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Market Avenue

Print Edition> Business
UPDATED: January 29, 2007 No.5 FEB.1, 2007
M&A Advice
Chen Hong learned the hard way why stocks are so important. Now he helps others avoid his own mistakes

Back in 1997, while still an unknown entrepreneur, Chen Hong sold his Internet service provider (ISP) AIMnet, the company that he had founded three years earlier, for $10 million in cash.

Maybe that sounds like a lot, but it's a pittance compared to what he would have received had he held out for shares in the sold company.

"If I had any shares then, I could have made hundreds of millions of dollars," said Chen.

The acquiring company, Verio, went public after acquiring a dozen similar companies and was later acquired by NDD for $5.6 billion.

"Cash plus stock" is the valuable mantra that Chen learned as the hard way. It's that kind of knowledge through experience that Chen, Chairman and CEO of the Hina Group, now is able to share with his clients through practical case examples.

The Hina Group, simultaneously registered in California and Beijing in April 2003, provides corporate finance and mergers & acquisitions (M&As) advisory services for corporate clients in the United States, China and throughout the Asia-Pacific region.

Sitting on his office balcony and enjoying panoramic views, Chen spoke of his "Hina" dreams. The word "Hina" means "the Chinese are capable." And that belief appears to be making Hina itself very capable.

Since 2005, Hina has advised parties involving more than 13 transactions, valued at over $700 million. In the "Zero2ipo-China Venture 50" list released in October 2006, three of the top five companies, including Worksoft, Oak Pacific Interactive and Shenzhen Xunlei, were Hina clients.

Recently, Chen sat down with us to share his hard-won expertise in everything from China's ripe investment landscape to M&A problems on the mainland.

The Hina Group not only provides financial advisory services for businesses, but also directly advises investors in some projects. What areas has Hina invested in so far?

Direct investment only accounts for a very small percentage of Hina's business because it tends to be distracting. Currently, the companies in which Hina is directly invested include Framedia and another media company.

In 2004, Hina invested 10 million yuan in Framedia, and later, IDG followed suit. In October 2005, Framedia was acquired by Focus Media for $183 million. Hina received a 20-fold return from this transaction, which is still the second largest acquisition case in Chinese media acquisition history. This acquisition made Hina a household name overnight.

Hina's investment fund currently focuses on technology, media and telecommunications in China. But we are beginning to look at some new areas such as the medical sector and chain stores. We normally invest in businesses at a later stage in their development, rarely setting our eyes on start-up companies.

Hina provides financial advisory services for many businesses such as Worksoft, whose two financing cases were overseen by Hina. Why did Hina decline direct investment in Worksoft, choosing instead to invest in Framedia?

Hina's investment decisions were made with caution and involved many factors. Generally speaking, Hina wishes to hold a large stake in the invested business, which requires a large amount of funding.

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