After two robust years, Taiwan will continue to be an attractive market with a reasonable valuation for private equity (PE) investors, who said that they are eyeing local companies with high-quality management teams and a stable cash flow as long-term investment destinations.
“The [local] media and telecommunications sectors have been popular [among PE firms] as they generate a stable cash flow, as well as the [domestic] manufacturing, service and financial industries,” Susan Lin (林水仙), managing director of AEA Investors (Asia) Ltd, told reporters at the sideline of a forum organized by the Asian Venture Capital Journal yesterday in Taipei.
She said political events, which might have created stock market fluctuations, would have a limited impact on investment decisions by PE firms, which will stay here for “at least three to five years” by injecting both capital and managerial expertise.
Lin, however, added that several sectors that rely on domestic consumption such as tourism, service and food-and-beverage industries, may attract more attention from PE firms. Such sectors are expected to see a pick up in demand once the new government accelerates its deregulation of China-bound investments.
Asian Venture Capital Journal statistics showed that PE investments in the local market rose to record highs of US$4 billion and US$4.9 billion respectively in 2006 and last year — a jump from the US$3 billion combined from 2001 to 2005.
An attractive equity valuation, world-class companies with strong management and readily available local currency financing at low cost will reward the local market, said Kung Kuo-chuan (龔國權), co-founder and partner of MBK Partners, at yesterday’s forum.
Kung analyzes consolidation of several key sectors where opportunities present themselves, including the financial and telecommunication industries.
As long as the local market continues to deregulate, there will still be good opportunities for PE investment in Taiwan over the next 10 years, he said.
Kung said, however, that his company is usually interested in firms with more than US$100 million in market capitalization, although smaller companies may be of interest if their prospects are good.
Speaking at yesterday’s forum, Lee Shyan-yuan (李賢源), a commissioner at the Financial Supervisory Commission (FSC), also extended the regulator’s welcome to inbound investments from multinational PE firms or venture capitalists.
“The FSC doesn’t harbor any bias against PEs, which we welcome to bring in capital,” Lee said.