According to the Zero2IPO Research Center, China VC & PE market was generally active in October. Specifically, a total of eight mainland China-focused VC/PE funds were newly raised, collectively disclosing US$3.23B, registering an obvious uptrend from last month in both deal number and capital raised. Meanwhile, 42 VC/PE firms invested in 25 domestic enterprises. The total amount invested, disclosed by 17 domestic enterprises, came to US$1.05B with an average of US$61.93M. The deal number increased by 66.7% and the amount invested increased by 596.5% respectively in comparison with last month. The average investment amount rose by 350.7%.
Although the worldwide financial crisis has led to a sluggish IPO market and the termination of economic growth, VC/PE firms are endeavoring to attain momentum of seeking more investment opportunities because they are more or less encouraged by the following favorable factors. First, the evaluation criteria for domestic projects have been readjusted, resulting in a decrease of investment expenditures. Second, the regulatory policy for domestic investments has been less stringent. Third, China is less affected by the financial crisis than the developed countries.
Traditional Industry Receives the Largest Investment; Broad IT Remains Focus of Investment
By industry, Traditional industry continued to take the lead mainly contributed by the well-performed TMT sector (In October, TMT was heavily invested by VC/PE investors). The average investment amount of Traditional soared as well. Five Traditional deals (20.0% of the total) received US$668.28M (63.5% of the total). (Note: one deal did not disclose the amount invested). Amongst them, Black Stone acquired 20% stakes in BlueStar for US$600M, escalating the proportion of Traditional investment amount in the monthly total.
Broad IT industry became another highlight in October and it remained as an important investment filed. A total of 12 deals accounted for about 50% of the total. Wherein, six investment cases disclosed a US$115.10 million. The average for IT deals increased by 77.7% over last month, showing IT industry was still one of the key VC investment fields. In terms of breakdown, Telecom is the best received.
Increased Investment Scale & Higher Concentration Degree of Medium and Large Deals
By number, there were five deals at a size between US$20M and US$40M (inclusive of US$20M), three deals at a size between US$40M and US$100M (inclusive of US$40M), and two deals at a size above US$100M (inclusive of US$100M). The combined number of these types of deals accounted for nearly 60% of the entire deals with disclosed amount. This month, the concentration degree of medium and large-size deals is high. The two deals at a size above US$100M received a combined US$703M, representing 69.3% of the total.
Influenced by the financial crisis, the investment cost tends to be lower, which stimulates the investment market to a certain extent. Accordingly, the continuous downtrend of the investment scale during the past months ultimately halted and began to rebound in October.
M&A Market Resumes Active with TMT Performing Outstandingly
The Zero2IPO Research Center focuses heavily on the TMT, Energy and Bio/healthcare sectors. Of these three sectors, seven transactions were finalized in September. All of them did occur in TMT sector. Five of them disclosed a value of US$254M.
Seven cross-border M&As disclosed an accumulative value of US$258M (one translation's value is unavailable). Four VC/PE related M&A cases were mainly distributed in Broad IT and Traditional sectors. The total value of these VC/PE related cases was US$68.29M.
Domestic IPO Enters a Vacuum Period with Domestic & Overseas Listings is heavily Blocked
According to the Zero2IPO Research Center, IPO market was still affected by the financial storm. Since September, the pace of new listings has obviously slowed down. In October, IPO hit a historic low. A-Share IPO entered a vacuum period. There was only one China concept IPO at overseas market. Renhe Commercial Holdings Co., Ltd. offered US$437M by floating on Hong Kong Exchanges and Clearing Ltd (HKEx). Obviously, the more aggravated the financial crisis becomes, the greater adverse effect on VC/PE exits it has produced.
