PE investments decreased significantly in Q3 2008. 19 deals secured an aggregate of US$2.117 Billion representing a 42.4% decrease in deal number and a 17.1% decrease in investment amount quarter over quarter. The average deal size stood at US$111 Million瘯?瘰 ??瘮?臁瘳 ? ?? 眥???? ?
1. Analysis by PE Investment Scale in Q3 2008
PE investments decreased significantly in Q3 2008. 19 deals secured an aggregate of US$2.117 Billion representing a 42.4% decrease in deal number and a 17.1% decrease in investment amount quarter over quarter. The average deal size stood at US$111 Million rising by 43.9% quarter on quarter (Table1-1).
Out of the 19 deals, most of the deals were worth between US$10-30 Million and US$50-70 Million. The number deals surpassing the hundred-Million bar decreased to 4 (Figure1-1). In terms of investment firms, Warburg Pincus L.L.C outperformed the rest, contributing 4 deals including 2 PIPE deals. Morgan Stanley topped the contribution level with US$77 Million (Figure1-1).
2. Industrial Distribution of PE Investment in Q3 2008
2.1 Overview
The 19 deals were secured across 9 sectors in Q3 2008. The Manufacturing and IT Services sectors performed best, attracting 4 deals. Medical & Healthcare, Energy & Mining, Real Estate sectors each witnessed 2 deals. In terms of investment amount, IT and Manufacturing sectors were active, each securing over US$300 Million. This quarter sees Real Estate sector being the highest collector in terms of investment amount, garnering US$793 Million.
The average deal size was topped by the Real Estate sector with an aggregate of US$396 Million, which is mainly due to Morgan Stanley’s investment of US$77 Million into a real estate company. The Manufacturing sector came in second with an average deal size of US$112 Million. Out of the 4 manufacturing deals, 2 deals were closed with each invested value of less than US$70 Million (Table2.1-2).
10% of the total deal number was made up of IT Services, Manufacturing, and Medical & Healthcare sectors (Figure2.1-2). The Real Estate sector yielded the highest investment amount, representing 37.4% of the total. Observations revealed that the investment amount in the Real Estate sector had been the largest since Q1 2008 (Figure2.1-2).
Industrial Distribution of PE Investments in Q3 2008
2.2 Analysis by Hotspot Sectors
One of the biggest aluminum manufacturers in China, Liaoning Zhongwang Group Co., Ltd. received US$300 Million. The enterprise produces aluminum for residential construction and industrial uses.
The investment amount in the IT Services sector amounted to US$354 Million, surging by 248.7% quarter on quarter. Digital China Holdings Limited, a leading IT distribution and services company, with Suzhou Ventures Group Co., Ltd. established the jointly invested Digital China Information Technology Services Company Limited. The establishment of the joint venture indicates that the development of Digital China's IT service business has stepped up to a new stage. Suzhou Ventures Group invested RMB500 Million focusing on key employee incentive projects and M&A.
Hony Capital invested in Huahai Medical Info-Tech Co., Ltd. which engages in the R&D and production of medical treatment digitalization and information technology products. Huahai’s PACS are widely used in approximately 300 hospitals in China.
The high cost of land purchase and sluggish real estate market impacted cash flow of real estate companies, driving them to seek PE investments. The average deal size for the Real Estate sector had been increasing remarkably from Q4 2007, and has reached US$396 Million in Q3 2008 (Figure2.2-1). This indicates PE firms are optimistic about China’s Real Estate market in the long run despite the global economic downturn.
3. Analysis by Investment Strategy
3.1 Overview
Out of 19 deals disclosed in Q3 2008, Growth Capital spread US$1.747 Million over 13 deals representing 80.4% of all dollars and 65.0% of all deals. PIPE injected US$108 Million into 4 deals, representing the same level as Q3 2008 by number of deals and a 72.7% decrement in investment amount quarter on quarter. 2 Buyout deals were closed, raising US$263 Million. The number of Buyout deals was basically the same as last quarter, and the investment amount dropped by 72.7% quarter on quarter (Table3.1-2, Figure3.1-2 & Figure3.1-3). Growth Capital experienced the largest average deal size of US$134 million, followed by Buyout’s US$131 Million and PIPE’s US$26.89 Million.
PE Investments by Strategy in Q3 2008
3.2 Growth Capital
Growth Capital focused on Manufacturing, Energy & Mining, and IT Services sectors in Q3 2008. All of Manufacturing, and Energy & Mining deals were closed by Growth Capital funds (Table3.2-1).
Out of the 2 deals in the Energy & Mining sector, an Energy company, Wuxi Qiaolian Windtech Co., Ltd. received US$70 Million. Daye Nonferrous Metals Co., Ltd, a Mining company, secured US$1 Billion. Daye is specialized in manufacturing, mining, smelting and processing of both raw copper and processed copper; ranked 5th in the industry.
3.3 Buyout
A total of 2 Buyout deals were distributed in IT Services and Real Estate sectors in Q3 2008. An investment firm bought over an IT company worth US$240 Million (Table3.3-1).
3.4 PIPE
4 PIPE transactions were distributed in Chain Operation, IT Services, and Medical & Healthcare sectors in Q3 2008.The Medical & Healthcare sector secured the largest investment amount (Table3.4-1). Warburg Pincus L.L.C. has invested US$63 Million into a New York listed pharmaceutical company. Warburg’s investment in this quarter reached US$73.21 Million, accounting for 68.1% of total PIPE investment.
4. Analysis by Stage
Maturity stage deal number and investment amount remained the largest in Q3 2008. 13 maturity stage deals secured US$1.576 Billion. However, the number of maturity stage deals fell quarter on quarter, indicating PE firms do not favor pre-IPO enterprises (Figure3.1-1).
5. Geographical Distribution
19 PE deals were conducted in 12 regions in Q3 2008. PE investments are still concentrated in Beijing and Shanghai. Beijing took the lead by securing US$399 Million over 5 deals. Shanghai stood second capturing 3 deals with a total of US$1173 Million (Table5-1).
6. Analysis by Investor Type
China’s domestic PE firms contributed US$146 Million over 2 deals in Q3 2008. The weightage of the number of deals fell to 10.5% and that of investment amount decreased to 7.0% (Table6-1, Figure6-1 & Figure6-2). The average deal size of Chinese PE firms surged by 124.8%, and that of foreign PE firms’ increased by 16.10% quarter on quarter.
The significant decrease in the number of deals reveals PE firms’ wait-and-see attitude. Many Chinese investment firms entered PE market favoring pre-IPO projects in 2007. However, they are faced with great pressure generated by the stock market slump.
7. About CVSource
Developed by ChinaVenture, CVSource is an online database on China venture capital and private equity industry. The development of CVSource lasted two years and it was officially released to public in January 2008. Focusing on China equity market, CVSource covers the entire value chain of China venture capital and private equity industry providing detailed data and information on LPs, funds, investment firms, investment professionals and companies active in China as well as related financing, M&A and IPOs.
8. About ChinaVenture
ChinaVenture is a leading investment research and consulting firm which provides 3rd party transaction, comprehensive statistics and customized consulting to VC/PE firms, investment banks, and enterprises active in China. ChinaVenture also supports media platform and organizes investment conferences. ChinaVenture was established in 2003 and has offices in Beijing and Shanghai. ChinaVenture Investment Consulting, Ltd.
Rm.801, Building C, SOHO New Town, 88 Jianguo Rd., Chaoyang District, Beijing, P.R. China Tel: +86-10-59799690 Fax: +86-10-85893650-60
China's Private Equity Market
PE investments decreased significantly in Q3 2008. 19 deals secured an aggregate of US$2.117 Billion representing a 42.4% decrease in deal number and a 17.1% decrease in investment amount quarter over quarter. The average deal size stood at US$111 Million瘯?瘰 ??瘮?臁瘳 ? ?? 眥???? ?
1. Analysis by PE Investment Scale in Q3 2008
PE investments decreased significantly in Q3 2008. 19 deals secured an aggregate of US$2.117 Billion representing a 42.4% decrease in deal number and a 17.1% decrease in investment amount quarter over quarter. The average deal size stood at US$111 Million rising by 43.9% quarter on quarter (Table1-1).
Out of the 19 deals, most of the deals were worth between US$10-30 Million and US$50-70 Million. The number deals surpassing the hundred-Million bar decreased to 4 (Figure1-1). In terms of investment firms, Warburg Pincus L.L.C outperformed the rest, contributing 4 deals including 2 PIPE deals. Morgan Stanley topped the contribution level with US$77 Million (Figure1-1).
2. Industrial Distribution of PE Investment in Q3 2008
2.1 Overview
The 19 deals were secured across 9 sectors in Q3 2008. The Manufacturing and IT Services sectors performed best, attracting 4 deals. Medical & Healthcare, Energy & Mining, Real Estate sectors each witnessed 2 deals. In terms of investment amount, IT and Manufacturing sectors were active, each securing over US$300 Million. This quarter sees Real Estate sector being the highest collector in terms of investment amount, garnering US$793 Million.
The average deal size was topped by the Real Estate sector with an aggregate of US$396 Million, which is mainly due to Morgan Stanley’s investment of US$77 Million into a real estate company. The Manufacturing sector came in second with an average deal size of US$112 Million. Out of the 4 manufacturing deals, 2 deals were closed with each invested value of less than US$70 Million (Table2.1-2).
10% of the total deal number was made up of IT Services, Manufacturing, and Medical & Healthcare sectors (Figure2.1-2). The Real Estate sector yielded the highest investment amount, representing 37.4% of the total. Observations revealed that the investment amount in the Real Estate sector had been the largest since Q1 2008 (Figure2.1-2).
Industrial Distribution of PE Investments in Q3 2008
2.2 Analysis by Hotspot Sectors
One of the biggest aluminum manufacturers in China, Liaoning Zhongwang Group Co., Ltd. received US$300 Million. The enterprise produces aluminum for residential construction and industrial uses.
The investment amount in the IT Services sector amounted to US$354 Million, surging by 248.7% quarter on quarter. Digital China Holdings Limited, a leading IT distribution and services company, with Suzhou Ventures Group Co., Ltd. established the jointly invested Digital China Information Technology Services Company Limited. The establishment of the joint venture indicates that the development of Digital China's IT service business has stepped up to a new stage. Suzhou Ventures Group invested RMB500 Million focusing on key employee incentive projects and M&A.
Hony Capital invested in Huahai Medical Info-Tech Co., Ltd. which engages in the R&D and production of medical treatment digitalization and information technology products. Huahai’s PACS are widely used in approximately 300 hospitals in China.
The high cost of land purchase and sluggish real estate market impacted cash flow of real estate companies, driving them to seek PE investments. The average deal size for the Real Estate sector had been increasing remarkably from Q4 2007, and has reached US$396 Million in Q3 2008 (Figure2.2-1). This indicates PE firms are optimistic about China’s Real Estate market in the long run despite the global economic downturn.
3. Analysis by Investment Strategy
3.1 Overview
Out of 19 deals disclosed in Q3 2008, Growth Capital spread US$1.747 Million over 13 deals representing 80.4% of all dollars and 65.0% of all deals. PIPE injected US$108 Million into 4 deals, representing the same level as Q3 2008 by number of deals and a 72.7% decrement in investment amount quarter on quarter. 2 Buyout deals were closed, raising US$263 Million. The number of Buyout deals was basically the same as last quarter, and the investment amount dropped by 72.7% quarter on quarter (Table3.1-2, Figure3.1-2 & Figure3.1-3). Growth Capital experienced the largest average deal size of US$134 million, followed by Buyout’s US$131 Million and PIPE’s US$26.89 Million.
PE Investments by Strategy in Q3 2008
3.2 Growth Capital
Growth Capital focused on Manufacturing, Energy & Mining, and IT Services sectors in Q3 2008. All of Manufacturing, and Energy & Mining deals were closed by Growth Capital funds (Table3.2-1).
Out of the 2 deals in the Energy & Mining sector, an Energy company, Wuxi Qiaolian Windtech Co., Ltd. received US$70 Million. Daye Nonferrous Metals Co., Ltd, a Mining company, secured US$1 Billion. Daye is specialized in manufacturing, mining, smelting and processing of both raw copper and processed copper; ranked 5th in the industry.
3.3 Buyout
A total of 2 Buyout deals were distributed in IT Services and Real Estate sectors in Q3 2008. An investment firm bought over an IT company worth US$240 Million (Table3.3-1).
3.4 PIPE
4 PIPE transactions were distributed in Chain Operation, IT Services, and Medical & Healthcare sectors in Q3 2008.The Medical & Healthcare sector secured the largest investment amount (Table3.4-1). Warburg Pincus L.L.C. has invested US$63 Million into a New York listed pharmaceutical company. Warburg’s investment in this quarter reached US$73.21 Million, accounting for 68.1% of total PIPE investment.
4. Analysis by Stage
Maturity stage deal number and investment amount remained the largest in Q3 2008. 13 maturity stage deals secured US$1.576 Billion. However, the number of maturity stage deals fell quarter on quarter, indicating PE firms do not favor pre-IPO enterprises (Figure3.1-1).
5. Geographical Distribution
19 PE deals were conducted in 12 regions in Q3 2008. PE investments are still concentrated in Beijing and Shanghai. Beijing took the lead by securing US$399 Million over 5 deals. Shanghai stood second capturing 3 deals with a total of US$1173 Million (Table5-1).
6. Analysis by Investor Type
China’s domestic PE firms contributed US$146 Million over 2 deals in Q3 2008. The weightage of the number of deals fell to 10.5% and that of investment amount decreased to 7.0% (Table6-1, Figure6-1 & Figure6-2). The average deal size of Chinese PE firms surged by 124.8%, and that of foreign PE firms’ increased by 16.10% quarter on quarter.
The significant decrease in the number of deals reveals PE firms’ wait-and-see attitude. Many Chinese investment firms entered PE market favoring pre-IPO projects in 2007. However, they are faced with great pressure generated by the stock market slump.
7. About CVSource
Developed by ChinaVenture, CVSource is an online database on China venture capital and private equity industry. The development of CVSource lasted two years and it was officially released to public in January 2008. Focusing on China equity market, CVSource covers the entire value chain of China venture capital and private equity industry providing detailed data and information on LPs, funds, investment firms, investment professionals and companies active in China as well as related financing, M&A and IPOs.
8. About ChinaVenture
ChinaVenture is a leading investment research and consulting firm which provides 3rd party transaction, comprehensive statistics and customized consulting to VC/PE firms, investment banks, and enterprises active in China. ChinaVenture also supports media platform and organizes investment conferences. ChinaVenture was established in 2003 and has offices in Beijing and Shanghai.
ChinaVenture Investment Consulting, Ltd.
Rm.801, Building C, SOHO New Town, 88 Jianguo Rd., Chaoyang District, Beijing, P.R. China
Tel: +86-10-59799690
Fax: +86-10-85893650-60
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