co investment fund

A Partnership Proposal:

Recruiting Chinese Investors/LPs & Establishing a Co-Investment Fund

Co-Win Venture Resources


• Established in China, Co-Win is a co-investment service firm with stellar track records. Co-Win specializes in identifying venture capital and private equity opportunities for top-tier GPs.

• Co-Win co-invests with GPs and assists their portfolio companies in:– Next-round financing– Merge & acquisitions– Cross-border business development and collaboration

• Co-Win also provides co-investment solutions to high net worth Chinese investors.

• Recently, Co-Win switched its focus to the U.S.


Agenda

• Opportunities and Challenges with Chinese Investors

• Why a Partnership can Help Achieve Your Goal• A China-round Co-investment Fund Proposal• Profile of an Ideal Partner• Action Plan• Appendices– An Introduction to Co-Win Venture Resources– Recent Reformation to China’s Capital Market

Opportunities and Challenges with Chinese Investors


The Big Picture• U.S.

– The economy has recovered from a long recession, leading to increased level of investment activities (CNBC, 2014).

• China– Despite loads of problems, the economy in China is still growing fast

at an annual rate of 7%, exceeding most Western countries (Fortune, 2015)

– Restructuring is expected.• Manufacturing is slowing down.• But service industries are growing fast.

– Leading Chinese companies are investing heavily at the global scale.– Wealthy Chinese investors seek to allocate a large portion of asset

overseas.

http://www.cnbc.com/id/102294235

http://fortune.com/2015/01/21/china-economy-growth-slowdown/


Opportunities to U.S. Financial Institutions

• Client recruitment– U.S. financial institutions can recruit Chinese high net worth

individuals (HNWIs) as clients.• Significant amount of capital

• Great investment opportunities– Particularly, U.S. private equity funds can enjoy great return if they

invest in a company that• operates in a fast-growing service industry;• possesses advanced technologies, leading brands, unique

products/services;• can succeed in China’s huge market.


U.S.-China Collaboration Success Stories

• China Auto Rental (www.zuche.com, HK: 0699)– Hertz spent years searching for a success formula in China.– In 2012 Hertz chose to invest $200 million in China Auto Rental (CAR) for a

20% stake. CAR went public at Hong Kong in 2014, bringing at least three times return to Hertz.

– Co-investors such as Warburg Pincus also enjoyed investment success.

• eHi (www.1hai.cn, NYSE: EHIC)– Enterprise was late to China’s car rental market, so it chose to invest in eHi for

a 15% stake. eHi went public at New York in 2014.– Co-investors such as Ctrip ($100 million) enjoyed investment success.

http://www.zuche.com/

http://www.1hai.cn/


China Investors’ Requirement

• We were asked by a large Chinese asset management firm to seek investment opportunities in the U.S. and Europe.– Preference is given to convertible bonds of listed companies. – Deal size at about $100 million.

• In 2014, this investor has invested $530 million in U.S. stock markets, $730 million in Europe stock markets, and $3 billion in Asia stock markets.

• The sectors of interest include: – healthcare service, pharmaceutical, food;– healthy and happy lifestyle products/services: movie, media, culture, leisure, sports, tourism, vacation, and

education;– fashionable consumer products for the middle class;– environment and energy saving, public utility;– high-technology;– financial service.

• Particularly interested in those companies who plan to expand their businesses in China.– This Chinese firm can strongly support their expansion in China in terms of commercial resources, public relations,

and quality talents.


How many HNWIs are there in China?• According to Hurun Report (2013) and Wealth-x and UBS

billionaire census (2014), the number of Chinese HNWIs (asset value in USD) is as follows:– Over 1 billion: 150– Between 750 million and 1 billion: 75– Between 500 and 750 million: 250– Between 250 and 500 million: 800– Between 200 and 250 million: 1200– Between 100 and 200 million: 1500– Between 50 and 100 million: 2800– Between 30 and 50 million: 4700– Total above: 11475

– Over 16 million (CNY 100 million): 64500

http://up.hurun.net/Humaz/201312/20131218145442191.pdf

http://www.wcvb.com/blob/view/-/28100080/data/2/-/hrkwry/-/Billionaire-Census-2014-pdf.pdf





Characteristics of Chinese HNWIs

• The population size of “China Ultra High Net Worth” is estimated to be 17,000, with an average net worth of 1.82 billion (CNY), or USD 293 million.

• The population size and net worth are still increasing over time.

• The majority of these individuals are entrepreneurs in manufacturing, real estate, and technology, media & telecommunications industries. – Average age is 51. – Most of them reside in large cities along the east coast line of China.– Confident in China’s economy development.

Source: China Ultra High Net Worth Report 2014-2015 (China Minsheng Bank & Hurun Report, 2015)

http://www.hurun.net/CN/ArticleShow.aspx?nid=9625


Chinese HNWIs Investment Requirements• More than 70% of Chinese HNWIs have financing needs. The main purpose includes

supporting enterprise growth, M&A, and liquidity. 77% of them use bank systems for financing.

• 60% of Chinese HNWIs invest in the name of their enterprises, with the main goal of maintaining or increasing asset value. 85% of them use their own investment team.

• 75% of Chinese HNWIs use M&A for vertical integration, expansion, and diversification.• 80% of Chinese HNWIs are interested in overseas investment for the purpose of enterprise

internationalization and risk mitigation through diversification.• Some Chinese HNWIs invest in art work. Majority of them choose jewelry, and ancient

paint/drawing.• Chinese HNWIs are interested in holding large-amount insurance policies for the purpose of

wealth succession planning, risk mitigation.• 60% of Chinese HNWIs would like private healthcare service• 70% of Chinese HNWIs face wealth succession problems.• 75% of Chinese HNWIs want to manage their own charity fund, which on average is about

1.6% of their total assets.• 70% of Chinese HNWIs want private banker service.

Source: China Ultra High Net Worth Report 2014-2015 (China Minsheng Bank & Hurun Report, 2015)

http://www.hurun.net/CN/ArticleShow.aspx?nid=9625


Chinese HNWIs and Private Equity Investment

• Chinese HNWIs have a strong desire to allocate assets overseas.– But face the challenge of an unfamiliar environment: legal system,

financial markets, investment products…– Some were forced to invest in what they are familiar with, which not

necessarily led to high return on investment. • For example, residential real estate investment in poor areas.

• Private equity investment has attracted much attention.– Most Chinese HNWIs are entrepreneurs. They want to acquire U.S.

companies with advanced technologies and leading brands to support the growth of their enterprises.

– Many of them accumulated their wealth through private equity financing. They are familiar with private equity as one of the best types of investment vehicle.


Challenges: Recruiting Chinese HNWIsU.S. Financial Institutions Chinese Financial Institutions

Challenges a U.S. financial institution faces in recruiting Chinese HNWIs as clients:• Strong connections are vital to

effectively find the targets. • Trust is a pre-requisite.• Understanding a Chinese HNWI

client’s requirement takes tremendous amount of time and effort.

• Does the U.S. financial institution have the right product that will be of interest to Chinese HNWIs?

Can a Chinese financial institution satisfy Chinese HNWIs’ asset management requirement overseas?• Advantage of knowing more Chinese

HNWIs.• But investment products are mostly

domestic.• Not many have overseas presence.

Generally, they lack the expertise to manage asset overseas for Chinese HNWIs.


Challenges: Investment Opportunities – 1U.S. Funds Chinese Funds

If an U.S. fund invests in an American company and the company would like to succeed in China:• Strong support to the investee is vital.

Such support includes but is not limited to: suppliers, distribution channels, government relations, media, and bank loans.

• It requires in-depth expertise to leverage the exit channels in China. Such channels include the stock markets in China, and acquisition by a Chinese buyout fund or a large corporation.

If a Chinese fund invests in a Chinese company: • Usually the fund can support the

investee’s growth in China rather easily.

• It is challenging to help the investee acquire advanced technologies overseas, or expand business overseas.

• Leveraging exit channels in the U.S. is difficult because it requires strong connections to U.S. financial institutions and large corporations.


Challenges: Investment Opportunities – 2U.S. Funds Chinese Funds

If a U.S. fund invests in a Chinese company directly:• It requires tremendous knowledge of

China to correctly identify the right investment target. Assessing a company that operates in a different culture and business practices is an extremely difficult task.

• Supporting the investee growth in China requires strong connections in China.

• Competition from Chinese domestic funds is intense.

• Winning the trust of investee Chinese companies is also a daunting task.

Some Chinese funds want to invest in an American company: • Due to limited international expertise

and connections in the U.S., most Chinese funds do not have the ability to invest in American companies beyond the angel investment stage.

Why a Partnership can Help Achieve Your Goal


Successful Recruitment of Chinese HNWIs• Although numerous HNWIs in China, recruiting them as clients

by a U.S. financial institution alone can be difficult.• We have strong personal connections to many Chinese HNWIs

who want to allocate their assets to the U.S.– Most of them are our past or current clients. We have their trust.– Unfortunately we do not have an asset management or investment

platform in the U.S. to directly satisfy their requirement.– But we can refer 50~100 Chinese HNWIs to our partner as future

clients, with an average investment of $5 million (USD).• A mutual beneficial proposition

– We can satisfy client requirement through our partner.– Our partner can save huge marketing cost in business development.


Identify Investment Targets

• Our U.S. partner– knows the best American companies as potential investment targets.

• We have expertise in selected industries that are growing rapidly in China, for example:– Medicine/Healthcare services– Happy lifestyles– Brand name consumer products– Business/financial services

• A mutual beneficial proposition– Together we can find the best American companies that can succeed in

China.– Such investment opportunities can lead to a high return rate (25%+)


Help Investee Grow in both U.S. and China

• Our U.S. partner can utilize its connections to help an investee American company grow in the U.S.

• We can support the investee grow in China.– We have connections to hundreds of private equity funds and large

corporations in China, who can provide necessary resources and support to the investee.

– We are expert in international collaboration and M&A. We have successfully facilitated multiple projects in the past.

• A mutual beneficial proposition– Together we can support the investee to grow in both U.S. and China.– Business success at both ends ensures investment success.


More Exit Channels

• In most cases, the exit channels for a U.S. fund are largely restricted to the U.S. stock markets, buyout funds, or acquisition by large U.S. companies.

• Our connections can bring additional exit channels.– China’s stock markets– Chinese private equity/buyout funds– Acquisition by large Chinese corporations

• A mutual beneficial proposition– Working together, we can have exit channels in both the

U.S. and China, ensuring a successful exit of the investment with a much higher return.


Major Reformation to China’s Stock Markets

• List mechanism switched to registration-based.– No longer requires a lengthy approval process.– Speedy IPO becomes a reality!

• New markets with much lower IPO threshold– Growth Enterprise Market (GEM), hosted at the Shenzhen

Stock Exchange– Over-The-Counter-Bulletin-Board (OTCBB, more

commonly referred to as the “new third board”), hosted at the National Equities Exchange and Quotations, NEEQ, Beijing.


More about the “New Third Board”• Caters to small to medium sized businesses.

– Greatly welcomed by Chinese enterprises.– Embraced by investors with huge enthusiasm.– Potentially may become the largest market in the world in a few years.

• Provides new and promising opportunities for American businesses in China.– One of our current deals, Top1 Auto, is a good example. An

international car rental company brings its capital, brand, and advanced technologies for a 20% stake in Top 1 Auto. Top 1 Auto will then go IPO at the “New Third Board” for both parties to enjoy great financial returns.

A China-round Co-Investment Fund Proposal


Establish a Co-Investment Fund – 1

• Chinese LPs– We are confident to raise the capital with a target of $200 million

(USD).• Operate as a regular fund under our partner’s administration.

– Saves operating cost and promotes our partner’s brand in China.• Invest in the best American companies who are interested in

succeeding in China– Our connections will support the investees to explore the market in

China.



• Invest in four broad areas/service industries, which are booming in China:– medicine/healthcare services– happy lifestyles– brand name consumer products– business/financial services



• Adopt a low-risk co-investment strategy, following U.S. top-tier funds and large Chinese corporate investors.– Our connections, and international collaboration and M&A expertise

contribute to co-investment qualifications.• More exit channels

– Regular U.S. exit channels– IPOs in China– Chinese buyout funds– Acquisition by large Chinese corporations


U.S. Service Businesses(Investee)

Leverage our connections in ChinaCo-Investment

Fund

U.S. Leading Funds or Chinese Large Corporate Investors

Succeed in China

U.S. Stock Markets Stock Markets in ChinaAcquisitions or buyouts


Netflix Announced its China Plan

See how the market reacts to the news!

Profile of Ideal Partners


Ideal Partners…

• With good track records and leadership• Strongly motivated to explore opportunities

presented by or related to China.• Open to innovative investment ideas.• Specialized in selected service industries.• Connected to American businesses, private

equity funds, late-stage venture capital funds and hedge fund.

Action Plan


Action Plan

• Meetings to discuss the details of the partnership proposal.

• Partnership opportunities are not limited to the proposed co-investment fund.

• We could start from client recruitment, and work on raising a new fund, facilitating your portfolios’ exit and their business development and next-round financing or M&A in China.

In summary:

• The Co-Win team can bring high quality relational capital and real money to the proposed partnership.

• The Co-Win team is full of energy and entrepreneurship.

• Working together, we can create innovative and feasible investment products to achieve a high return, with a small risk.


Co-Win’s Value to a U.S. Partner

Return

Risk

Proposed co-investment

fund

Conservative PE funds, or

Fund of funds

Aggressive PE funds

Comparable return & risk Co-Win’s value: Help our partner achieve a high return rate, while minimizing risk.

Appendix – 1

An Introduction to Co-Win Venture Resources


Co-Win Track Records – 1Industry Company Invested Investors Current Status

Supply Chain, Logistics

Eternal Asia (www.eascs.com, SZ002183),a supply chain service company based in Shenzhen.

SAIF, May 2006 The company went IPO at Shenzhen in 2007, bringing 10 times of return to investors.

Garment, Footwear

Longhao (www.longhao.com.cn), a garment and footware manufacturer and distributor based in Shenzhen.

Hony Capital, January 2008

The company was partly acquired.

Medical Devices Edan Instrument (www.edan.com.cn, SZ300206), an electronic medical device manufacturer and distrubtion based in Shenzhen.

Matrix, Softbank, and WI Harper, December 2007.

The company went IPO at Shenzhen in 2011.

Auto Parts Liancheng (www.lmc-ind.com), a precision machinery iron casting manufacturer located in Shandong.

Hony Capital, February 2008

Pre-IPO

Energy Equipment

Gross Tubes (www.gross-tubes.com), a large diameter seamless steel tube manufacturer located in Zhejiang.

CDH, September 2008

Pre-IPO

Gym Chain Store Shenzhen Catic Wellness (www.physicalclub.com), a gym chain headqaurtered in Shenzhen.

Dacheng Fund, 2008

Pre-IPO

Pharmaceutical Shenzhen Hepalink Pharmaceutical (www.hepalink.com, SZ002399), a pharmaceutical company.

Goldman Sachs, November 2007.

IPO in 2010, bringing 180 times of return to investors within 3 years.

Environment protection

Ocean Power Industrial (www.oceanpower.com), a multi-business group company headquartered in Shenzhen.

Pre-IPO

http://www.eascs.com/


Co-Win Track Records – 2Industry Company Invested Investors Current Status

Toy design and animation

Audi Toy and Aumei Culture, Guangzhou. IPO in 2010

Ultrasound diagnostic systems

SonoScape (www.sonoscape.com), a high standard diagnostic ultrasound systems and transducers manufacturer located in Shenzhen.

China International Capital Corporation (CICC), 2011

Pre-IPO

Mobile phone wholesale

Aisidi (www.aisidi.com, SZ002416), a mobile phone and digital products distributor headquartered in Shenzhen.

The company went IPO at Shenzhen in 2010.

Decorative stone manufacturing

Universal Marble & Granite Group (www.umgg.biz), a decrotive stone material manufacturer located in Dongguan.

China International Trust and InvestmentSecurity fund

Pre-IPO

Serviced offices Capital Inernational Business Centre (www.wybgs.com), a commercial office leasing and servicing company headquartered in Shenzhen.

Sequoia Capital, Trust Bridge

Pre IPO

Commercial real estate

Wanda Group (www.wanda.cn), the largest commercial real estate group company of China, headquartered in Dalian.

Several private equity funds

Dalian Wanda Commercial Properties went IPO at Hong Kong in 2014.

Car rental TopOne Auto (www.top1.cn), a car rental company headquartered in Shenzhen.

Current deal In deal talk with global car rental companies

Human resources Shanghai KNX (www.knx.com.cn), a human resources services provider headquartered in Shanghai.

Current deal In deal talk with global human resources service companies


Co-Win Positioning

Co-Win strives to establish a platform to

serve U.S.-Sino investors, enterprises, and wealthy families

• Our core competence is international collaboration, investment, and M&A.

• Our goal is to help Chinese clients manage assets in the U.S., and help American clients manage assets in China.

Small to Medium Sized Enterprises

• PE financing to support growth• Collaborate with international companies

to enhance competitiveness• Acquire by international companies

Large Corporations• Internationalization through investment

and M&A• Global supply chain optimization• Acquire advanced technologies & brands• Diversification for risk mitigation and

better return

Entrepreneurs and wealthy families

• International M&A to improve competitiveness

• Asset management, succession planning, next generation education and development

Private Equity Funds• Invest in best enterprises, exit for profit• International capital raising

China U.S. & Europe

Small to Medium Sized Enterprises

• PE financing to support growth• Acquired by Chinese large corporations• Working with Chinese companies, business

development in China

Global Companies• Identify Chinese companies as partners,

business development in China• Acquire Chinese companies to support its

China strategy• Invest in Chinese companies and support

their IPOs for huge strategic and financial returns

Family Offices• Provide one-stop professional service to

investors and wealthy families• Develop Chinese wealthy families as

clients• Internationally invest in projects with great

potentials, particularly, co-invest with leading funds.

Private Equity Funds• Invest in best Chinese companies for great

return• Raising capital from wealthy Chinese

investors and families


Co-Win Service Offerings – 1• In China:

– Small to medium sized enterprises• Support their PE financing; • Recruit international partners to support accelerated growth, leading to a

future IPO or acquisition.– Large corporations

• Facilitate collaboration with American businesses, and acquisition of American businesses

• Help them manage overseas investment– Private equity funds

• Support their investment effort in China• Identify American businesses as partners or acquirers for the investees• Help with raising capital in the U.S.

– Investors and wealthy families• Help them manage assets in the U.S.


Co-Win Service Offerings – 2• In the U.S.:

– Small to medium sized enterprises• Connect them with Chinese PE funds• Identify Chinese partners for collaboration• Identify Chinese companies as acquirers

– Large corporations• Help them find Chinese companies as partners• Facilitate acquisition of Chinese companies

– Private equity funds • Raise capital from Chinese investors• Co-invest projects in China

– Family offices• Business development in China, recruit clients• Help Chinese investors and wealthy families manage assets in the U.S.


Co-Win in the EcosystemCollaborate with large corporations / Grow into a large

corporation / Successful IPO / Acquired

Collaborate with SMEs, or acquire them

Co-invest in excellent companies

Invest in alternative assets

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s

Entrepreneurs or executives become w

ealthy

Co-invest

Co-invest

Private Equity Funds

SMEs Large Corporations

Investors and Wealthy Families

Entrepreneurs or executives become wealthy

Invest to obtain returns

Co-Win serves different types of customers. Investment success will make many “old” customers “new” investors, hence forming a dynamic ecosystem.


Co-Win Advantages – 1

Co-Win is an integral part of the private equity and venture capital ecosystem, widely connected to the community both in China and globally.

• Connections in China– Growing companies– Corporate investors/acquirers– Emerging LPs– Existing GPs and emerging fund managers

• Connections outside of China– Global LPs– U.S. corporate M&A departments, and corporate venture capital

funds– U.S. technology ventures and SMEs– U.S. GPs


Co-Win Advantages – 2

International collaboration and M&A expertise• Please refer to the track records earlier.

These connections and industrial expertise enable Co-Win to make a variety of deals:• Direct and secondary deals in China• Co-investment deals both in China and U.S.• Fund deals both in China and U.S.• Portfolio exit through M&A

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