According to the research statistics released by Zero2IPO Research Center in Beijing on Dec. 7, 2009, a prestigious institution in Greater China specializing in the research, consultation and investment of VC and PE, although the recovery of economies around the world has picked up steam, the shadow cast by the financial tsunami in 2008 still enfolds the global PE investment and fundraising markets, and China is no exception either. Since 2009, Chinese PE market has underwent industry structural adjustments due to such factors as capital market turbulence, assets contraction of institutional investors and real economy depression. As of Nov. 30, 2009, 26 PE funds available for investment in Asia (including Chinese mainland) completed fundraising of a total of US$12.38B, tumbling 79.7% from 2008. At the same time, 102 investment deals were closed by PE institutions in Chinese mainland with a combined amount up to US$8.43B, down 12.3% over the previous year. The first 11 months of 2009 saw 64 exits of PE funds, an increase of 40 over 2008.
All the data and analysis were derived from the quarterly and yearly research of zero2IPO Research Center. The Center began to conduct nationwide quarterly and yearly survey and rankings of Chinese VC/PE market in 2001, and has since published quarterly and yearly research reports.
Amount Raised Drops Sharply; Growth Funds Dominant
From Jan. to Nov. 2009, a total of 26 PE funds were launched in Asia (Including Chinese mainland) and the amount raised stood at US$12.38B. Compared with 2008, the number of new funds fell by 25, while the amount raised nosedived 79.7%. Faced with the sharp contraction in funding supply for PE funds in 2009, institutional investors tended to take a cautious and wait-and-see attitude. As a result, it takes more time to raise a new fund than in the past two years, and an increasing number of funds were suspended. All the factors contributed to the depression of PE fundraising on Chinese market. In terms of type distribution, growth funds came up first with 21 deals involving US$9.50B. Compared with the previous year, the number of new growth funds in the first 11 months of 2009 dropped by 15, and the amount raised reported a decrease of 75.2%. Three Buyout funds raised a total of US$2.34B, accounting for 11.5% of the total number and 18.9% of the total amount raised. The number of new buyout funds decreased by four and the amount newly raised fell 85.6% from 2008. Another two real estate funds targeting Asia closed fundraising of US$546.00M, accounting for 7.7% and 4.4% of the total respectively.
Investment up Quarter-on-quarter but Down Year-on-year; Decline Slows down
As for investment, Chinese PE investment market has continued the downward trend under the impact from the financial tsunami, but the declining pace has slowed down compared with 2008. There were totally 102 PE investment deals in Chinese mainland from Jan. to Nov. 2009, decreased by 53 from the preceding year. The amount invested in the period stood at US$8.43B, down 12.3% compared with US$9.61B in 2008, reflecting the cautious attitude of investors.
Technology-intensive Industry Unattractive for Investors; Traditional Industry Pockets Lesser Investment
In terms of industry breakdown, 57 enterprises in Traditional industry of Chinese mainland totally secured US$2.48B from PE funds in the first 11 months of 2009. The number of investment deals remained basically unchanged compared with that in 2008, accounting for 55.9% of the total, while the amount invested only constituted 29.4% of the total, a decrease of more than 50.0%. All data demonstrates that Traditional industry has been greatly impacted by the financial crisis. Services claimed 19 deals amounting to US$5.50B, constituting 18.6% of the investment deals and 65.2% of the amount respectively, a mild upswing from 2008 in the amount invested. Moreover, some big deals dragged up the amount invested in Services in 2009. In the meanwhile, some technology-intensive sectors, such as Bio/Healthcare, Clean-tech and Broad IT, combined to contribute only a slice of the total amount invested, down to 5.4% from 27.8% in 2008. In this sense, technology-intensive sectors suffered more from the financial crisis.
Investment Strategies More Diversified; PIPE Investment Rises
From the perspective of investment strategy, growth capital topped in the first 11 months of 2009 with 70 deals, or 68.6% of the total, but lost its leading position with a total investment of merely US$2.13B, or 25.3% of the total. From Jan. to Nov. 2009, PE funds have actively adopted various investment strategies in response to the complicated market climate that resulted from inadequate economic fundamentals, sluggish stock markets and a lack of exit channel. There were 13 PIPE deals in the period, an increase of three over 2008, involving a combined investment amount up to US$5.75B, representing 68.3% of the total. The falling stock prices of some outstanding listed companies and demands for refinancing have created rare opportunities for PE funds to make investment in a bearish market. In addition, Chinese PE funds have been inactive in the real estate investment in 2009, although national real estate boom index kept climbing for several months. There were merely four real estate investment deals in the first 11 months of 2009, which involving a combined amount of US$253.00M, a drop of 72.0% over 2008.
Exits via IPO Active Again; Traditional Industry Takes Increasing Portion
As for exit, the number of exits via IPO came alive along with the gradual warm-up of economies worldwide. The first 11 months of 2009 witnessed an upsurge in the number of exits of PE funds with 64 exits, an increase by 40 over 2008. Moreover, IPO remained a major option for PE funds seeking exits. Amid the flourishing stock markets, the number of exits via IPOs reached 56 in the first 11 months of 2009, nearly three times the number in 2008.
As for industry breakdown, among the 64 PE exits in the first 11 months of 2009, Traditional industry claimed 39 deals, or 60.9% of the total, followed by Services with nine deals and Broad IT with six.
