IFLR 1000
The Guide to the World's Leading Financial Law Firms

The growth of the Chinese private equity market does not seem likely to be slowing down any time soon. International private equity houses have been increasingly prioritising using Chinese currency for their investments and developing Rmb-denominated funds with domestic partners. All of the major international private equity players have recently been teaming up with Chinese counterparts in order to tap the expanding market. This is good news for the legal community across the board, as both international and domestic firms have an important role to play in bringing these types of funds to fruition.

In fact, Rmb-denominated private equity funds have been growing at faster rate than the traditional dollar-denominated funds, due to the fact that they are more flexible. For example, Rmb funds can be used for otherwise restricted expenses like pre-IPO financing.

Related to the private equity hunger for access to these funds, the Shanghai government announced a pilot program in January 2011 that would allow foreign private equity funds to directly invest in China by allowing some qualified foreign private equity investors to convert foreign currency to Rmb. With the program, Shanghai hopes to maintain its place as a premier financial centre in China and further attract international private equity investment. How the program will develop in scope and satisfaction for these select qualified foreign investors remains to be seen.

On the fund formation side, there is an increasing trend for Asian financiers to start up their own, all-Asia private equity funds. These past years have seen key figures from leading financial institutions leave their international posts to start up these types of funds, and the trend continues.

Cleary's launch of its Hong Kong law practice in February 2011 looks to offer clients an expanded service and build on the strength of the firm's private equity practice. Freeman Chan joined as a partner from Norton Rose, where he previously led the China corporate finance practice. Partner Christof von Dryander also joined Cleary in February, and brings nearly 20 years of experience in Europe to help the firm assist with European clients looking to invest in the China market, and vice versa. Finally, partner Li Li also joined the firm as Beijing Office Director, and M&A and private equity lawyers Mike Preston was recently promoted to partner.

"Cleary is almost an in-house with TPG," says one client and the firm acted on a number of mandates for the company last year. In December 2010, partners Clayton Johnson and Mike Preston represented TPG in its equity investment in China International Capital Corporation (CICC). TPG purchased its equity stake from Morgan Stanley – which was one of the founding CICC shareholders – in the sale by Morgan Stanley of its entire 34.3% equity stake in CICC to TPG, KKR, Government of Singapore Investment Corporation and The Great Eastern Life Assurance Company.

Cleary also represented London-listed African Minerals in connection with a proposed $1.5 billion equity investment by Shanding Iron Steel Group. In addition, Cleary is advising African Minerals on an iron ore offtake agreement between both companies.

Clifford Chance continues to act for a wide range of international private equity funds on high-visibility transactions in China. A distinguishing feature of the private equity class is the genuine full-service offering that the firm provides to clients, offering deep experience in transactions, acquisition financing and fund formation in addition to regulatory advisory services.

In April 2011, Beijing partner Terence Foo led Clifford Chance's team in advising a subsidiary of Temasek Holdings on its $179 million acquisition of a 3% stake in New China Life Insurance, the fourth largest life insurance company in China. As part of New China Life's rights issue, Temasek also acquired subscription rights, which entitled them to $62 million in additional new shares. Standard Chartered invested with Temasek in order to acquire a 1.5% stake. The transaction represents one of the few private equity investments into a Chinese insurance company that has been approved successfully.

Clifford Chance's China private equity team also advised private equity fund L Capital Asia on a HK$140 million ($17 million) investment into Hong Kong-listed Emperor Watch & Jewellery-a leading Greater China watch and jewellery retail company. The deal, led by Terance Foo and Andrew Wahn in Hong Kong, involved subscriptions for convertible bonds and warrants in a Hong Kong-listed company issued pursuant to a general mandate granted to the directors by the shareholders. The investment aimed to target the growth potential of the Chinese luxury goods market.

O'Melveny & Myers' ability to handle complex private equity practice puts them among the top firms in terms of cross-border work in China. "The partners understand all the issues," says a client, "they are very creative in terms of solutions, which is often needed in the private equity space. They are a firm we would use on an ongoing basis. I'd be happy to work with them again and happy to develop a long term relationship with them."

The recent arrival of partner Doug Freeman to the Hong Kong office should also bolster O'Melveny's offerings.

One headline deal this past year saw the team representing Eddingpharm (Cayman), a China-based company that licenses, markets and distributes pharmaceutical products, in its $24 million Series B round of financing that included a $3 million repurchase of ordinary shares held by the founder. The investors were funds managed by OrbiMed Advisors, Domain Associates, and Sequoia Capital.

The team also advised Shanghai-based eHi Car Service (eHi) in its equity financing by a consortium of investors led by Goldman Sachs. eHi is a leading car rental company in China, and the financing was valued at approximately $70 million. Co-investors included Qiming Venture Partners, CDH Ventures, Ignition Capital, JAFCO Asia, and New Access Capital.

Paul Weiss consistently punches above its weight in the private equity market in Asia. Though the firm is by no means the largest, it continues to do notable deals. As a partner at a leading firm notes: "They've focused on investing in and developing just a few practice areas, and that has been a really successful strategy for them. For what they do in private equity, they're the best." Lead partners Jack Lange and Jeanette Chan direct the team in advising on high value-added buyout and growth capital transactional work, although the firm also has a presence in venture capital and fund formation. The firm's enviable client list includes The Carlyle Group, KKR, Morgan Stanley, Oaktree Capital, General Atlantic, CDH, Olympus Capital, Goldman Sachs, and Merrill Lynch.

Jack Lange and corporate partner Greg Liu worked as lead counsel in advising KKR (in partnership with the CEO and founder of Yageo Corporation) to take the Taiwan-listed electronic manufacturer Yageo Corporation private. They represented the partnership in a tender offer to acquire 100% of the shares in Yageo in connection with a proposed leveraged buyout of the company. The offer, valued at $1.6 billion, would be followed by a take-private merger, and the transaction will be financed by equity from the partners and a secured debt arrangement by UBS and Nomura. The new shareholding structure resulting from the take-private transaction is expected to provide Yageo with more financial flexibility, while the increased KKR investment should allow for growth and expansion. Once completed, it is likely that the transaction will be the biggest private equity buyout in Asia in 2011.

Simpson Thacher's leading private equity practice will be further bolstered this year with the addition of its Hong Kong law practice, which will provide a greater range of services to the firm's top of the line private equity clients. The firm can be proud of its truly strong Beijing office, which one peer describes as having partners who go beyond the "supporting role for Hong Kong" that many private equity firms' China offices play.

That strength was in evidence this year by the Beijing office's lead on transactions such as Chalco's acquisition of a stake in Lao Service Mining. Partner Shaolin Luo led Simpson Thacher's team in advising Chalco in acquiring a 60% stake in Laos-based Lao Service Mining (LSM) from Lao Services Incorporation (LSI). LSM will turn into a joint venture between Chalco and LSI as a result of the investment.

Partner Kathryn King Sudol also advised Blum Capital Partners in relation to its investment in Pacific Alliance Group Holdings, which has affiliates who manage investment funds covering private equity, hedge fund and distressed and real estate investments in China and across Asia.

Known for its private equity and M&A capability in the US and across the globe, Weil has left its mark on the China market by applying its global strengths

Veteran partner Stephen Xiang heads the Shanghai and Beijing offices, and leads the team on the ground in China. Xiang works closely with Hong Kong private equity head Peter Feist and together they lead a team of over 30 lawyers working on private equity related matters in greater China. Xiang's strong roster of private equity clients and history of cutting-edge work in China is exemplified by top deals like Unitas Capital, which completed in April 2011.

Weil's China team was counsel to Unitas Capital on its $758 million acquisition of international transport solutions provider Hyva holdings, which has operations in more than 130 countries and strong Bric presence. The competitive Hyva sale garnered keen interest from a significant range of strategic bidders and private equity houses. The team's ability to negotiate and finalise sponsor financing and transaction documentation under a tight time constraint speaks to the depth of the firm's China practice and cross-border private equity capability across multiple jurisdictions.

Catalysed by their recent successes, Weil's China private equity team has continued to expand-recruiting strong associates and growing the team on the ground in China and in the greater Asia-Pacific region. On the client side, users value both the depth of the firm's private equity knowledge and its on-the-ground knowledge of the China environment. As one client notes: "Weil has a sophisticated legal practice that understands the strategic concerns of international clients, while knowing what it takes to get deals done on the ground in the region."

Allen & Overy's private equity practice has continued to grow, with the team acquiring new clients such as Blackstone and winning repeat instructions from major private equity firms like the Carlyle Group. The team can also boast repeat instructions from funds like Ontario Teachers and the private equity arms of major financial institutions like Goldman Sachs Private Equity, InfraRed NF Fund (formerly HSBC NF Fund) and Macquarie.

One of the most innovative deals that the team worked on this year was in advising the Carlyle Group on its HK$20.6 billion ($2.65 billion) disposal of part of its interest in China Pacific Insurance by way of two block trades. This turned out to be one of the largest block trades in Hong Kong, and the deal was put out to tender to a number of investment banks due to its large size. Jeremy Hunt, Joelle Lau and Anthony Fan led on the transaction.

Allen & Overy's private equity team also advised the Carlyle Group on its $175 million acquisition of convertible preference shares of CP Pokphand, a SEHK-listed company, from the Charoen Pokphand Group. The deal was especially complex because of the regulatory issues facing PIPE's in Hong Kong Stock Exchange-listed companies.

In 2011, Baker & McKenzie Beijing partner Jackie Lo and Hong Kong partner Brian Spires advised China Investment Corporation (CIC) on its subscription for $250 million of convertible preferred shares and $50 million of warrants preferred shares in China's largest semiconductor foundry, Semiconductor Manufacturing International Corporation (SMIC). The deal involved adopting a ground-breaking conversion price adjustment mechanism in order to complete the transaction.

The private equity practice also represented Axa Private Equity on its seminal investment in a Hong Kong Listed company, in the form of $12.5 million in convertible bonds. Axa's investment involved complex option arrangements and undertakings agreed upon by the listed company and a shareholder.

Clients are pleased with their longstanding relationships with Baker's private equity team. "Baker is our usual contact for anything relating to our business, and the partner and his team would assist us to resolve the issues. I have been working with the Baker for more than ten years."

This past year was one of change for DLA Piper, including partner Steven Liu's promotion to the head of the firm's Beijing Corporate Group. Liu will oversee private equity and venture capital matters for the region and bring his deep experience in representing growing and emerging start-up companies as well as mature public companies, investment banks and private equity funds.

One example of his private equity work was in representing Charm in relation to its strategic investment by Aegis Group. a UK-based global advertising firm. Aegis purchased a 17.7% stake in Charm as part of a joint venture between Charm and Aegis' Vizeum arm. As a result of the deal, Aegis now holds 40% of the equity interest in Vizeum China while Charm holds the remaining 60%. In the future, Aegis plans to gradually increase its equity ratio to 100% by exercising share warrants. The deal was also novel because Charm repurchased shares from previous shareholders in addition to the issuance of new shares, which made for a complicated transaction structure that involved a large amount of money.

Paul Hastings' Greater China private equity team has experience across a range of private equity areas with a particular focus on real estate funds. The team has also seen two new, important additions this year in Roger Peng and Steven Winegar (previously managing director and senior counsel at Goldman Sachs Hong Kong). Bolstered by Shanghai partners David Wang, Jia Yan, David Blumenfeld and Milton Chou, Paul Hastings is showing an increasing presence in China-related private equity deals.

In December 2010, Peng led the private equity team in advising China's biggest online clothing retailer Vancl.com in its $100 million equity financing deal with a consortium of investors that included Ceyuan Ventures, Tiger Global Management, IDG Capital Partners, and SAIF Partners. He also represented Sequoia Capital 2010 CGF Holdco in the $55 million financing of leading Chinese manufacturer of juvenile clothing and accessories DADIDA International Holdings Company. Derek Roth also represented Tan-Eu Capital as co-sponsor in closing its real estate private equity vehicle, Sotan China Real Estate. The deal, which closed in February 2011 was valued at $400 million and was a first-time fund which represented a new way of raising capital for real estate investments.

Clients have special praise for Paul Hastings' responsiveness and language skills. According to one client: "Paul Hastings was very accessible-we could get a hold of them any time and they always responded quickly, which is important to us. They also have abundant experience in the venture capital and private equity industries and I think that the language skills of their partners are superior to other leading firms."

Clients and peers alike both had praise for Shearman and Sterling: "We were very satisfied with the firm's knowledge, expertise and innovation in solving issues." says one client. The firm has also expanded upon its offerings with the addition of its Hong Kong law practice in 2010, which should allow the firm to be a "one stop shop" for clients who require a full range of corporate services.

One of the firm's headline deals this year was managed by Hong Kong M&A partner Paul Strecker, who led a team advising Tiger Group Investments on a $5 billion maritime joint venture with the Carlyle Group with the intention to acquire over $5 billion in dry bulk, container, tanker and other shipping assets. The joint venture expects to deploy up to $900 million in equity capital over the next five years by focusing on key shipping strategic shipping segments in China, Taiwan, Hong Kong and Macau.

Shearman & Sterling's broad base of private equity clients includes Bain Capital, China Broadband Capital Partners, CVC, One Equity Partners and TPG among others.

Skadden Arps Slate Meagher & Flom's practice has had a successful year led by experienced M&A partner Michael Gisser taking up a more permanent role in the Beijing office in order to work with partners Jon Christianson and Peter Huang.

Clients appreciate the team's professionalism and capabilities. "Their advice is always clear, and it's a big plus that we don't have to reconfigure their advice and explain it to colleagues. They have never failed a deadline before. Recommendations are clear too. It's like if we are doing a big project and once they are on-board, we have nothing to worry about. That's the best thing about them. They work part of our team."

One of the private equity team's key mandates this year was representing the Carlyle Group on its $190 million acquisition of a strategic minority interest in China Fishery Group by way of a PIPE investment. China Fishery is a Singapore-listed business and the world's largest industrial fishing company. The transaction involved Carlyle's subscription of ordinary shares and warrants in China Fishery.

The private equity team also advised News Corporation on its sale of a controlling stake in its Chinese language television channels and language movie library to China Media Capital (CMC). Nick Norris and partners Bruce Goldner, Gary DiBianco and Howard Ellin led the deal, which included a reorganisation of the businesses in order to form the resulting joint venture. CMC is China's first private equity fund that is focused on media industry investment, and was developed with the backing of the National Development and Reform Commission. The agreement with News Corporation is CMC's first investment project.

Gregory Miao and partners Steve Arcano and Neil Stronski also advised Morgan Stanley on its sale of a 34% stake in China International Capital Corporation (CICC) to TPG Capital, KKR, the Government of Singapore Investment Corporation and The Great Eastern Life Assurance Company. The deal closed in December 2010.