Please click here to see the video on YouTube if you locate outside of China.
First: Consider the fringe
Second: Explore strategic acquisitions
Third: Evaluate creative partnerships
First, consider the fringe. No matter what line of business you’re in, you’re going to have your core consumer segment. For healthcare companies, that may mean Grade III hospitals or other large institutions. However, there may also outlying segments that you should consider as well – it may include research institutions, continuing medical education, or primary care. While they may not be the largest in size, it may be smart to establish an early foothold in the market and grow with the segment.
A real world example of this is in Alibaba’s recent investment of $170 million in Citic 21 CN, which is a data and content provider that serves the pharma market. As Alibaba’s core business focuses more on retail and related industries, this example shows their willingness to expand out into other high-opportunity segments.
Second, explore strategic acquisitions. Let’s say you’ve identified a high-potential fringe segment, but you find the market to be consolidated, being run by just a handful of top players. In this case it may be worthwhile to invest in or acquire a locally-based company with a strong market position.
An example of this is found in Bayer’s recent move to acquire Dihon Pharma, which is a maker of traditional herbal Chinese medicines (TCM), with sales of $168 million. Again, they identified the high-opportunity fringe segment they wanted to be a part of but didn’t have an established presence in (TCM) and pulled the trigger.
Third, evaluate creative partnerships. So let’s say you’ve identified the high-potential fringe segment, have chosen the locally-based company you’d like to invest in or acquire, but you don’t have the capital necessary to make it happen. Well here you could seek out like-minded companies to join you in investing.
A real life example here is of the decision of Shanghai Fosun Pharma and US PE firm TPG to take the Nasdaq-listed Chindex private in a $369 million deal. The move is a creative way that offers a company like TPG the chance to gain exposure to China's growing healthcare sector, but in a partnership that offers less risk.
Aug 14, 20133864
May 16, 20142358
Jun 20, 20142432
Apr 21, 20142306
SmithStreet provides you source for today’s leading business ideas. Our content explores the topics critical to China market today.