A TOP EXECUTIVE with private equity play SMC Capital China told Asia Fund Space that given the hypercompetitive consumer space in the PRC, his firm always looked for niche market opportunities to help maximize returns.
During an exclusive interview with Asia Fund Space during the recent 15th HKVCA China Private Equity Summit in Hong Kong, SMC Capital China Managing Partner Mr. Hamilton Tang said that the firm also targets consumer-targeted investment opportunities in the world’s No.2 economy – a focus which meant there were a multitude of choices.
Active since 2003, SMC Capital China was an early mover in the PRC private equity sector, and is focused on investing in mid-market, growth stage cross-border China consumer upgrade plays.
SMC Capital China Managing Partner Mr. Hamilton Tang
"Generally speaking, Chinese companies – especially in the consumer sector – compete primarily on price rather than brand or service.
"We believe this is unsustainable,” Mr. Tang told Asia Fund Space.
He said Chinese investors have typically been more interested in investing in local consumer-based firms that showed a growing market share trend.
"However, without direction toward establishing a strategy with staying power, this is unsustainable in China’s fiercely competitive consumer sector.
"Therefore, SMC Capital China tries to identify emerging leaders in niche consumer markets that we can help attain or sustain market leadership positions through our hands-on cross border work,” he said.
Private equity partners of SMC Capital China
Two sectors were attractive to the PE firm of late.
“Examples might be health supplements and nutrients.
“These are fast-growing, sustainable products in the PRC with significant markets overall, and we’ve seen 80% growth in online sales for these goods in Mainland China,” he told Asia Fund Space.
It wasn’t just the products or services offered, but also who was actually making the purchases that interested SMC Capital.
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SMC Capital China.
“Generally, we try to focus on companies that themselves focus on female consumers.
“That is because in China, the woman of the house typically controls household budgets,” he added.
Just prior to speaking with Asia Fund Space, Mr. Tang was part of a four-person panel during the 15th HKVCA China Private Equity Summit, with the Harvard Business School and Harvard Law School graduate speaking on the topic of: “Operations Value Add” when choosing PE investments in the PRC.
The overarching theme that day’s Summit was the shift in power balance and relational dynamics among Chinese PE practitioners, including the rise in domestic PE players and the changing roles of LPs and GPs.
“SMC Capital China is somewhat unique in that we aim for differentiation in our private equity investments.
“We also encourage both sides – PE investors and the companies they target – to see each other on an equal footing and as equal partners,” Mr. Tang said.
Sweet Deal: SMC Capital China targets consumer-targeted investment opportunities in China.
One area of interest that had more than caught the eye of SMC Capital China has been Rider Horse (莱德马业) – specifically SMC’s work with Inner Mongolia Rider Horse Group which has shippedover 800 New Zealand racehorses back to China to race and breed from, including New Zealand derby winner and horse of the year Mongolian Khan.
“The equestrian events of the 2008 Beijing Summer Olympics were actually held in Hong Kong which really brought a lot of interest to the sport and helped popularize it across the region.
“We believe Rider Horse has a strong and committedmanagement and I further believe that someday, though I certainly can’t say when, China will allow some form of horseracing,” he told Asia Fund Space.
If and when that happens, SMC Capital China is certainly betting on the right horse.
SMC Capital China has strong investment and operations experience from entrepreneurial and multinational corporations operating in China to global investment banks. Its key stakeholders and backers include Simon Murray (former Group Managing Director of Hutchison Whampoa), Thomas Schmidheiny (LafargeHolcim), and China’s Yongjin Group (a leading Chinese direct investment firm). Together with its network of overseas investors, they enable SMC Capital China to provide domestic and cross-border resources to enhance its portfolio's competitiveness and differentiation.
Mr. Hamilton Tang, Managing Partner, SMC Capital China, has over two decades of China and international investment banking, entrepreneurial and private equity experience. Previously, from 1996 to 2000, he was co-CEO of an Asia wide entertainment company that held interests in multiplex cinemas (including the largest theatre company in Hong Kong and the largest non-PRC cinema company in mainland China), ticketing, family amusement centers, and Chinese language film distribution and production. Prior to that, Mr. Tang was a Vice President at Morgan Stanley in the Investment Banking division in New York and Hong Kong.Mr. Tang received his Joint Degree MBA from Harvard Business School and Harvard Law School and a BA from Harvard College.