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In 2005, several Chinese entrepreneurs started a milk production company, Modern Dairy. The company realized there was a huge opportunity in China for milk as right now the country is third in the world in terms of production.
Besides, in light of some of the contamination problems in the industry,especially last year's melamine scandal, there was a need for a better approach.
Well, Modern Dairy has caught the attention of the mighty private equity firm KKR. This week, the firm invested $150 million in the venture, according to Bloomberg.
With the capital infusion, Modern Dairy will have the resources to implement modern health-safety measures. Obviously, this will be critical.
The firm will also have the ability to strike acquisition deals. Keep in mind that the milk production industry is highly fragmented in China.
Even though the Chinese milk industry has been dicey -- and even dangerous -- the fact remains that consumption keeps increasing (hey, what doesn't grow in China?). For the most part, China is westernizing, and as a result, adopting new dietary habits.
So, all in all, this should bode well for KKR's investment. And no doubt, the firm needs some hits.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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