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Regulations of Value Creation in Private Equity Funds - Focusing on Taiwan’s Biotech Industry
Private Equity Funds,Biotechnology Industry,Going Private Transactions,Information Disclosure,Shareholder Rights,
|Publication Year :||2020|
Taiwan has been developing biotechnology industry for more than 40 years, and to this day, the biotechnology industry is still one of Taiwan’s key policy industries. Thanks to long-term investments by the government, Taiwan's biotechnology industry has developed fundamental features and advantages that can compete in the global market. However, since biotech industries have a uniquely high entry threshold, biotech companies usually have difficulty maintaining sufficient funding between startup stage and product launch stage. Especially after 2016, biotech company’s stock prices in the Taiwanese stock market was bubbled, making it even more difficult to raise funds. In the past, most Taiwanese companies could only rely on their own resources and thus had limited funding; nowadays, collaborations with strategic investors through fundraising are on the rise. LCY Chemical and Microlife Corporation were both significant cases in Taiwan in 2018. They followed the acquisition model of international private equity funds (PE funds) and became unlisted privatized companies. This article focuses on how biotech companies can flexibly leverage PE funds to create company value and overcome the so-called “discontinuity of funding” in the ensuing finite domestic market and global competition. Another issue is that as PE fund is introduced into Taiwan, how to protect the rights and interests of companies and shareholders via the existing regulations.
In the US, the development of PE funds started with the development of the capitalism market economy. After comparing PE funds regulations of the US and Taiwan and studying recent acquisition cases, the author found that the value creation model PE funds brings to the target company includes using the company's balance sheet to restructure company finances, and building the target company's capabilities to increase value through asset redeployment, and operations and strategy reorganizations. PE funds models have strong resource integration capabilities. By helping industries consolidate through investments and M A, PE funds models can adjust equity structure, balance management team authority and power, bring in abundant capital, and strengthen company governance, which is very beneficial to the succeeding generations and overall enterprise consolidation.
According to the observations, private equity investments in the biotechnology industry have grown significantly in the recent years. This indicates that global investment institutions are optimistic of the biotechnology industry’s market potential. In 2018, PE funds were still very active in the Asia-Pacific region, and Taiwan's regulations on PE funds had gradually become clearer and more open. Looking forward, regardless whether it's traditional merge and acquisition or going private due to M A by PE funds, the action should not be heavily regulated by the government; instead, we should consider relevant procedure safeguarding mechanisms such as board’s fiduciary duties, information disclosure, avoidance of conflict of interest, reasonable pricing. We should respect the low-key and discreet features of PE funds and seek a balance between creating business value and protecting investor interests. This can satisfy the high demand for capital in our biotech industries and help them to keep on developing. Finally, with investors continuously investing in Southeast Asia, and European and American markets restricting Chinese investors’ actions on M A and oversea investments, Taiwan’s industry is facing a great opportunity to work with international PE funds to speed up global deployment and initiate the next wave of growth.
|Appears in Collections:||事業經營法務碩士在職學位學程|
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