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Secrets of a successful PE firm

By Cai Xiao  (China Daily)

08:16, September 21, 2012

Venture capital and private equity firms in China are eyeing small and micro companies and those in crisis. [Photo/China Daily]

Thirty-eight newly launched funds, 111 investment deals totaling 11.2 billion yuan ($1.76 billion) and 11 successful applications for initial public offerings by companies it invested in.

That's the track record of Beijing-based private equity firm China Science and Merchants Capital Management Ltd, also known as CSM Group, in 2011 alone. It drew the attention of the whole Chinese venture capital and PE market with its outstanding investment performance over the course of the year.

In the first half of this year, of 104 companies that went public in China, four were invested in by CSM Group.

Shan Xiangshuang, the 45-year-old founder and chairman of CSM Group, told China Daily that although other players in the industry had their doubts, he was not surprised with the compelling investment achievement of his company, because it has 13 years of experience in China and has developed many successful tactics specific to China.

"In the past 10-plus years, we have positively sought out private entrepreneurs as our LPs (limited partners) and given them power to make decisions in the deals in which we invest," Shan said.

Shan said that LPs in the West are usually managers of large institutions such as pension funds. However, in China they are mostly private entrepreneurs who are very hard-working and show great interest in the activities of the equity investment funds into which they put money.

"Consequently we invite entrepreneurs who are the main LPs of our equity investment funds into the decision-making commissions and they can be very helpful when the deals we are going to invest in are in the fields in which they have expertise," said Shan.

"Unlike many VC and PE firms in China, we set up regional offices and look for local partners with good resources to join us, which helps us find investing deals faster and better," Shan said.

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