PwC Private Equity 2013 Review and 2014 Outlook
26 February 2014
Foreword – explanation of data shown in this presentation •
The data presented is based on information compiled by ThomsonReuters, ChinaVenture and PwC analysis unless stated otherwise
•
Thomson Reuters and ChinaVenture record announced deals. Some announced deals will not go on to complete
•
The deal volume figures presented in this report refer to the number of deals announced, whether or not a value is disclosed for the deal
•
The deal value figures presented in this report refers only to those deals where a value has been disclosed (referred to in this presentation as “disclosed value”)
•
“Domestic” means China including Hong Kong and Macau
•
“Private Equity deals” or “PE deals” refer to financial buyer deals with deal value over US$10mn and/or with undisclosed deal value but invested by Pes
•
“VC deals” refer to financial buyer deals with deal value less than US$10mn and/or with undisclosed deal value but invested by VCs
•
In order to exclude foreign exchange impact, deal values from 2008 to 2012 were adjusted based on 2013 average Rmb/US$ exchange rate
•
Statistics contained in this presentation and the press release may vary from those contained in previous press releases. There are three reasons for this: ThomsonReuters and ChinaVenture historical data is constantly updated as deals are confirmed or disclosed; PwC has excluded certain transactions which are more in the nature of internal reorganisations than transfers of control; and exchange rate data has been adjusted.
PwC
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Overview
PwC
Key messages •
Between 2003 and 2013, fundraising in the China market dominated Asian PE with around US$312 billion raised.
•
2013, Renminbi PE fundraising declined for the second straight year as the domestic Chinese PE industry continued to consolidate; US$ denominated fundraising has been consistently healthy over the same period.
•
The number of new investments recovered in the second half of the year and, on a full year basis, deal values held up well. The average deal size for 2013 was around US$95.40 million, reaching its highest level since 2008.
•
PE investors’ industry focus was broadly consistent with earlier years; We believe that the technology, media and telecommunications (TMT), healthcare, industrial and consumer related sectors will show strong growth.
•
Growth capital deals declined as the PE industry shifted focus towards PIPE and, increasingly, buy-out transactions whilst PE interest in outbound deals continued, albeit still at low levels in absolute terms.
•
2013 was the third straight year of decline for PE exits as well as the first year that IPO was not the dominant exit-route; Although the overhang of new investments compared to exits remains the number one issue affecting the PE and VC industry, PE-backed IPOs showed a significant recovery in the second half of 2013 off a very low base.
•
In 2013, the number of PE/VC backed IPOs by Chinese companies was 35, 43% of the figure in the US, the first time the US figure has exceeded China since 2008.
PwC
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Fundraising
PwC
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China focused funds made up only 7% of global PE fundraising in 2013 – a decline for the second straight year – while the global markets rebounded, China markets were slowed down by its domestic IPO embargo PE/VC funds raised with geographic preference in China vs ROW (2007 – 2013)
US$ billion 800 700
688
668
600 500 431 382
400 320
332
296
300 200 100
39.9
42.9
39.2
15.6
58.7
45.4
33.1
0 2007
2008
2009
2010 World
2011
2012
2013
China
Source: AVCJ ,Preqin
PwC
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Fundraising for the China market dominated Asian PE with around US$312 billion raised Total funds raised by fund country, with geographic preference in Asia (2003 –2013)
US$ billion 350
Excludes allocations from non-China specific funds 312
300
250
200
150 105
100
75
57 50
0 China/HK
Japan
India
Others
Source: AVCJ
PwC
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2013, Renminbi PE fundraising declined for the second straight year as the domestic Chinese PE industry continued to consolidate; US$ denominated fundraising has been consistently healthy over the same period PE/VC fund raising for China investment*
No.
US$ billion 60
* Excludes PEs investing in China from non-region specific funds
300
277 250
50
249 21.8
200
40
172 165
150
21.1
14.9
123
39.8 100
130 20
30
20
31.8 9.5
50
21.0
20.3
10 13
0
4.5
6.7
2008
2009
0 Renminbi Fund Size
2010
2011 Non-renminbi Fund Size
2012
2013
Fund Volume
Source: AVCJ and PwC analysis
PwC
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Although Renminbi PE fundraising declined in dollar terms, its share of the market increased to 77% in 2013, up by 12% compared to 2012 The growth of Renminbi denominated funds (2008 - 2013) 100% 23% 66%
80%
35%
32%
24%
80%
60%
77%
40% 34%
20%
65%
68% 76%
20%
0% 2008
2009
2010 Renminbi Fund
2011
2012
2013
Non-renminbi Fund
Source: APER、AVCJ
PwC
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Better External Environment - Gradual improvement of the regulatory system & local policies for VC/PE for future development •
The relevant legislative and regulatory agencies are actively discussing how to further regulate and support the future development of VC/PE after the amended Law of the People's Republic of China on Funds for Investment in Securities took effect in June 2013.
•
Local governments have launched equity investment incentives to attract registration of Renminbi funds and stimulate local economies. A considerable deal of Renminbi funds have started looking at the areas like Shenzhen Qianhai, Guangzhou, Hengqin development area, Xinjiang and Tibet. (Shanghai PFTZ also recently became a new focus.) Shenzhen Qianhai Case study • Preferential policies of approval, taxation, management systems, legislation and other legal aspects are specially conferred by the State Council. The objective was to create the most relaxed, best, international and legal environment in Qianhai. •
PwC
3 financial reform s and innovations related to the Qianhai equity investment industry: Broaden the channels for offshore RMB investment by building a pilot cross-border RMB business area; ; Support and establish of FoF in Qianhai; Support foreign equity investment funds’ development in Qianhai, actively explore new models for foreign equity investment firms in the capital settlement, investment, fund management and other areas
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Deals
PwC
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The number of new investments recovered in the second half of the year …
Private Equity deals, 2013 vs. 2012 (half yearly) No.
US$ billion 18.5
300
20 16.5
250
18 16
15.1
14
200
12 150
8.8
10
8 205
100 168
164
162
6 4
50
2 0
0 1H2012
2H2012 Announced Deal Volume
1H2013
2H2013
Announced Deal Value
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
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… and on a full year basis, deal values held up well. The average deal size for 2013 was around US$ 95.4 million, reaching its highest level since 2008 Private Equity deals, from 2008 to 2013 No.
US$ billion
550
40
500
400 350
35.0*
32.6
450
30
25.4 22.4
25
22.8
23.9
300
20
502
250 200
425 365
150
35
332
367
15 10
254
100 5
50 0
0 2008
2009
2010 Announced Deal Volume
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
2011
2012
2013
Announced Deal Value * Includes US$9.8 bn Taikang and Guolian investment in Petrochina’s West Pipeline JV
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PE investors’ industry focus was broadly consistent with earlier years; we think TMT and healthcare sectors will grow in importance PE deal volume by industry sector No. 550
500 450 400
13 30
350 8 47
300
250
14 33
200
40
150
60
100
0
12 20 23 32
77
54
45
50
2008
2009
50
Industrials Healthcare Materials
34 31 98
54 72
124
31 31
24 46
44
32
58
45
67
73 88
90
2010
2011
Consumer related Real Estate Retail
Media and Entertainment Financial Services Others
42 2012
82 2013
High Technology Energy and Power
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
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PE invested heavily in high-tech, industrial and consumer-related industries in terms of deal value (Petrochina deal excluded)
PE deal value by industry sector US$ billion 40 35 1.4 2.6
30
10
5 0
1.5 2.5 0.7
0.5
20 15
3.6
1.0
25
0.9 0.4 3.0
7.5
9.2
7.2
6.3
1.0 2.1
2.0 0.5 2.1
1.2 1.4
3.5 1.5 2.3
2008
2009
2010
2011
Energy and Power Real Estate Raw Materials
High Technology Financial Services Telecommunications
1.8 6.8
11.6
3.2
4.1
Industrials Healthcare Others
4.1 6.2
1.9 3.4 1.7 3.2 1.8
11.0
2012
2013
Consumer related Media and Entertainment
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
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Growth capital deals declined as the PE industry shifted focus towards PIPE and, increasingly, buy-out transactions
PE deal volume by type No. 550 16
500 450 400 350
13 15
118 29
85
18
21
300
132
51
200 150
68
4
250
329
368
327
246
199
100
206
50 0 2008
2009
2010 Growth
2011 PIPE
2012
2013
Buyout
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
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Growth capital deals and PIPE were dominant in terms of deal value
PE deal value by type US$ billion 40 35 30 25 20
3.9
2.8
0.6 1.2
0.6
10.8 4.2
9.5
4.3
14.7
5.2 15 10
15.9 17.0
5
19.0
15.3
14.5
16.4
6.2
0 2008
2009
2010 Growth
2011 PIPE
2012
2013
Buyout
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
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Exit
PwC
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PE-backed IPOs showed some recovery in the second half of 2013 off a very low base …
PE/VC backed deal exit volume by type, 2013 vs. 2012 (half yearly) No. 140 120
3
100 48 5
80 60
5
44
1 34
40 64
51
20
34
29 6
0 1H2012
2H2012 IPO
1H2013 M&A - trade
2H2013
M&A - PE
Source: AVCJ and PwC analysis
PwC
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… but it was the third straight year of decline for PE exits, almost entirely attributable to problems in the equity capital markets; 2013 was the first year that IPO was not the dominant exit-route PE/VC backed deal exit volume by type No. 350 8
300
6
83
250
91
200
8
5
150
92
84 100
7
212 171
85
44 50
6
98
88 46
35
0 2008
2009
2010 IPO
2011 M&A - trade
2012
2013
M&A - PE
Source: AVCJ and PwC analysis
PwC
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The overhang of new investments compared to exits remains the number one issue affecting the PE and VC industry
PE/VC deal volume vs. No. of exits
No. 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100 0
425
502 367
365
254
332 1,011
738
712
694
88 89
46 51 2008
903
2009
212
171
91
97
2010 VC deals
PE deals
473 98 100
2011 M&A exit
2012
35 91 2013
IPO exit
Source: ThomsonReuters, ChinaVenture, AVCJ and PwC analysis
PwC
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From November 2012 through to December 2013, China experienced its longest IPO embargo in the A Share’s history. Therefore all IPOs were split between the US and Hong Kong capital markets in 2013 PE/VC backed IPO exit volume by bourse No. 250
14 11
200
10 18
150 118
4
100
106
6-
50
0
7 2 21 4 12
2008
48
30
70
2009 Hong Kong
6
11
7 27
11
39
2010 NYSE/ NASDAQ
Shenzhen
26
2 11
29
2011
2012
2013
Shanghai A
Others
Source: AVCJ and PwC analysis
PwC
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In 2013, the number of PE/VC backed IPOs in China was 35, 43% of the figure in the US, the first time the US figure has exceeded China since 2008 PE backed IPO exits China vs US – number of exits (2008 – 2013)
No.
250
213 200 170 150
100
98
88
82 70 51
47
50
49 35
13
7 0 2008
2009
2010
2011 US
2012
2013
China
Source: AVCJ ,Thompson Reuters, NVCA
PwC
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2014 Outlook
PwC
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Outlook •
As IPO markets re-open, PwC has an optimistic outlook for fundraising markets in 2014 and expects them to significantly rebound. Meanwhile, Renminbi denominated fundraising will prevail as usual.
•
We also think that the number of new investments will increase with the trend to buy-outs continuing.
•
Although smaller in number, we will see more outbound PE deals and we expect to see some PE interest in investing in SOEs and in A-share listed companies.
•
PE exits will rebound strongly as IPO markets re-open, we expect to see quite a number of PE backed IPOs in 2014. Besides, we also expect to see more secondary (PE to PE) activity.
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Better External Environment - Gradual improvement of the regulatory system & local policies for VC/PE for future development.
PwC
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Thank you!
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