The aging founders of the first-generation modern companies in China are trying to survive their first generational switch and private equity funds try to help them digitize their operations to move on, says Winston Ma, adjunct professor at New York University School of Law and former managing director of the sovereign wealth fund China Investment Corporation (CIC) in the Global Finance Magazine.
Global Finance Magazine:
PE in the past five years has been especially busy introducing digital business strategies to investment-target companies that were founded in the 1980s, during the early years of China’s economic “reform and opening” movement, according to Winston Ma, adjunct professor at New York University School of Law, former managing director of the sovereign wealth fund China Investment Corporation and the author of several books on financing in China. PE funds have learned how to work closely with well-established companies long controlled by aging founders or their family members, helping them finance modernization drives—and sometimes complete overhauls.
“The founders are getting old,” Ma says, “and the second generation either doesn’t want to take the company or doesn’t want to go through a digital transformation.”
But adapting to the digital age is practically a matter of survival for these older companies, which Ma calls “the backbone of the Chinese economy.” So “they have become interesting targets for private equity,” he says, since top executives recognize the value of PE financing and managerial support.
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