Program
| Wednesday, 17 September 2008 |
| 18:30 |
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Welcome cocktail reception |
| Thursday, 18 September 2008 |
| 08:00 |
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Breakfast and registration |
| 08:50 |
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Welcome remarks |
| 09:00 |
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Opening keynote address
Hongjun Lu, President & Professor, PCEC SHANGHAI INSTITUTE OF INTERNATIONAL FINANCE
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| 09:30 |
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CEO's view on dealmaking in China
First generation founders of Chinese companies are finding the
business environment increasingly challenging. Although the tax
regime has now been harmonised between foreign and domestic
enterprises, labour laws are increasingly stringent, the VAT rebate on
exports has been scrapped, and raw materials as well as labour costs
continue to rise. In spite of these factors businesses continue to thrive
as managers switch from focusing purely on expansion and top-line
growth, to honing manufacturing processes and improving operating
efficiency. A group of experienced managers discuss:
- The key operating challenges facing Chinese companies
- Is it possible to grow too quickly? What are the most common issues
that arise in fast growing companies? How can they be overcome?
- The transition from top-line to bottom-line growth
- The role of mergers and acquisitions in creating the national
champions of tomorrow
Moderator
Robert Theleen, Chairman & CEO, CHINAVEST
Panelists
Gengshu Miao, Chairman, CHINA NATIONAL FOREIGN TRADE TRANSPORTATION (GROUP) CORPORATION
Iqbal Ali Khan, Director, IBM GREATER CHINA GROUP
Yuliang Pang, Chairman, LINKGLOBAL LOGISTICS CO LTD
James M. Rice, Vice President & Country Manager Greater China, TYSON FOODS INC
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| 10:45 |
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Coffee / tea networking break |
| 11:15 |
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Outbound M&A: Securing resources and growing margins
In 2007 China's outbound M&A reached US$24 billion, an increase of
60% on 2006. Two factors, the falling dollar and China's gradual easing
of the Renminbi peg, make foreign acquisitions more attractive than
ever for Chinese companies. Meanwhile, the large cash balances on
many companies' balance sheets and US dollar reserves in the economy
at large offer a strong diversification-of-risk rationale. Other factors,
including competition for scarce global resources and "margin rollup",
or vertical integration of the supply chain, are also powerful motivators
though. On the flip side, Western governments have turned their usual
arguments against protectionism on their head, rebuffing offers from
Chinese acquirers, sometimes at the expense of the target company's
shareholders (see CNOOC, Unocal and Chevron).
- Will future overseas acquisitions be affected by the continuing
global credit meltdown?
- What structures are Chinese investors using for their overseas
acquisitions, and why?
- Which sectors are particularly sensitive to protectionism? Do
different countries have different priorities? Is this a developing or
receding trend in the West?
- What is the likely global economic and developmental impact of
CIC, CDB and SAFE's investments overseas?
- How much of overseas investment can be attributed to Chinese
companies seeking to diversify their risk out of the domestic market
and their own operations?
Moderator
Honson To, Principal, KPMG FINANCIAL ADVISORY SERVICES
Panelists
Yan Xiong, President, CHINA BEIJING EQUITY EXCHANGE (CBEX)
Brian Gu, Managing Director & Head of Greater China M&A, JPMORGAN
Simon Yuan, Director, Head of China Financial Institutions Group, MERRILL LYNCH (ASIA PACIFIC) LIMITED
Charles Cheng, CEO, Investment Banking China, STANDARD CHARTERED BANK
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| 12:30 |
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Luncheon
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| 14:00 |
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Private equity as a change agent in Chinese M&A
Many Chinese companies display common shortcomings in
terms of corporate governance, operational efficiency and social
responsibility, even though in general, they've mastered the
purchasing side of the business. These are all traditional strengths
of established PE growth capital investors. PE deal volume
experienced a sharp dip in September 2006 due in large part to
the implementation of rules severely curtailing inward investment
via offshore vehicles and overseas listings via SPVs, although it
has recovered since. Meanwhile, China's government is looking
increasingly for transfer of skills and knowledge by companies
that invest from overseas, rather than purely financial investments.
Senior PE professionals consider:
- How to make investments under the new, tighter FDI approval
process? Are RMB-denominated funds the answer, and when is a
foreign investor not a foreign investor?
- Funding structures to tackle China's special challenges.
- Hybrid ownership: PE partnering strategic investors and
management teams—what's in it for each party?
- Effective engagement with the Ministry of Commerce SAFE and industry
oversight bodies: Are there ways to speed the approval process
for foreign investments?
- How to identify the future winners of the present all-out-race for
market share and coverage.
Moderator
John E. "Jack" Lange, Partner, PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
Panelists
Jing Huang, Managing Director, BAIN CAPITAL
Chip Chaikin, Managing Director, BLUE POINT CAPITAL PARTNERS ASIA
Kathy Xu, Founder & Managing Partner, CAPITAL TODAY
Herman Chang, Sr. Director - Industrial, CARLYLE ASIA PARTNERS
Alvin Ho, Managing Director, CLSA CAPITAL PARTNERS (HK) LTD
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| 15:00 |
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Coffee / tea networking break
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| 15:30 |
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Secular and structural trends driving deals: Energy, food and water, money supply and commodities
China's appetite for raw materials to feed her manufacturing facilities
and allow continuing domestic development seems to know no
bounds. Everything from fossil fuels to base metals is being sourced
via strategic investments and long term contracts from as far afield as
Australia and Africa. Even rice, southern China's staple foodstuff, and
wheat, consumed more heavily in the north, have seen active trading
on CBOT and have hit record highs in H1/2008. The price of crude oil,
at an all-time high of US$140 a barrel, is driving up prices across many
sectors which are reliant on its derivatives for shipping the goods or
generating energy to process them. Meanwhile, continuing brownouts
and power failures highlight China's rapidly expanding need for reliable
power (estimates for 2008 consumption are 1.8 trillion kWh, up a little
over 8% from the previous year). All of these trends create giant stresses
on existing resources both within and outside China. This diverse panel
of commodities players reflects on the current state of the market:
- Are current commodity prices likely to remain with us for the
foreseeable future, or are they the product of a perfect storm of
transient factors?
- How much effect is the stockpiling of raw materials in China having
on spot and futures prices worldwide, and what is stopping Chinese
companies from hedging their future exposure through more
sophisticated instruments?
- In terms of energy in particular, what alternatives to fossil fuels is
China pursuing, and what direction should it be taking? When can
we expect to see new supply outstrip the growth in demand for
power generated by old fashioned means?
- Could food production in China be made more efficient? What are
the barriers facing industrial food production in the Mainland?
Panelists
Frank FX Gong, Managing Director, Head of China Research & Strategy and Chief Economist, JPMORGAN
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| 16:00 |
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Deal dynamics: Pricing, completion and what happens next
Although PE dealmakers in China frequently cite "dislocations in
the price discovery system" as one of their key difficulties in getting
deals done, AVCJ's numbers indicate that absent GIC's US$2.5bn
investment in ICBC in June 2006, deals have climbed to US$5.69bn
in the year to 30 April 2008, from US$4.39bn the year before.
Shanghai's benchmark index has corrected by a third in H1/2008,
which may be leading private companies to revise their pricing
expectations. Before price negotiations are closed however, investors
have to complete a raft of key man background checks, financial
due diligence, and content themselves that they fully understand
the way the company trades and relates to both customers and
suppliers. Even once a price is agreed, clearance from the Ministry of Commerce,
SAFE and industry bodies can take months, and the outcome is by
no means guaranteed. These experienced dealmakers share their
experiences:
- How to get the right price, and the role of regional property
exchanges in the purchase of SOEs.
- Smart structuring: Keeping tabs on the cash until performance
targets are met.
- Non-contractual ways of gaining and keeping control, and how
to avoid hobbling a control agreement.
- How to engage the local team in introducing strong corporate
governance which complies with SarbOx and FCPA.
- Protecting trade secrets and IP through operational adjustments
and social accountability.
Moderator
Jim Zhang, Head of Corporate Finance, EVOLUTION SECURITIES CHINA
Panelists
Shirley Chen, Managing Director & Head of Private Equity, CHINA INTERNATIONAL CAPITAL CORP LTD (CICC)
Fernando Bensuaski, Managing Director, GOSHAWK CORPORATE OPPORTUNITIES LTD
Jay J. Hoenig, President, HILL & ASSOCIATES CHINA
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| 17:00 |
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Day one concludes
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| 18:30 |
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Evening cocktail reception
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| 19:30 |
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Gala dinner
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| Friday, 19 September 2008 |
| 08:00 |
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Breakfast |
| 08:50 |
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Welcome remarks |
09:00 |
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Inbound M&A: Tapping China's domestic growth
The lure of a giant domestic market, fast-improving quality controls
and an appreciating currency makes for a compelling investment
thesis. Opportunities include thousands of potential acquisition
targets in the 15-20 year old private sector, as well as the all but
100 or so "National Champions" that SASAC has mandated for
disposal. But increased valuations, lengthy and sometimes opaque
investment clearance procedures, cultural differences, IP protection
concerns and control issues, make each investment a big time
commitment, with no guarantees of success. Experienced investors
and their advisors elaborate on:
- Capital controls and (still) bullish stock markets: Their impact on
foreign companies' ability to invest.
- Different deal styles: Corporate Direct Investment vs. PE-JV, WOFE
versus Minority Interest. What are the benefits of each?
- Controlled industries and the parameters for investment.
- Managing the integration process: Common hurdles and tricks for
dealing with them.
- Protecting against downside risks: Preferred stock and other
capital and operational tools.
Moderator
Dale E. Colling, Chairman, ALC ADVISORS
Panelists
Kevin O'Connor, Business Development Manager, CATERPILLAR STRATEGIC INVESTMENTS
Krzysztof Werkun, Partner, CHINA RENAISSANCE
William Yeung, Managing Director of Investment Banking, CLSA
Joseph Tai, CEO & Managing Partner, INTEGRAL GROUP
|
| 10:15 |
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Coffee / tea networking break |
10:45 |
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The people puzzle: Recruiting, developing and retaining talented staff in a competitive market
One of the most frequently repeated laments amongst investors in
China's companies, and the senior management of those companies
themselves, is the dearth of management talent in the country.
Although it's been 30 years since Deng Xiaopeng proclaimed the
glory of riches, with 29 years of a planned economy behind them, China's
entrepreneurs started from scratch, without any legacy expertise to
build on. Nowadays, many managers train overseas, returning with new
skills and ideas to pollinate management thinking at home. But given
the influx of Fortune 500 companies offering international salaries and
benefits packages, many local firms still struggle to recruit and retain
staff. These experts help you balance the human capital equation in
your favour when they discuss:
- Why recruit when you can build from within?
- How companies can empower and develop their existing staff.
- Golden handcuffs: constructing packages that reward longevity
and penalise dilettantism.
- What is a fair cost comparison for a well paid, well educated and
well motivated local business manager?
- What can investors and acquirers do to help companies build out
their bench?
Moderator
Steve Mullinjer, Partner, HEIDRICK & STRUGGLES
Panelists
May Tung, Consultant, RUSSELL REYNOLDS & ASSOCIATES
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| 11:45 |
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Consolidations in Chinese industry
The Asian Development Bank forecasts that China's growth will slow
to 10% in 2008 and 9.8% in 2009, down from 11.4% in 2007, while
inflation is set to rise from 2007's 4.8% to 5.5% during 2008. Although
many industries in China — especially the consumer sector — are
firmly in the land-grab phase, could this dip in growth, together
with rising prices, signal an opportunity to begin consolidating
some of the past years' explosive gains? Senior investment bankers
and other dealmakers share their perspectives and consider the
following:
- Is the time right for larger SOEs, private entities or MNCs to perform
a roll-up in some sectors? Which areas will lend themselves to this
treatment?
- Does the October 2007 SAIC-Nanjing Motors merger mark the
start of the consolidation trend?
- What are the factors besides labour and RMB inflation, and labour
and environmental legislation, pressurising domestic companies?
How can these be overcome by consolidation?
- How do state-mandated capital-account controls, such as
September 2007's lending freeze, impact the dealmaking
landscape?
Moderator
Weichou Su, Managing Director, THE HINA GROUP
Panelists
James Wang, Director, THE JORDAN COMPANY (CHINA)
Bin Cui, Director & Executive Vice-president, TOWONA MOBILE DIGITAL TV MEDIA GROUP
Qiang Wu, Director, Corporate Business Development, UFIDA SOFTWARE
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| 13:00 |
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Luncheon
Concluding remarks
Conference concludes |
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