Huaming Gu: Finding The Rare Investment Jewel In China’s Niche Markets

http://www.ChinaMoneyNetwork.com Like our Facebook Page and follow us on Twitter @chinamoneypod In this episode of China Money Network, co-founding partner of Baird Capital Partners Asia, Huaming Gu, talks about his fund's fund raising during the depth of the financial crisis, and how his firm works with small and medium enterprises in China to clean up corporate governance and establish financial discipline, while hoping to achieve nice returns. Listen to the full-interview in the audio podcast, watch the shortened video version, or read a transcript summary. Q: First, give us a brief introduction of Baird Capital Partners Asia and your strategy? A: We are a China-centric growth equity fund that is dedicated to the small end of mid-market. We invest in three sectors: health care, manufacturing and business services, where we have deep knowledge globally. We look at companies with EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) north of $2 million. We take significant minority stakes and work with the company to improve the business. Our current fund has $75 million under management in China. Globally, we have $2.4 billion under management and have invested in over 250 companies. Q: China's private equity industry faces many challenges right now. Many fund managers say that right now is the time for private equity firms to add value. What have you done to deepen your own niche and create value? A: For us, it's actually a good thing. We never bank on IPOs as our primary exit route. We are more toward building a business for M&A exit. We are very operational intensive. We tend to look for companies that we can help them to make them better. We are investing more into operating expertise to our portfolios, an essential part of our strategy. For example, we add an in-house financial director to a portfolio company and try to put in place financial discipline at the company. Q: What kind of specific financial discipline do you try to instill in the company? A: The companies we invest in are smaller companies, which are probably run by an entrepreneur. Often times, they don't have a good financial controller. They probably will have bookkeeper or a cashier. We go in there to help them to first keep the records straight. We also install the discipline of expenditure, making capital investments and collecting money. Some industries in China are known for longer receivables. We help companies to manage cash flows to support their continued growth. Our Guest Today: Huaming Gu is co-founding partner of Baird Capital Partners Asia, a private equity fund focused on China's small and medium enterprises in the healthcare, manufacturing and business services sectors. Previously, Mr. Gu was at EQT Partners Asia, a China-focused buyout fund. Before that, Huaming was the general manager of China sales and marketing at General Electric Advanced Materials Automotive in Shanghai and Emerson Electric.