Chinese investors bring exit opportunities but inflate entry prices

Kenny Wastell
16 March 2017

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Private equity houses are anticipating a surge in interest from Chinese investors for European assets, according to a recent report by placement agent MVision and the London Business School.

In the survey of 58 professionals at GPs across five continents, 86% of those polled believe the increase in involvement from Chinese investors presents more exit opportunities.

The research, carried out by placement agent MVision and the London Business School, found GPs expect Chinese investors to increase investment in the healthcare, technology and infrastructure space, and to move away from investment in real estate.

The sector that is believed to have been the most popular with Chinese investors over the past year is the industrial sector, with 53% of respondents saying they had noticed buyers from the country targeting the space. The technology sector is perceived to have been the second most popular with 48% saying they had noticed Chinese investors targeting it.

On the fundraising front, MVision CEO Mounir Guen said in a statement that more than half of those interviewed revealed they would actively seek out commitments from Chinese LPs for new funds this year.

However, of those polled, 76% believe a growth in activity from Chinese investors – including corporates and PE firms – is inflating valuations. Some respondents said this was a natural consequence of an increased number of bidders in a given process, though 45% said offers from Chinese backers were "overpriced".

Two thirds of respondents said they had faced more frequent competition from Chinese buyers in auction processes over the course of the past 12 months, while 29% said they had lost an auction process to a Chinese competitor during 2016.

In February, Chinese private equity firm PAG led a €214m expansion round for Latvian dairy Food Union Group, in order to support the company's ongoing expansion in China.

The private equity space has also seen the growth of Sino-Italian firm Mandarin Capital Partners in recent years. The GP expanded its remit to include Germany as a target market with the opening of a Frankfurt office in September 2013.

Europe is expected to attract the greatest level of investment, the recent research found, with the US in second place.