At the beginning of March, Providence Equity Partners, one of the large international buy-out firms, sent a note to investors to announce that Sean Tong, one of its Hong Kong-based managing directors, was leaving the firm to launch a China-focused private equity investment platform. Mr Tong is just one of many locals leaving western firms to set up his own shop, adding to competition that was intense even before the defections.
“With the growth of domestic private equity firms in China, the major international firms are losing their competitive edge,” says a China lawyer at one of the big US law firms in Hong Kong.
So today, if they are to flourish in the Chinese market, private equity firms will have to reinvent themselves once more. Buy-out firms have already had to adapt their model to the reality of the Chinese market several times, because the formula that has worked so successfully in the US does not travel particularly well.