Case Study of Private Equity Investment on Corporate Turnaround of a Taiwan Company
Date Issued
2007
Date
2007
Author(s)
Sheu, Bor-Ru
DOI
zh-TW
Abstract
In 2006, the Ministry of Economic Affairs amended the 〝Scope and Guidelines for Venture Capital Investment〞 effectively removing the limitations on the scope of investment. This has allowed the nation's venture capitalists to enter new business sectors such as corporate revitalization and restructuring by allowing them to take part in re-investment companies' re-capitalization plans via mergers, acquisitions and buyouts. This might possibly offer new opportunities to transforming local venture capital funds into private equity funds. In December 2000, HSBC Private Equity (Asia) buyout a controlling stake in Tong Lung Metal Industry Co., formerly a debt-ridden family-run locksmith company undergoing a corporate restructuring plan. The restructured Tong Lung Metal Industry, as the first buyout by a foreign private equity fund known to have taken place in Taiwan, has been one of the nation's rare and most successful turnaround examples. The company has completed its latest phase of nearly eight years of restructuring that began in 1998 and has resumed its trading on Taiwan’s over-the-counter market on 23rd March, 2006. In late 2006 and early 2007, Test Rite Group has completed an acquisition from HSBC PE (Asia) to own 68% stakes on Tong Lung Metal Industry.
This thesis has conducted a case study and research on the turnaround investment of a Taiwan company by an international private equity fund, i.e. the buyout of Tong Lung Mental Industry Co. by HSBC Private Equity (Asia). In 1998, Tong Lung suffered great loss from the embezzlement of company assets by its former chairman and relevant personnel and was adjudicated for reorganization by the court pursuant to the application filed by the creditor banks in 2000. In 2001, the court adjudicated that the reorganization has been completed. It has been almost six years since funds advised by HSBC Private Equity (Asia) Limited, together with member companies from two business groups in Taiwan, i.e. Shingkong Group and Chailease Finance Group, jointly took a majority equity interest in Tong Lung. Since then with efforts of the turnaround management team, Tong Lung’s business has been turned around, the restructuring debt has largely been repaid, the company has re-established itself as a global leader in the door-lock industry and its shares have been re-listed on the OTC market. Test Rite Group's reinvestment in Tong Lung has mainly focused on Tong Lung's excellent capability of design, R&D, and manufacturing in door lock products, in hope of consolidating the competitive edge of the two parties for a win-win situation.
Previous case studies by several business schools in Taiwan have focused on restructuring process, corporate governance, restructuring and turnaround strategies. On the basis of findings and insights of previous researches on this restructured company, this thesis has extended researches into areas of the responsive strategy of bank debt creditors to corporate turnaround, the turnaround investment strategy and exit strategy of private equity buyout, the key issues of turnaround management including corporate governance, organization restructuring, asset restructuring, business strategy, financial restructuring, and operation efficiency, as well as new corporate and business strategies after the exit of HSBC private equity fund. Lastly, this thesis has examined the possible advantages and disadvantages of private equity funds’ investment on Taiwan’s corporate turnaround.
Keywords：Private Equity Fund, Corporate Turnaround, Corporate Restructuring, Corporate Governance, Merger and Acquisition
Subjects
私募股權基金
企業重建
公司重整
公司治理
併購
Private Equity Fund
Corporate Turnaround
Corporate Restructuring
Corporate Governance
Merger and Acquisition
Type
other