Buying Small is Beautiful For Private Equity

The conclusion of Carlyle’s attempt to buy into Xugong Construction Machinery is a good example of a clash between international politics and private equity deals. After being exposed to repeated scrutiny by Chinese regulation, Carlyle was forced to reduce their original 85 percent share to a 45 percent minority position. While a number of firms are eagerly looking into the Chinese market, this deal is a reminder of the influence of political pressure.

“People are busy reading the tea-leaves trying to understand what happened in the transaction,” says David Patrick Eich, a partner at Kirkland & Ellis in Hong Kong.

This article appeared in its entirety in the March 19, 2007 edition of Financial Times.