Actis: Private equity investments in a capricious market

• Main Authors: LIM, Meng Ann, MATHUR, Sarita
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2014
• Subjects: Private equity; investment; finance; budget hotels; hotel industry; China; Asia; Business Administration, Management, and Operations; Finance and Financial Management; Strategic Management Policy
• Online Access: https://ink.library.smu.edu.sg/cases_coll_all/79; https://cmp.smu.edu.sg/case/1761
• Institution: Singapore Management University

This case looks at the front end of a private equity (PE) deal cycle. It is set in September 2008, and begins with the Investment Principal of Actis (China), a global private equity firm, preparing to present the proposal for 7 Days Inn, the fourth largest budget hotel chain in China, to the Investment Committee (IC). Just a day before the IC meeting, he hears news about the Lehman bankruptcy. How would the news about the collapse of Lehman Brothers impact the 7 Days deal? Would it change the industry and company forecasts, which he and his team had meticulously calculated? Would Li be able to convince the IC that 7 Days Inn was still a good investment? Most importantly, should Actis go ahead with the proposal or should they re-consider?