Bain Investment: Long-Term Latent, Looking At The Cash Flow And Cooperative Relationship Of Enterprises

"We generally do not choose to invest directly in Chinese enterprises. Local entity Instead, we need to restructure the enterprises and set up overseas Off Shore Company to control the entities in the country. Carlyle Asia Venture Partners, managing director and Asia growth capital team leader, Mr Wen TSE once said. Zu Wencui's remarks reveal one of the ways that private equity funds invest in China.

Mr. Bain, managing director of investment (Asia) Limited, disclosed. Investment Enterprise standards. "First, we must have a long-term view. We should not only see whether an industry is being sought after by investors at a specific time, whether it is sought after by the stock market, but also whether there is a reasonable need for the existence of the enterprise in the long run, and whether there is a long-term development potential. Generally, it takes at least 5 years for each project to be invested. In the history of Bain investment, the longest holding time is 15 years.

"Second, we value highly. enterprise Cash flow. The key point of business fundamentals lies in the ability of enterprises to generate free cash flow for quite a long time. Some enterprises may earn a lot of money, but the cash flow is very poor. Some enterprises' capital cycles may take 10 months to 12 months from receiving contracts to completing projects. There is also a longer period for enterprises to return money, and often wait until the project is submitted to customers before they begin to withdraw money. From construction to final recovery, it will take more than 2 years. For such companies, the standard of our investment is that enterprises must produce better cash flow after a predictable period. "

"Third, within the company invested, we need to establish long-term cooperation with other shareholders. Therefore, before investing, it will consider whether there is a long-term cooperative relationship with the management of the company. Especially in China, because Bain is more shareholding companies, how to find a team, find an effective mechanism, establish long-term cooperative partnership and achieve the consistency of interests is crucial for us. "

Take Carlyle as an example: the standard of its investment enterprises is a strong and mature management team, a market share lead and an expected cash flow. On the whole, enterprises with three standards are often favored by private equity funds.

First, excellent personal conditions. For private equity funds, the personal quality of entrepreneurs is particularly important. Generally speaking, when choosing private investors, apart from paying attention to the technology of entrepreneurs, they also value their "soft factors" such as their sense of innovation, professionalism, integrity, cooperative communication and contingency determination.

Second, enough profitability. Private equity funds conduct detailed and thorough investigation and assessment of investment projects, including the overall situation and development plan of enterprises, the industry of the enterprises, the analysis of competitors, the investigation of business management, the analysis of sales and marketing, and the financial analysis.