Kerman & Co on Zhejiang Silk Road Fund Investment

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Kerman & Co’s Private Equity team recently represented Zhejiang Silk Road Fund, a private equity fund principally sponsored and managed by Zhejiang United Investment Group, China (“ZUIG”), on its equity investment in CMR Surgical Ltd’s (“CMR Surgical”) Series B funding round.

On 4 June 2018, CMR Surgical announced that it has closed a Series B funding round raising $100 million from new investor, Zhejiang Silk Road Fund and existing investors Escala Capital Investments, LGT, Cambridge Innovation Capital and Watrium. It is thought to be Europe’s largest ever fundraising in the medical devices industry.

Headquartered in Cambridge, England, CMR Surgical is developing the next-generation robotic system ‘Versius®’, for universal minimal access (or “keyhole”) surgery. The company’s vision is to make minimal access surgery universally accessible and affordable by significantly expanding the range of procedures that can be performed robotically.

Commenting on the investment James Wang, Managing Partner of ZUIG said “We are delighted to complete this transaction with the support of Kerman & Co. We relied upon Kerman for solid and sensible advice, which contributed greatly to the overall success of this investment.”

Paul Gilks, Partner at Kerman & Co, commented “We were delighted to work with the ZUIG team on this transaction. The role of the Chinese speaking members of our team was crucial in enabling us to meet the challenging timeline for completing the due diligence exercise and negotiating the legal documentation.”

The Kerman & Co team was led by Corporate Partner Paul Gilks, and comprised Joan Yu (Corporate), Peter Kohl (Corporate), Claudia Otto (Real Estate), Zane Shihab (Trademarks), Coral Yu (Corporate), John Daly (Corporate), Eugenie Freeman (Employment) and Amit Bhangham (Real Estate).

ZUIG was also advised by Fraser Brown of Cleveland Scott York in respect of patent matters.

 

Interview with Paul Gilks & Coral Yu of Kerman & Co LLP

In your opinion, how do you see the Chinese market affecting future transactions, and how does this particular transaction contribute to this movement?

We sense that there may be a perception that closing deals with Chinese investors can be difficult and can slow down the fundraising process. This was not, in fact, our experience in the ZUIG transaction where the legal due diligence process and signing of the legal agreements was completed in a matter of weeks.

The restrictions on China’s outbound investment have recently been tightened, but the regulatory approvals in this case were received within the deadline agreed by the parties. Once the investment community gets comfortable with the new Chinese regulatory approval process, we can only see Chinese investment activity in UK companies increasing.

There is clearly growing interest from Chinese strategic investors in making investments in UK technology companies. From a UK Company’s point of view the benefit of having a Chinese partner is likely to become increasingly important as a way of accessing the growing Chinese marketplace.

 

How do you ensure the entire team are on the same page when working on such a big transaction?

We are very fortunate to have two native Chinese speaking lawyers on the Kerman team. Their role was particularly important to ensure that no misunderstandings arose with the client while negotiating the more difficult issues.  Legal due diligence covered corporate, commercial, property, employment and IP matters, with each department contributing its own section to the due diligence report. The patent issues which were particularly critical in ZUIG’s assessment of the investment opportunity were dealt with by Cleveland Scott York, who we have worked with on other assignments.

 

Were there any lessons learnt after everything was finalised?

We were struck by the professionalism of the ZUIG team who were prepared to work around the clock to get the deal over the line. China is 7 hours ahead, so you can easily lose a day unless you arrange conference calls and respond to emails early in the day. There was clearly some concern from the Company and other investors that the tightened Chinese regulatory approval process might delay completion. However, we believe that this did not become an issue partly because ZUIG was proactive in communicating with the regulatory authorities to smooth the approval process. In the event that ZUIG participates in future investment rounds this experience will be put to good use.

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