Chinas PE Market Delivered Recordbreaking Numbers of Both New FundsInvestment Deals.docx

Chinas PE Market Delivered Recordbreaking Numbers of Both New FundsInvestment Deals.docx

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ChinasPEMarketDeliveredRecordbreakingNumbersofBothNewFundsInvestmentDeals

China’sPEMarketDeliveredRecord-breakingNumbersofBothNewFunds&InvestmentDeals

Zero2IPOResearchCenter

December8,2010

China’sPEmarketdeliveredtheaggressivereboundaftertheplungein2009,asChinaeconomymaintaineditsbetterperformanceworldwide,inaccordancewiththestatisticsofJanuary-November2010recentlyreleasedbyZero2IPO,afamousVCandPEresearch,consultationandinvestmentinstitutionintheGreaterChinaregion.74PEfundsavailableforinvestmentinChineseMainlandcompletedtheirraisingduringthefirst11months2010,afour-yearhighintermsofnumberofnewfunds,raisingatotalofUS$26.41B,2.04timesofthatraisedduringthefullyear2009.Inreferencetotheinvestmentactivitycontinuingtogainmomentum,307enterpriseshadgarneredPEinvestmentsuptoNovember30,disclosingatotalinvestmentamountofUS$9.32B,andbio/healthrankedthetopattractiveindustrybyanastonishingmargin.Asforexit,2010continueditssoaringtendencyintheendofyear,asthefirst11monthsclosed138exits,including61exitsinOctoberandNovember,andIPOremainedthemajorexitoption.

EnthusiasticPEfundraisingaccompaniedwithdecreasingscaleofsinglefund

Thefirst11monthsin2010closed74PEfundsavailableforinvestmentinChineseMainland,withatotalfundraisingamountofUS$26.41B.Despiteincreaseinboththenumberofnewfundsandfundraisingamount,thescaleofsinglefundhassuccessivelydecreasedsince2007,andtheaveragefundraisingamountwasonlyUS$356.87Mthisyear.Furthermore,accordingtotheobservationbyZero2IPOResearchCenter,thenumberoffundsscaledbelowUS$100.00Mrosepersistentlysince2008,whilethataboveUS$1.00Bkeptdecreasing,therefore,the2010witnessedmoreobvioustendencyofdecreasingfundraisingscale.40outof74fundsraisedduringthefirst11monthswerescaledunderUS$100.00M,withatotalfundraisingamountofmerelyUS$1.48B.

Inaddition,Zero2IPOResearchCenterinitiatedthestatisticsonnewly-establishedfundsinChina’sPEmarketsince2010.AsofNovember30,2010,atotalof30newly-establishedfundslaunchedtheirraising,withthetargetfundraisingscaleuptoUS$12.13B.

Thefirst11monthswitnessedmoregrowthfundsamongthe74funds,totaling60growthfundswithUS$10.46Braised.Despiteonlyfourfundsraised,buyoutfundsboastedrelativelyhigherscale,withafundraisingamountaccountingfor53.3%ofthetotal.Meanwhile,tenrealestatefundsaggregatelyraisedUS$1.86Bsince2010,5.0and3.40timesofthesein2009intermsofnumberoffundsandfundraisingamount.Zero2IPOResearchCenternoticedthatasChinagovernmenttightenedcontrolontherealestatesector,somerichindividualshadinjectedtheircapitalsintotherealestateindustryviaPEfunds,withaviewtoevadingpolicyrestrictiononinvestment.Thoughsuchfundsrenderchannelsforindividualinvestorstoparticipateinrealestateinvestment,theriskdisclosuretoinvestorshasyettobeimproved,accordingtoZero2IPOResearchCenter.

WithincreasingenthusiasmofforeignPEinstitutionsinraisingRMBfundsandslowingpaceinraisingforeigncurrencyfunds,RMBfundshavefurtherextendeditsleadoverforeigncurrencyfundsintermsofnumberofnewfunds.64outof74fundsraisedwereRMBdenominated,3.05timesofthatduringthefullyear2009,upmerely14.2%from2009intermsoffundraisingamount.Therewereonly10foreigncurrencyfundscompletingfundraisingwithatotalamountaccountingfor62.3%,duetolarge-scalebuyoutfundsandgrowthfunds.

Enthusiasticinvestmentactivitybutmoresmall-scaleinvestments

Intermsofinvestment,outof307ChineseenterprisesinvestedbyPEfundsduringthefirst11monthsof2010,263dealsdisclosedatotalinvestmentamountofUS$9.32B,up162.4%and7.7%from2009regardingthenumberofdealsandinvestmentamount.Thoughthenumberofinvestedenterprisesbrokethefour-yearrecord,theinvestmentamountofasingledealhitafour-yearlowwithanaverageinvestmentamountofUS$35.43Mdisclosedby263deals.

Inreferencetotheinvestmentstrategy,PEadoptedmorediversifiedinvestmentstrategyin2010,seeingsubstantialincreasesininvestmentdealsviathosestrategiesexceptgrowthcapital.276of307investmentdealswereviagrowthcapital,anotableincreasefrom82dealsin2009.Therewere15PIPE（PrivateInvestmentinPublicEquity）deals,onaparwiththatin2009;fourinvestmentdealswereclosedviaM&A,aslightdropfromthesixdealsinthepreviousyear;inaddition,thereweretenrealestateandtworestructuringinvestmentdeals,bothoutperformingthepreviousyear.

Bio/healthcaretookthelead,Internetbetter-receivedbyPEinstitutions

IntermsofindustrybreakdownofPEinvestments,theinvestmentdealsduringthefirst11monthsweredistributedin21industries.Tobespecific,ashi-techindustrieswerethebestreceivedfields,thebio/healthcareandclean-techundertheemergingsectorswerefocusedbyinvestmentinstitutions.Excludingafewleadingenterprisessecuredlarge-scaleinvestments,nearly70%ofinvesteeseachobtainedlessthanUS$20.00M.Bycontrast,thosedevelopedtraditionalsectors,i.e.agr/forestry/fishing,food&drinks,chainretailandmachinerymanufacturing,hadrelativelylargerinvestmentamountforasingledeal.Furthermore,itisnoteworthythattheinternetindustrypoorlyreceivedbyPEinvestorswitnessedsignificantimprovementsinbothnumberofdealsandinvestmentamountthisyear.E-commerceandinternetserviceundertheindustrygarneredmaininvestments,andenterprisesobtaininglarger-scaledinvestmentsmostlyboastedfully-fledgedbusinessmodelsandstablegrowththroughtheindustryreshuffling.

Beijingsawmoreinvestmentdeals,centralregionrankedhigheroverall

The307investmentdealsclosedduringthefirst11monthswerescatteredmainlyin29provincesandcities.Specifically,Beijing,ShanghaiandJiangsumaintainedtheleadinnumberofinvestmentdeals,andrankedamongthetopfiveintermsofinvestmentamount.Shanxirankedsecond,amarkedimprovementintermsofinvestmentamount,mainlyduetoBOCInternational’sinvestmentinJinyuluRailwayChannel.Generally,China’scentralandwesternregionsoutperformedthehistoricalstandard,includingSichuan,Henan,Hunan,HubeiandAnhui,postingconsiderableincreasesintermsofnumberofdealsandinvestmentamount.

IPOexitcontinueditspredominance,machinerymanufacturingtoppedthelistofexit

China’sPEmarkethadshownsignificantimprovementinexitsince2010.138exitshadbeencompletedbyPEinstitutionsuptoNovember30,including133IPO-backedexitsand5exitsviatradesale.Intermsofinstitutiontype,64outof133exitswerecompletedbydomesticinstitutions,68byforeigninstitutionsandsixbySino-foreignjointventures.

Intermsofindustrybreakdown,themachinerymanufacturingheldasafeleadoveritsfollower,thebio/healthcare,with23exits,forinstance,thelistedNVCLightingHoldingLimited,ZhengzhouCoalMiningmachineryGroupandMingyangWindPowerarebackedbyPEinstitutions.Thebio/healthcaredelivered16exits,involving14investedenterprises,whicharemainlydistributedintwosub-industries,pharmaceuticalsandhealthproducts.Thefood&drinksrankedthird,anditiscommonthatmultipleinstitutionsinputcapitalsinanenterpriseandwithdrawfromit,forinstance,ChinaMinzhongFoodCorporationLimited,ChinaNewBorunCorporation,GlobalDairy,GuangdongYashiliGroupandModernFarmingGroupreceivedcapitalfromanumberofPEinstitutionsbeforetheirIPOs.

Asformarketbreakdownofexits,HKMBremainedthemajormarketforIPO-backedexits,whiledomesticmarketsdeliveredoutstandingperformanceafterIPOrestartandlaunchofChiNext,completing50exitsviadomesticsIPOduringthefirst11months,a37.6%ofthetotal.Theyear2010sawslightincreaseinexitsbyforeigninstitutionsviadomesticIPO,registeringfiveforeigninstitutions,i.e.GoldmanSachsandCarlyle.