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Bain Capital’s ‘Take Private’ of China Fire


Denis Gromb, Antin I.P. Chair Professor of Finance at HEC Paris, talks about his business case study “Bain Capital’s ‘Take Private’ of China Fire” co-authored with Marc Kitten of CANDESIC and about case writing.

Bain Capital’s ‘Take Private’ of China Fire - Denis Gromb - HEC Paris - ©ArenaCreative-AdobeStock

Company valuation

The case focuses on China Fire, a NASDAQ-listed Chinese company operating in the fire protection industry serving the Chinese steel and nuclear sectors. The company is being ‘taken private’ by its family owners and Bain Capital’s private equity arm. The case allows instructors to cover different methodologies for valuing a company: historical trading range, brokers’ price targets, trading multiples, transaction multiples, historical takeover premia and discounted cash flow analysis.

But other themes as well

The case’s core is focused on valuation methods, but it also touches upon less technical but equally interesting issues. For a start, why is a Chinese company, whose entire business is in China, listed on an American stock market? Why are US-listed Chinese firms currently under attack by US hedge funds? Why are they reacting with buyouts and why are US private equity firms willing to help?

Case studies

We wanted to write a case we could use in all types of programs: undergrads, MBAs, executives, etc. I like cases that put financial decisions in a broader business context. Here, for instance, the case covers valuation methods, but this is meaningful only if one understands that following governance-related scandals, US-listed Chinese firms are under attack. Is China Fire a collateral victim or was it previously overpriced?

I also like cases with ‘drawers’ that can be pulled out or not depending on discussion dynamics. With China Fire, I often go into short-selling by hedge funds. This is not central to the case but allows students to make connections with other courses. Context also invites students to share their own knowledge and experience, and they often have a lot! We also wrote a very short abridged version of the case that works well if participants have little preparation time or must prepare in class.

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