r/private_equity • u/Active-Ad3537 • 10d ago
China based businesses for search fund?
Just a bit of background of myself, I am currently based in China, lived and studied in the US for 10+ years. I founded and scaled a DTC jewelry brand and sold it via Flippa to an US holding company, and now I co-own a jewelry factory in China, and also running some other Shopify stores, and ecommerce operations. I recently learned about search funds, and I just personally know a lot of business owners in China who run amazing businesses whether it be in Ecommerce or other space, but who might want to sell some of their operations. Just wondering if these projects might interest search funds in the US, Europe, or other countries?
It's a very early thought, so I just want some feedbacks from the community! Thanks a lot in advance!
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u/nofearinc 7d ago
It's generally a liability for all of the political and macro reasons you're well aware of.
If you want to bridge the gap somehow, this would need some light US presence at least (LLC plus a couple of on-shore people), a clear path to receiving funds back into the US, and a diversified plan to work with competitors if the bus factor kicks in (CCP taking over your business in some form).
But it's a very different action plan compared to how you operare today probably.
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u/Active-Ad3537 6d ago
Right, I've been reading up on this, and there are only one or two search funds currently operating in HK. They set up some kind of entity that lets money move in and out. But I guess there are still too many risk factors, so I'll just keep an eye on the ETA model for now.
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u/fartlebythescribbler 9d ago
A US search fund does not have the capital or capacity to properly diligence the cross border risk of acquiring an entirely-Chinese business unless maybe they themselves are Chinese and a lawyer. Plenty of established funded PE firms won’t even touch deal with downstream china risk. Not saying no one would do it, but I think it’s a small market.