The Analyse Of Vw Fund's Private Equity Investment

Capital will follow profit for ever! Looking for a best business model is the target of the capital for ever also. In the first half of 2005, Goldman Sachs invested US$ 25 million in Wuxi Suntech Power Co., Ltd. as a private equity ("PE") investor. The total investment cost was about US$ 40 million, including other investment disbursements. Suntech Power successfully joined NYSE at the end of 2005 with offer price of US$ 15 per share. Suntech Power debuted on the NYSE at US$20.35 on Dec. 14, 2005, and the value of the shares Goldman Sachs held surged to US$ 400 million, which was 10 times its initial investment cost. The successful IPOs of Mengniu Dairy and China Yurun on Hongkong Mainboard also brought 10 times of return to their PE investors. These successful private equity investment cases shocked the domestic capital market as most domestic private fund had only few investment channels and were struggling for 8% annual return in the bear stock market and future market at that time. The legal PE investment which pursues high return in short period could trace back to the cradleland for world's earliest PE investment model—United Kingdom. In 1979, the total PE and VC investment was only GBP 20 million, but this figure surged to GBP 2,074 million in 1994, which was more than 100 times that in 1979. Section One introduces the general aspects of current PE investment.Although the China's A share index doubled and the average return in stock market exceeded 100% in 2006, that still is inferior by comparison with the return from PE investment, and the safety of PE investment's profit model also surpass that of capital operation in stock market. So Section Two analyzes the whole process of PE investment fund's investment, from initial PE investment, development of enterprise together with PE investment fund to enterprise's successful IPO backed by PE investment fund. Section Two also expatiates on the details of due diligence and the related laws and rules in PE investment process. In addition, the famous Valuation Adjustment Mechanism (VAM) and other investment risk control methods are introduced in Section Two.In order to substantiate the above description of PE investment better, Section Three chooses an investment case of VW Fund in 2006, together with two due diligence reports VW Fund did for the group and its subsidiary PV company, investment agreements, etc.Nowadays, not only the developed countries in Europe and America but also the developing counties throughout Asia and Africa are striding for intelligence economy. New management theory, advanced management model and novel mode of thinking are widely adopted. There is more and more fierce competition among the countries. This change is backed by new knowledge, new science and innovation. If, there is no dual support of innovative mind and material resources, the innovation and development of the high tech are not possible. The Private equity is playing an increasingly important role in this intelligence renovation supporting system. The Chinese government should promote the effective combination of investment capital of private stock right together with the intelligence renovation, follow the successful experience of the investment capital of private stock right in developed countries so as to expand the local investment capital of private stock right. In the last chapter, the writer summarized his view point based on previous analysis. He emphasized that the government should make effort to cultivate local investment capital of private stock right instead of being ruled by foreign capital. The investment capital of private stock right should be another investing channel of the China's one thousand billion bank savings and the investment capital of local A share market.