Private equity, venture capital deals hit new record

A total of 1,883 private equity and venture capital deals were completed in China’s telecommunications, media and technology industry in the second half of last year, accounting for 46 percent of total PE/VC investment, a record number since 2016, according to a PwC report.

The report showed that 1,290 PE/VC deals were clinched in the third quarter of 2018, while in the fourth quarter, the number of PE/VC deals in TMT sectors dipped to below 600, as overall PE/VC investments plunged.

In the second half of 2018, there were 54 large-size deals with a single deal value over $100 million, and these large-size deals had a total value of $21.3 billion, making up 76 percent of the total in TMT sectors in the second half.

“In the second half of 2018, total deal number and value in all sectors fell back to low levels, and PE/VC investors turned more cautious. Although TMT sectors saw a big drop in deal numbers and value compared with the first half amid the lackluster PE/VC investment market, they remained the leaders among all sectors,” Gao Jianbin, PwC China TMT leader said.

The report also said similar to the first half of 2018, the number of PE/VC deals involving startups was the biggest among all categories in the second half, while companies in the expansionary period received the largest investment in terms of deal value. Investors adopted a strategy to avoid risks by mainly investing in mature projects that had survived market competition and were in stable development.

“As China officially launched an innovation initiative for the integrated circuit industry and a government IC industry fund raised 150 billion yuan ($22.4 billion) in second-phase financing, a number of IC innovation enterprises have been established in the second half of 2018,” said Charline Ni, PwC China technology leader.

“A total of 36 IC-related companies received funding, up 260 percent from the first half of 2018, and three of them each obtained more than $100 million in investment. Cloud computing, artificial intelligence, robotics, and virtual reality also were hot spots that lured investment during the period,” Ni said.

Ni added although the technology industry is rapidly expanding under favorable policies, internet and mobile internet are still the attractive sectors in the TMT industry. Internet finance, internet-based education, fragmented entertainment and content sharing were hotly pursued by investors.

“The setup of the science and technology innovation board will improve the inclusiveness of the domestic capital market towards emerging enterprises, and open a new financing and exit channel. The board offers a new platform for high-tech emerging enterprises, and technology companies are expected to kick off a new wave of IPOs,” Janson Yang, PwC China assurance partner, said.