"Activity in the China PE market continues to increase post-credit crisis. Whilst most of the activity tends to be minority investments, this transaction will be a reminder that buyout deals are also possible," said Clifford Chance's PE partner in Beijing, Terence Foo, who led the firm's team. "The challenge is to find the right company with the right structure that is suitable for a buyout."

This is the third successful buyout of a Chinese company that Clifford Chance has closed in recent years. Previously, the firm advised CVC Asia Pacific on the buyout of Plantation Timber Products in 2006 and Asia Dekor Holdings Limited in 2008. Both deals were LBOs, and both involved deal sizes of US$100m and above.

Firms who are hoping to close more LBOs will continue to overcome some significant barriers. "Buyouts in China are notoriously difficult to close," said Foo. He pointed out three main challenges to buyouts: high-value deals typically require regulatory approvals at the central government level which are more difficult to obtain; a foreign investor taking control of a Chinese national champion may encounter some form of protectionism; and getting leverage from banks for China deals is difficult where the ability to obtain security is fairly limited.

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