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In a way, the private equity market in China looks similar to the ways things looked in the U.S. during the late 1970s. Basically, the opportunity was massive. Of course, one of the big beneficiaries was KKR.
Well, the firm is also jumping into the action in China. This week, KKR led an investor group that invested $160 million in a Chinese financial leasing firm, called International Far Eastern Leasing Co Ltd. The other investors included the Government of Singapore Investment Corp and China International Capital Corp. Having such strategic partners is a necessity in China (in terms of dealing with the complex regulations).
Because of strict banking laws, it is easier for Chinese businesses to get financing from financial leasing companies (at least for smaller ones). It helps that the business loans are backed by collateral.
However, the market is quite fragmented. So, with the help of KKR, there is an opportunity to build a market leader. At the same time, such a firm will be critical in getting deal flow and putting together private equity transactions.
Recently, KKR has certainly been active in China. Some of the deals include Tianrui Group Cement Co. and Ma Anshan Modern Farming (a dairy farm).
Tom Taulli is the author of various books, including The Complete M&A Handbook
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