Taiwan’s biggest buyout firm is getting ready to swoop in when Asia’s ageing entrepreneurs struggle to hand over control to a younger generation.
CDIB Capital Group is in talks with several firms in the greater China region, targeting leveraged take-private and buyout deals of about $200 million to $500 million in size. These comprise mostly of industrial-manufacturing firms listed in either Hong Kong or mainland China, according to an interview in Taipei last month with senior executives.
The group, which says it manages about $2.3 billion in proprietary and third-party capital, may also strike one or two buyouts in Taiwan this year, after privatizing specialty chemical maker Jintex Corp. in 2019.
More than one-quarter of 1.5 million small and medium-sized Taiwanese companies have at least two decades of history, and are likely to seek new ownership as their founders enter retirement. That’s according to CDIB Capital, whose president says it’s the right time for private-equity money to jump in.
“Taiwan business owners are usually older, which gives us lots of opportunities,” said William Ho, president of CDIB Capital. “Passing on the baton is a big problem as their children may not be interested in — or able to — run the business.”
CDIB, Taiwan’s first privately-run financial institution focusing on direct investments, is a unit of China Development Financial Holding Corp., according to the parent company’s website. CDIB has invested in almost 2,000 companies in Taiwan and nearly 200 companies in the greater China region, according to Ho. The company started its venture capital and PE funds business in 2013.
The group’s investments usually last about four years and target an annual return of at least 20%, added Ho. It tends to focus on deals that are too small for global buyout firms like Carlyle Group or KKR & Co. CDIB also plans to target privately-held companies.
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Ho, a 25-year private-equity veteran and a former partner at CVC Asia Pacific, joined CDIB Capital in mid-2019. The group also hired Alex Ying, a 20-year Carlyle veteran, as managing director and head of the buyout group; a team of 12 people in Taipei, Hong Kong and Shanghai.
“Uncertainties such as U.S.-China trade war, and the threat from the Chinese supply chain, are increasing pressure on Taiwan’s SMEs,” said Steven Wu, executive vice president in CDIB’s private-equity business. “That’s why business owners want to talk to us. They trust us with their companies because we’ve been in the local market for a long time.”