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SMG expands in mainland China, focusing on tier 2/3 cities

SMG expands in mainland China, focusing on tier 2/3 cities

As private equity investment continues to gain attention in mainland China, more foreign PE/VC firms are turning their focus on the Chinese market. Recently, Simon Murray Group’s (“SMG”) chairman Simon Murray and the group’s executive team announced to the media that SMC Capital China (“SMC3”), the group’s platform in China, has established three JV RMB-denominated funds. It will quickly expand its business in China. SMC3 is open to invest in any compelling industry but has three preferred target sectors where its partners can bring their experience and value-added, namely:  1) consumer and healthcare; 2) IT and advanced manufacturing; and 3) clean-tech and energy savings. The firm believes in the huge potential in the water treatment market in China.

Simon Murray believes that the Chinese private equity market is still under-penetrated in certain niches, particularly in second and third tier Chinese cities. "We hope to gain support from local LP government and strategic partners to discover and assist more underserved Chinese companies," explained by Mr. Murray.

SMC3 is making a major long term commitment to China private equity,” says Mr. San Eng, the Founding Partner of SMC3.   “SMC3’s ‘Vision 8|8’ plan is to become the most ‘Chinese’ of the international growth capital firms in China, focusing on world-class best practices with full localization via both USD and RMB funds.   By 2015, we aim to manage over RMB8 billion with local offices, teams and strategic partners in at least 8 Chinese cities.”

“In the cleantech and energy saving sector, we focus on four sub-sectors “explains Mr. Alexandre Xing, SMC3’s partner, “The four sub-sectors are: 1) Energy saving technology in industries such as water, mining, environment and others; 2) water treatment technology including waste water treatment, seawater desalination; 3) solid waste treatment and recycling; and 4) technologies related to cleantech and energy conservation. In Mr. Xing’s opinion, water saving and treatment is becoming increasingly important in China. Thus, related industries will experience huge growth potential

San Eng also points out that SMC3 typically invests in companies valued at eight times P/E or below.

Most importantly, SMC3 s approach is working with access to great deals.   In past eight months, it has secured investments in six deals totalling over RMB350 million in total commitments (including expected follow on investment rounds).   SMC3 was the lead investor in all but two of these six deals.   One portfolio firm, SMC Synapse Partners, saw its core holding in 21Vianet Group complete its successful US IPO in April 2011 (NASDAQ: VNET).

For full details, please click here for original article in Chinese.

UPDATE. 2011-05-18
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