PE Investment Case Study Of The Influence On Performance Of Listed Companies

Since the first debut in China in the 1990s, private equity investment has boomed in the recent ten years. In addition to the rapid growth in the size of managed assets and the number of invested enterprises, the investment pattern is getting increasingly diversified. PE agency is injecting investments into listed firms and playing an active part in corporate governance, merger and acquisition, and continuously offering market value management services for listed firms. By focusing generally on long-term investment and value investment, PE agency has established important external governance mechanisms. This is of significant importance to the governance of listed firms, improvement in corporate performance and market value. As the reform of non-tradable shares came to an end in 2007, the full-circulation stage for equity on Chinese stock market arrived. This has allowed the listed firms to have more clearly defined equity structure and introduce strategic investors. Under this circumstance, "PE+ Listed Firms" mode enjoyed wide popularity in the capital market. Therefore, the effect of PE agency’s strategic buying in shares of listed firms on market value has been made the focus of attention of the capital market.Based on theoretical analysis and the case of Shengyu Fund’s strategic investment in HengbaoCo.,Ltd in 2013, the paper analyzed the effect of PE agency’s strategic buying in shares on business performance of listed firms. The paper began by reviewing and sorting out relevant literature and research achievements both at home and abroad. Then it summed up PE agency’s influential factors to business performance of listed firms. Finally, the paper sorted out Shengyu Fund’s strategic investment process in HengbaoCo.,Ltd, and studied the role it had played in the formulation of Hengbao strategic transformation, industrial merger and acquisition, equity incentive and refinancing following its investment in the listed company. It was found that PE agency’s strategic buying in the shares of listed firms and participation in business governance had a positive effect on business performance of listed companies. However, the extent of effect relied on the depth of cooperation between the listed firms and PE agencies and on specific operation methods and capabilities.The research results in the paper opened up theoretically and practically new ideas to both listed firms and PE agencies. Based on the research results on the effect of PE investment on business performance of listed companies, the paper offered suggestions to investment agencies and the healthy development of IT industry from the perspective of improvement in system and environment, development of PE investment, and further participation of PE investment in corporate governance to enhance business performance.