Sme Private Equity Investment

After 30 years of reforming, China's economy has made a huge progress and GDP of Year 2007 reached RMB 24.66 trillion, which was the fourth high all over the world. Meanwhile, small and medium sized companies (SMEs) play a more and more important role in the economy. In 2006, the number of China's SMEs was around 42 million, generating value of the 60% of GDP, which requires SMEs to raise more money to fund the high growth. Thus, private equity (PE) becomes more popular to Chinese enterprises, as private equity investment, a supplement to the financing channels, could allocate the resources effectively and optimized the industry structure.The article starts with the concept of private equity, sorting out the different expressions, and analyzed the recent development in China's market. Then the research explained the meaning of the private equity investment towards the SMEs. The article also states the key process of the investment, including due diligence, valuation analysis, post-investment management and exit strategy etc. Lastly, based on the characteristics of SMEs, the author addresses the different strategies of private equity investment, especially about the risk control and value creation.The article starts the research about the characteristics of SMEs' development and PE's investment, then analyzes the reasons and benefits, and focuses the different investment strategy. The analysis would help the PE investors understand Chinese SMEs and maximize the value of their investment.