While there are still opportunities for private equity transactions in China, the structure of deals is changing, says international law firm Dechert in a recent report. As offshore transactions require more and more approvals, onshore deals are providing a more flexible option.
It is the so-called round-trip investments that have been getting harder to do. This is when an investor puts money into an offshore holding company to gain an indirect stake in a company operating in China. The advantage of these deals is that they have many sophisticated features that Western investors are familiar with common and preferred shares, financial ratchets and valuation adjustments.
The problem is that, since 2005, the Chinese government has...
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