3i Group’s Private Equity Investment in China’s Little Sheep (MindTap v4 Integrative Case 11)
1. What are the key factors that explain the success of Little Sheep? What are the main obstacles associated with its continued growth?
2. Compare and contrast the similarities and differences between the typical mid-size private equity investments in the West and such investments in China (as captured by this case). If you were a manager working for a Western private equity firm (such as 3i), what lessons would you draw from this case?
3. If you were an entrepreneur at a firm in China (such as Little Sheep) or in emerging economies in general, what lessons would you draw from this case?
K, eftii Refresh Submissions
13i Group’s Private Equity Investment in China’s Little Sheep How and why was an unlikely yet productive relationship forged between a large, well-established global private equity firm and a rapidly growing Chinese restaurant chain? Lily Fang, INSEAD Roger Leeds, Johns Hopkins University, School of Advanced International Studies “Many people grow a company like raising a pig. The pig gets fat, you kill it and make money. I grow my company like raising a son. The average life of a restaurant is less than three years in China. I want Little Sheep to last a century.” —Zhang Gang, Founder, Little Sheep Catering Chain Co. “Helping a great business to realize its potential takes a lot more than just capital. It is ultimately about the people, thus your relationship with the management team and the sort of support you can provide, such as introductions to key industry expertise and relevant operational best practice, is very important.” —Anna Cheung, 3i Partner, China 3i Group PLC 3i Group plc is one of the oldest private equity firms in the world, with a track record dating back to 1945 when the British government and a consortium of banks founded two organizations—the Industrial and Commercial Finance Corporation (ICFC) and the Finance Corporation for Industry (FCI)—to bridge the financing gap afflicting small and medium-sized enterprises (SMEs) in 2 the aftermath of World War II. In 1975, these two corporations merged, and in 1983, the combined entity was renamed 3i—“investors in industry.” In 1994, 3i was listed on the London Stock Exchange, becoming the first large private equity fund to go public and have access to permanent capital. 3i invests in a wide variety of businesses through its five lines: buyouts, growth capital, venture capital, infrastructure, and quoted private equity (see Exhibit 1). Expanding its geographic footprint beyond the UK and Europe, 3i today has offices in 14 countries across Europe, Asia, and the US and has…