some time (if you get an opportunity, which is very hard to come by). And then, after a few years, you can quit and shift to investment banking. Investment banking is very strong in the Chinese market. So you can shift to investment banking in China and then find a way to go back to the US or the UK in a higher position if you want.

Normally, people who work in PE (local professionals) don’t quit private equity. If they do, there are two options – investment banking and venture capital.Venture Capital.Venture capital (VC) refers to a type of long-term finance extended to startups with high-growth potential to help them succeed exponentially. read more.

Conclusion

As a foreigner, it’s better that you don’t try to get into Private Equity in China unless you have to get into it for other reasons. The private equity market in China is not as good as investment banking. So even if you work in PE for some time as a foreigner, it’s better to shift into investment banking for better prospects.