According to the Zero2IPO Research Center, in June 2008 a total of 16 mainland China-focused VC/PE funds raised US$11.833B. In the context of global economic recession, investors are still wooing Chinese market. Meanwhile, 28 VC/PE firms invested in 27 Chinese enterprises. 23 of the 27 disclosed a total amount of US$318.82 million. The deal number increased by 58.8% but the amount invested decreased by 64.4% respectively, over last month. The average amount invested declined sharply. 

Traditional Investment Continues to Be Hot; Services Investment Tends to Perform Stably 

A breakdown of industry distribution follows. Traditional stood out in May and continued to perform well in June with 10 deals (37.0% of total deals) receiving US$170.02M (53.3% of total amount). Two of the 10 Traditional deals received considerably larger amount of investment, uplifting the proportion of Traditional investment in total investment in June.

Services investment tends to perform stably during the recent several months. Each month sees five or so deals. Most of the Services deals are sized from US$5 million to US$30 million. IT investment began to show signs of growth in June. In terms of deal number, there was an improvement from last month. Specifically, during June 2008, 10 IT deals (37.0% industry breakdown) received US$87.87 million (27.6% of the total monthly investment).

Deal Size Declines Sharply

During the month of June the concentration degree of small and medium-size deals is pretty high. The deals less than US$20M accounted for about 80% of the total deals. Specifically, there were nine deals less than US$5M, four deals between US$5M and US$10M, and five deals between US$10M and US$20M. 

The largest deal in June is the investment where Morgan Stanley and the International Finance Corporation (IFC) injected US$100M into Nature Flooring. There is no deal with size over US$100M in June. Accordingly, the average deal size falls sharply over last month.

VC/PEs Actively Exit; Hong Kong Exchange Stock Well Performs

In June 23 Chinese companies achieved IPO status. The number of IPO events is on a par with that for May. The offer amount and average offer amount both gain slightly. Nevertheless, the number of VC/PE exits is twice that of last month.

According to the Zero2IPO Research Center, in June the 23 Chinese companies raised a total of US$2.35B with an average of US$102.02M. The 12 Chinese companies that listed on the Shenzhen Stock Exchange raised a total of US$742.59M (31.6% of the total). The seven Chinese companies that listed on the Hong Kong Stock Exchange raised US$1.48B (63.2% of the total) with an average of US$211.94M. And the remaining four small-size Chinese companies that debuted on SGX raised a total of US$120.36M (5.1% of the total).

In June, Traditional enterprises still dominated on exit market. Seventeen debuts were in the Traditional sector (73.9% of the total) and they raised a total of US$1.67B (71.0% of the total). Other debuts include three in Services, two in Broad IT, and one in Bio/healthcare. The three Services debuts raised a total of US$554.92M with an average of US$184.97M, the highest average in June. The two Broad IT debuts raised only US$50.12M. The only one Bio/healthcare debut raised US$74.70M.

The eight VC/PE-backed Chinese enterprises evenly debuted on the Shenzhen Stock Exchange and the Hong Kong Stock Exchange, raising a total of US$737.22M. Specifically, four of the eight debuts raised US$153.35M on the Shenzhen Stock Exchange and the remaining four raised US$583.87M on the Hong Kong Stock Exchange. The performance of VC/PE exits on the Hong Kong Stock Exchange is better.

By industry, the eight VC/PE-backed Chinese enterprises include five Traditional enterprises, two Broad IT enterprises and one Services company. Notably, the successful IPO of Little Sheep on the Hong Kong Stock Exchange not only delivered strong returns to 3i and Prax but also undrew the curtain of the internationalization of Chinese food.

M&A Market Is Active; TMT Stands Out

The Zero2IPO Research Center focuses heavily on the TMT, Energy and Bio/healthcare sectors. Of these three sectors, 13 transactions were finalized in June. Eight of the 13 disclosed a value of US$16.38B.

Two VC/PE-related M&A events disclosed a value of US$432M. One happened in Bio/healthcare sector and the other in Traditional sector. Additionally, 10 cross-border M&As occurred. Six of the 10 disclosed a value of US$3.73B.

The TMT sector stood out in June on the M&A market. Among seven TMT deals, three disclosed a value of US$16.24B with an average of US$5.41B. The Bio/healthcare sector was also quite active. Among five Bio/healthcare deals, four disclosed a value of US$90.83M with an average of US$22.71M.