NewswireToday - /newswire/ -
Shenzhen, Guangdong, China, 2010/01/20 - “Risk and Reward. They are the yin and yang of investing.” So begins the latest of CFC’s Chinese-language research reports on Risk and Reward in Private Equity Investment in China. The 18-page report is available at the CFC website.
The report’s goal, as stated in the introduction, is to “summarize the ways PE firms evaluate the risks of an investment opportunity so that entrepreneurs will better understand the decision-making process of PE firms, and so greatly improve the odds of succeeding in raising PE capital.” The report identifies five key areas of risk that private equity investors attempt to quantify, manage and where possible, mitigate:
1. Market Risk
2. Execution Risk
3. Technology Risk
4. Political Risk
5. Due Diligence Risk.
Peter Fuhrman, China First Capital’s chairman, remarks “As far as we know, this is the first such detailed report prepared in Chinese, specifically for Chinese entrepreneurs. It was written with input from the entire CFC team, and represents a collation of our experiences in dealing both with the founders and owners of Chinese SME and the PE firms that invest in them.”
The report aims to increase Chinese entrepreneurs’ level of understanding ahead of any PE fund-raising process. The report puts it this way:
“PE firms seek to lower their risk when they invest, not completely eliminate it. Risk is a necessary part of any profit-making activity. The basic principle of all PE investing is finding the best “risk-adjusted return” – which means, the best ratio of risk to potential future profit."
Some strategies for entrepreneurs to lower an investor’s risk are also discussed in the report.
China First Capital (chinafirstcapital.com) is an investment and merchant bank with focused leadership on serving China’s middle market private Small and Medium Enterprises (SMEs), assisting them with capital-raising strategic M&A and other financial transactions. Unlike traditional investment banks China First Capital’s role as financial and strategic advisor to Chinese SMEs often begins at early stages of corporate development and continues through the capital raising process from private equity to a successful IPO and beyond to global leadership.