China's Private Equity Market And Its Company Valuation

Private equity (PE) investment is developing with great pace all over the world. The Asia area, especially China, has been one of the key markets. In recent years, PE investment has experienced a great development in China, but still stands at the initial zone for various reasons. There are some barriers, doubts, arguments in maturity of the market, game rules, mechanism, developing mode etc.PE investment has a history of almost a century in the West. But the first real PE investment occurred at 2004 in China, and there are only a few papers about the PE market of China, not say a systematical theory. In another word, the academic research lags behind the practical development in PE investment. This paper makes a systematical introduction and synthetical analysis to PE investment by practical research and discussion mainly from a practical perspective.The paper starts with a detail introduction to primary conceptions about PE investment, the styles of PE institutions and its organization & operation formulas. Later, it depicts the operation of PE investment in detail, including the elements of PE market, financing, management, quit, and profit/loss prediction & calculation; it also analyzes and discusses the risk of PE investment and risk-control strategies. Then, it focuses on the development of PE investment in China, and gives conclusion and research in existing problems. Finally, it puts a high weigh to the research of company valuation in PE investment: fist, it gives out general valuation methods, theoretically and practically; second, it demonstrates the practical valuation methods in domestic PE investment, and ends up with regression formulas; at last, it analyzes the key factors in company value with a Fish-bone Diagram, and discusses all factors.The analysis in this paper will make a synthetical understanding in the development of PE investment in China; meanwhile, the research promotes scientificity and accuracy in company valuation, which is helpful to risk control of PE investment. Wish this can make some positive effection to the PE investment industry of China, which is the position this paper is supposed to stand on.