MoneyTree™ China TMT Report Q3/Q4 2016

Overview

The second half of 2016 saw overall private equity and venture capital (PE/VC) investment volume as well as total PE/VC investment volume in Telecommunications, Media and Technology (TMT) both reach their highest levels since 2012. Investment values in both categories dropped, however, as investors adopted a rational response to the market, according to the MoneyTreeTM Q3/Q4 2016 Report.

Key findings

  • During H2 2016, deal volume in the TMT industry hit the highest six-month level since 2012 and reached 1,478, reflecting investors’ confidence in the TMT industry. However, deal value for H2 went down by around 30% as compared with that of H1 due to overly disperse investments and a decrease in the number of unicorns seeking high finance, which, in turn, indicated that the high valuation of unicorns had deterred investors from new targets.
  • The Internet sector was most sought after as investors were attracted by the continued influence of ‘Internet Plus’ on traditional fields and emerging businesses such as bike sharing; therefore, the Internet sector remained unshaken as the largest one within the TMT industry. Technology remained the second, while Entertainment and Media overtook Telecommunications and Mobile to take third place.
  • We have seen a continual emergence of new companies that have contributed to innovation and entrepreneurship in fields that are changing people’s lifestyles and living environments. This is the trend of the times, and so new projects in this arena have attracted attention from investors. Deal volume of initial investments took up over 60% in Q3 2016, but the proportion slid to 46% in Q4 because of an overall downward trend.
  • Listing on Chinese markets became mainstream in H2 2016. But as Hong Kong and US equity markets continued to rally, companies, especially those that have not yet become profitable, will choose these markets as IPO destinations.


Highlights

PE/VC investments in TMT industry

In Q3 2016, the proportion of TMT deal value to overall industry investment value hit the highest mark since 2012, peaking at 84%.

2. In Q4 2016, TMT deal value dropped dramatically from the record high of Q3 2016, accounting for only 29% of overall industry investment and falling back to the level in 2014. 

Investments by TMT sector

In H1 2016, TMT industry investment value was greatly boosted by sizeable investments in a number of super-sized unicorns. The market continued to thrive in H2 2016 after the super-sized company investment spree, and deal volume saw a rise due to market expectations. But there was no blockbuster company during the period; therefore, single-deal value declined dramatically, which directly dragged down the deal value in H2 2016. Internet remained the most attractive sector in the TMT industry, with both deal volume and deal value much higher than those of other sectors.

PE/VC exits in the TMT industry

In Q3 2016, the proportion of IPOs surpassed that of strategic sales for the first time since Q3 2015, and a trend that continued in Q4 2016. As market expectations for the regulatory authorities to expand direct financing channels and to deal with the pent-up IPO demand for IPOs, IPOs, especially IPOs on A-share exchanges, saw accelerated growth in H2 2016 and became the principal form of gaining liquidity for private investors. This trend will continue as long as the Chinese capital market continues to support this momentum.

Contact us

Wilson Chow
Global and China/Hong Kong TMT Leader
Tel: +[86] (755) 8261 8886
Email

Jianbin Gao
Private Equity Group Central China
Tel: +[86] (21) 2323 3362
Email

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