Balendo Lo buys and sells China firms, usually for no less than US$100m Dealmaker Balendo Lo Wai-chuen's first job with auditors KPMG quickly cured him of his early ambition to be an accountant. Hong Kong-born Mr Lo left aged 14 to be educated in England, graduating in accountancy and business from Exeter University. His first task, filing value-added tax returns for Japan Airlines in London, opened his eyes. Greeted by stacks of invoices, he realised that as fast as he worked, the piles of paper kept growing. 'Every time I came back to my seat I couldn't see across the table. I decided I wanted to be doing more interesting things than verifying other people's accounts, though I was very good at it,' he says. Next he tried banking, specialising in areas such as aircraft leasing and mining financing. He was hired by HSBC to help in investment banking, ending up in the private banking division. But when his father fell seriously ill in Hong Kong, he flew straight home. Having missed the chance to say goodbye to his grandmother when she died because he was on a plane, he did not want it to happen again. 'Dad had cancer but his operation went well, so I decided to stay and see what Hong Kong was about after 20 years away.' It was 1997 and ironically his first job offer was to set up First Bank of New York's London office. He declined, instead joining the listings division of the Hong Kong Stock Exchange 'for a laugh', but it was far from a breeze. He was plunged into an initial offering frenzy as one of a team of six senior managers in the listings division. 'I took care of companies beginning from R to Z. We were so busy I was running six share offers every day through the exchange and was the only senior manager with two sub teams, so I handled more offerings than anyone else.' It proved invaluable, as he was rubbing shoulders with bankers, lawyers and accountants he would later recruit to buy companies with him. After the market crash, the stream of new listings dried up and work became 'a bit boring,' he updated the exchange's internal operating manual, incorporating best practice and new rules. Mr Lo pushed to make the listings division more specialised, with share sales allocated to team leaders according to workload, instead of alphabetically. Then he was poached by a company to be its internal investment banker. 'They picked me to do a deal because of my banking and investment and regulatory experience.' It was something of a coup, involving the company that became China Electronic. 'We sold a Shanghai-listed China company, we were the only controlling shareholders to have done this, completely restructuring. It was a backdoor listing, with the approval of all seven ministries in China.' Having sold China Electronic for his boss, he was now convinced the only way to make money was buying and selling firms. He set up on his own. 'I didn't need a licence, I was employed within the firm and assembled an experienced team who can handle anything an investment bank can handle.' Each of his six strong hand-picked team takes care of different parts of a deal from the accountancy to the legalities. 'I focus on constructing the deals and doing the vetting.' They call themselves OSA. In between deals, they hold brainstorming sessions around the pool at his Jardine's Lookout home. 'We are targeting a company now, so there's no point having a $2 million office when we will have a new office when we buy the company.' The formula is the same each time and the focus strictly China. 'It's where the money and the potential business is. We select a target, we work on it using our friendship and contacts in China, value-add it, build it, then, if appropriate, [list] it or sell it to investors.' He says his group normally does not touch anything below US$100 million because it costs the same to work a US$10 million deal. 'In terms of asset valuation in China, we know what the market needs, how to structure a firm to make it leaner, have its poor management slimmed down, and create better value for shareholders.' His sights are set on two targets - a medical company and a huge player in the 80 billion yuan a year lotto business. He sees no official blocks. 'The state is far more liberal now and provides opportunities for a big operator to come in and make it more interesting.' The government welcomes new games, as long as they are not classified as gambling, for welfare and spot lotto. 'I think this can be a trillion-dollar business in China, this is just a $2 game that generates money for welfare, it's not like you walk into a casino and lose your life savings.' Three parties are involved in mainland lottos - the system supplier, who gets up to 1.5 per cent of gross turnover, the operator, who gets 6.5 per cent, and the government. Mr Lo's group aims to be the operator in some provinces. The medical company he is targeting has the licence to distribute liver cancer drugs in China, which has more than 600,000 cases each year. 'These new drugs reduce the tumour, buying you time, and time is money. We believe once we secure the approvals, the company will have a value tens of thousands of times what it is worth now.' He is also working on a firm that makes electric cars in China, but its top speed of 40kmh makes it more suited to private estates in the US than in the mainland, he admits. For funding, there's plenty of Middle Eastern money looking for opportunities in China, but he has to know the source. 'Actually, the Middle East is highly regulated, but we are working with bankers who are trying to put up US$500 million as seed money to invest in selected industries in China.' Mr Lo, 48, is something of a poacher turned gamekeeper and his successful deals owe much to his Hong Kong stock exchange experience, where he learnt the minutiae of the listings rules that had made him a thorn in the regulators' side. 'Every time we target, buy or sell, they change the regulations to try to stop me doing it again,' he chuckles. 'After each deal, they try to close the loopholes that I have found. I would never do anything that is not proper. But that doesn't mean that I don't utilise what is to my advantage.' Plans for the next five years include becoming increasingly picky. But when it's the right target, there's no hesitation. 'We are a good team that works well together - and we go for the kill.'