Bain Capital has acquired 80% of Lionbridge Financial Leasing (China) and has become the largest shareholder of the company, with the remainder held by the management team. This is the largest transaction in China’s financial leasing sector in 2014.

 

Lionbridge is one of China’s fastest growing financial leasing companies, with the total leased assets at about 3 billion renminbi (US$489.16 million)  at the end of the first half, 2014. Focusing on China’s small and medium enterprises (SMEs), the company provides leasing services, lease-back services and leasing asset management in four industry verticals: heavy duty vehicles, medical equipment, manufacturing equipment and agriculture equipment.

 

As industry players align themselves with government policies to help meet SME financing demand, the leasing industry in China is entering a dynamic period of growth. China’s financial leasing sector has grown from 8 billion renminbi in 2006 to 3 trillion renminbi in 2014, making the country one of the world’s biggest leasing markets.

 

However, the penetration rate in China remains low compared to developed countries, indicating huge potential for future growth. Lionbridge recognized that China’s existing financial system is not set-up to serve SMEs and capitalized on this gap by establishing a unique business model and an extensive service network of 174 offices covering 22 provinces, through which bespoke services are provided to local SMEs.

 

To accommodate the credit profiles of China’s SMEs, Lionbridge created a robust risk management system tailored for small scale finance. In addition to the standard risk control mechanisms such as separating credit assessment from loan approval processes as well as setting up review committees, it established a quantitative evaluation model and system that assess credit status and potential clients’ repayment ability. It also minimizes its operational risks by focusing on valuation, ownership control and liquidity levels of all leased assets.

 

Lionbridge’s model connects the traditional leasing business with its SME clients’ operations through identifying their operational needs and providing suitable value-add services. It then becomes an essential part of its clients’ business processes. By leveraging this business model, Lionbridge has become one of the top three companies in heavy duty vehicles in less than two years, the company said.

 

Managing director of Bain Capital Jonathan Zhu said “This investment marks Bain Capital’s entry into China’s financial services sector and our efforts to capture business opportunities in the underserved SME sector, where there is a large unmet financing demand. Providing tailored retail financing services and connecting financing with business operations are the key characteristics that make Lionbridge’s business model unique. Its management has extensive sector expertise and an impressive track record. The network and reputation they have cultivated over many years of hard work are invaluable assets to the company.”