* funds seeking deals to help privatise listed firms

* late 2008 or early 2009 will be good for China dealmaking

* wary of super cheap deals hiding risks (For more Reuters DEALTALKs, click [DEALTALK/]

By George Chen, Asia Private Equity Correspondent

SHANGHAI, March 17 (Reuters) - China-focused private capital funds, once eager to help Chinese companies go public, are now more interested in listed firms which have the potential to be privatised at a low cost, dealmakers said on Tuesday.

Public listings on international stock markets and trade sales of private capital-backed companies used to be two of the most popular options used by private equity and venture capital funds to exit their investments.

However, the global investment landscape has changed greatly in the past year due to the financial crisis as many companies had to delay or cancel their plans for initial public offerings.

To some Chinese entrepreneurs whose companies went public in early 2008 before IPOs completely dried up, listings were not a happy experience either as the share prices of such firms have mostly fallen below their IPO levels.

"Some entrepreneurs are now planning to privatise their listed companies as they don't have the heart to see continuous falls in share prices below a reasonable level they can accept," said Sequoia Capital's founding China partner Neil Shen.

Shirley Chen, a managing director of China International Capital Corp (CICC), said her firm has been looking at several small- and mid-sized listed companies with potential for privatisation this year.

She did not name any companies but noted it could be a good opportunity now to work with entrepreneurs to delist their companies from second-board markets such as the Alternative Investment Market of the London Stock Exchange.

"Second-board markets in London or Singapore are too small for some Chinese companies. After IPOs in these markets, it will be really difficult for these firms to raise additional funds from these markets particularly in bad times," said Chen, who is also the head of private equity at CICC.

Chen noted privatisation of listed companies would cost less now due to cheaper share prices, and trade sales when companies grow bigger can be an exit option for funds.

CICC is China's first investment banking joint venture, in which Morgan Stanley (MS.N) holds a 34.3 percent stake.

WHEN TO INVEST?

"Share prices of some listed companies fell very sharply in the past year, so we should be happy to make investments now from the perspective of private equity funds," Chen said.  Continued...