London Times
Chinese set sights on AIM

SEVERAL hundred Chinese companies have expressed an interest in floating on the Alternative Investment Market (AIM) after recent heavy lobbying by the London Stock Exchange, which runs the junior market. [ More ]

Financial Times
AIM Flourishes with Internationally Focused Companies

One of the more notable aspects of the success of the London Stock Exchange's Alternative Investment Market has been its ability to attract internationally focused companies. [ More ]

The Tiger Capital Partner Fund 1
Asia and in particular China has seen enormous growth in Foreign Direct Investment both in terms of Infrastructure projects as well as Private Equity/Venture Capital funding for Asian businesses, particularly in the Technology, Media and Telecommunications (TMT) sectors. In 2004 over $1.2Bn of Venture Capital/Private Equity money was invested in Mainland China businesses with over 60% invested in the TMT Sector (source CVCF 2004).
One of the key issues facing the VC and Private Equity Firms is how to gain an exit from their invested companies and achieve a worthwhile return. Of the $802M realised in exits from investments in 2004, almost 70% came from the overseas listing of only 5 companies, the vast majority of exits came via the trade sale route and realised less than 25% of the total exit proceeds (source CVCF 2004).
Although there is a proliferation of VC and Private Equity investment funds concentrating on investments in China and other Asian markets very few, if any, are specifically geared towards achieving a suitable exit in the short to medium term, ie within 12 to 18 months from investment. Tiger is establishing a specialist Investment Fund, seeking commitments of up to GBP50 Million, to complement the existing investment groups in the Asian region by providing Seed IPO finance for SME businesses in the key markets of China, Korea and Japan.
Tiger Capital Partners Fund 1 (the Tiger Fund) is designed to enable these businesses to obtain a listing via an IPO on one of the 3 London Capital Markets. The companies targeted by the Fund are in the growth stage of their development, so an IPO on the junior AIM market would be the preferred exit route for the funds investments. The Fund acquires a minority equity stake in each business and assists each one to execute an IPO, normally within 18 months of the investment.
Asian Investment Targets
The Tiger Fund targets investment in businesses which either:
have already received previous VC Investment
have already invested and developed Proven technology
are ready to pursue an IPO as part of a phased exit strategy
have international business or international growth potential
This means that in the vast majority of cases the Tiger Fund will be considering investment in proven business with proven business models and strong growth prospects, which combine to increase the probability of a successful IPO.
London Exits
The Tiger Fund represents an excellent opportunity for both individual investors as well as existing VC and Private Equity funds to participate in what is to be a growing trend amongst Asian SMEs to seek a listing in London. The US markets have become compliance heavy and as a result many European companies are de-listing their ADRs simply because of the financial burden let alone the potential liabilities for non-compliance.
With the legislation introduced under the recent Sarbannes Oxely Act (SOX) complicating and increasing the cost of the IPO process for NASDAQ and NYSE, coupled with the lack of investor confidence and red tape associated with the home grown exchanges in China, Hong Kong and Japan, exits from investments in SME companies in the region have tended to come from trade sale or merger opportunities. These opportunities generally do not provide the same returns as the VC firms would expect from successful IPOs of their invested companies, although they can be profitable.
Londons Capital markets and in particular AIM, with its flexible rules and regulations, is an ideal platform to achieve an IPO exit for SME companies at potentially much higher valuation than that achieved via trade sale. It also enables the company to avoid the potential post-IPO limitations of a domestic Asian market. London is one of the most liquid capital markets in the world with over US$3 Trillion of securities traded last year alone, almost 3 times that of New York. That coupled with the relatively relaxed regulation of the AIM market should make London the focus of many more Asian companies, particularly those with a globally applicable product or business model. In essence the same companies which the Tiger Fund will address.
Tiger Capital Partners Funds represent a complementary channel for Asian VC firms and Investors to take advantage of our existing advisory services as well as access to our Funds to effect a suitable exit strategy from their investments.
If you want more information about Tiger Capital Partners Fund 1, please contact us.
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