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YUAN Weigang: Big PE Turned into “Small Shareholder”——The Report about TTGG in “Zheshang Financier”

Date: 2014-06-09
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Compared with other institutions, TTGG has natural advantages in its organizational structure. “We are a private enterprise grew out of a state-owned enterprise through reform and restructuring. We have the culture of state-owned enterprises and the mechanism of private enterprises, so our team’s strength, system and standard are the most important features of the company. In TTGG, the system and the majority have the final say.”

This is a song worth singing aloud in the venture capital transformation in Zhejiang. In 2009, Zhejiang Silicon Paradise Asset Management Group Co., Ltd. (hereafter referred to as TTGG) reasonably began transformation in the rising PE market and started to look for chances in industrial integration field. Several years later, Chinese equity investment industry that had IPO as the main exit pattern became a land of wailing and despair. When others were struggling for a way out, TTGG already stood on the frontline of domestic industrial M&A.

In recent years, TTGG not only put forward nearly 20 M&A cooperation cases customized for listed companies, but also formed the “tripartite” business modules——venture capital, industrial M&A, financial service. This pattern has strong expansibility.

TTGG’s industrial M&A are not the M&A service in common sense, but the rare “investment bank+ M&A” pattern. Will this pattern create a future for TTGG? At the beginning of May, TTGG Board Chairman YUAN Weigang explained the reasons to “Zheshang” Magazine’s journalist.

Why did TTGG transform? During 2008 and 2009, in the years when PE was booming, 4 or 5 companies planning to be listed came to TTGG, seeking for finance. But they were turned down “mercilessly” by TTGG. Later, two of them successfully got listed, and their P/E ratio reached dozens.

Recalling “missing the opportunity”, YUAN Weigang didn’t seem upset. In fact, back then, TTGG already was aware of market risks, and began to actively avoid risks and transform toward industrial integration.

“Why did we transform? Traditional VC and PE are typical extensive cultivation that depends on the market. When the secondary market is in good conditions, you can earn more. When the secondary market is in poor conditions, you will earn less, and even end up with nothing.” YUAN Weigang said that back then the P/E ratio was more than 10; except for high-growth industries, all projects were listed as project that shouldn’t be touched by TTGG. Similar opinions have been expressed by him in public occasions time and again.

In TTGG’s senior management team, there are fewer members like YUAN Weigang who has a profound financial background than members who do industrial work. Counting in its controlling shareholder GGTT, Board Chairmen and CEOs of listed companies, there are more than a dozen people. This also is the biggest difference and advantage of TTGG compared with other domestic VC and PE management agents that have more members with a financial background.

“As a result, we have a better understanding of some industries. This is the core reason that TTGG had the courage to carry out industrial integration.” Shortly before, YUAN Weigang revealed that industrial M&A was their most important business after the transformation, and it accounted for nearly 50% in the company’s business both last year and this year; they mainly engaged in listed company restructuring and industrial M&A integration.

At present, the proportion of PE investment has dropped to about 30% in TTGG. Meanwhile, by developing middle and early stage projects and M&A business, TTGG formed the “tripartite” business structure consisting of venture capital (VC, PE), industrial M&A (industrial integration and M&A), financial service (financial service and real estate funds). So far, the assets management scale of TTGG has exceeded 10.7 billion Yuan.

TTGG had reasons to transform toward industrial integration. On the one hand, past attempts were very successful. In addition to the favorable policies in recent years, the cancellation of the approval examination for listed company M&A and the introduction of the “Nine New Opinions” this year brought new opportunities to M&A field. They believe this road will bring a different future to TTGG. On the other hand, in international PE investment companies, 70% incomes come from enterprise M&A, and only 30% come from investing in IPO projects. Shortly before, Hony Capital, CITIC Capital, CDH Fund, Hopu Investment and other organizations began to develop in overseas market. They have taken part in overseas projects time and again.

Different M&A. However, the M&A methods and strategies of TTGG are quite different from that of Hony Capital, CITIC Capital, and CDH Fund. In most M&A cases, there is an industrial group behind TTGG M&A, and the M&A target will be taken over by the industrial group in the end. Hand in hand with TTGG, enterprises not only can get capital support, but also can take advantages of TTGG’s resource superiority, brand effect and professional investment management ability, to give full play to the multiplier effect of PE investment fund.

In Sept. 2011, hand in hand, TTGG and Dakang Livestock Farming created the first work of market-based “PE+ listed company” M&A pattern in Chinese capital market. In Jan. 2013, TTGG and Jingxin Pharmaceutical jointly set up a M&A Fund of one billion scale, successfully took over century-old store——Guangdong Yihetang in the Oct. of the same year, and helped the listed company expand its production capacity. TTGG has carried out industrial M&A in agriculture, culture, pharmaceutical, environment protection and other fields, and has created a number of classic successful cases.

In international M&A, TTGG also has made practical strides. In May 2012, TTGG and German GCI Corp. signed a contract about international M&A. In 2013, TTGG set up a Hong Kong subsidiary, which got the assets management license issued by Hong Kong Securities and Futures Commission. This has great strategic significance for the internationalization and globalization of TTGG. At present, TTGG’s Office in North America is in preparation and construction. The cooperation with Canadian companies also has begun.

Another move of TTGG is founding the Wealth Management Center. YUAN Weigang said frankly that it was to provide company LP with better all-round services when TTGG’s development reached certain stage. “Now that our scale is large, the investor services years ago have formed a system, so we need a professional management platform for the services.”

“Small Shareholder”, Large Industry. The standards of TTGG for choosing industries and partners in the process of industrial integration show its enterprise culture that it always sticks to: “tolerance, harmony, happiness.”

What industries does TTGG choose? According to, YUAN Weigang, the industries TTGG chooses must be in accordance with the state industry orientation, and have great market space, with no obvious monopoly. As to partners, besides the company’s current position in the industry (generally it should be among the top), what TTGG values more is the partner’s team.

“The actual controller must have passion and dreams. He does business not only for money. What’s more important is he should have tolerance, enterprising spirit and the sense of social responsibility.” According to YUAN Weigang, it’s a business of integration, which needs the cooperation of multiple parties, and cooperation needs tolerance.

Compared with the investment philosophy of profit maximization, TTGG prefers to create value, change value, enhance value and share the increment in value.

“We are willing to be and only will be a small shareholder.” YUAN Weigang used “Small Shareholder” to describe the role of TTGG in the industrial integration chain. “Small” means TTGG doesn’t pursue high shareholding proportion. In each project, TTGG generally doesn’t hold more than 5% of shares. YUAN Weigang hopes that the work TTGG does in industrial integration can stir up some ripples in the lake, and form its unique M&A brand “Small Shareholder”, to make some difference for the whole M&A industry.

Recently, “Small Shareholder” cases appeared one by one: the share transfer for Tongwei, public share acquisition for Routon, share subscription for Sunwin Intelligent, supporting financing for LANXUM, etc. In all the cases, TTGG was involved as a small shareholder and became a middle and long-term responsible small shareholder of those companies. 

“Industry is the strong point of industrial capital. Our superiority is in transaction structure design, benefit balance and resource integration.” YUAN Weigang thought.

YUAN Weigang: Big PE Turned into “Small Shareholder”——The Report about TTGG in “Zheshang Financier”

Meanwhile, YUAN Weigang pointed out that M&A in capital market was becoming hot, so overheating or bubbles may occur in the next few years.

YUAN Weigang: Big PE Turned into “Small Shareholder”——The Report about TTGG in “Zheshang Financier”

“An industry that doesn’t have bubbles has no vitality.” YUAN Weigang said frankly that agents in the industry should pay attention to risk control, especially the legal risks in the cooperation with listed companies. TTGG doesn’t fear market followers. Risk control is the highest state in finance.

“At present, many organizations mimic the practice of TTGG Dakang, but that’s a Version 1.0 TTGG M&A Fund. Now our pattern has been upgraded to Version 2.0, Version 3.0, and even Version 4.0. This is an era of personality, so imitation has no vitality. In the industry, we need mutual help, learning and cooperation.” said YUAN Weigang “To advance in small steps, never stop, and half a step faster” is the basic development philosophy of TTGG. Openness, tolerance, honesty and win-win are the essentials.

YUAN Weigang: Big PE Turned into “Small Shareholder”——The Report about TTGG in “Zheshang Financier”

(Time: 6 June 2014; republished from Zheshang Financier; written by: JIN Shaoce; Photo by: LU Tonglei)

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