Private Equity in Asia & China October 2005
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Jefferies BroadviewA division of Jefferies & Company, Inc.
Private Equity In Asia And China
October, 2005
CONFIDENTIAL DRAFT
Member, SIPC
Table of Contents
Private Equity In Asia 1
Private Equity In China 16
Venture Capital In China 22
State Of The Chinese Technology Capital Markets 46
i
Private Equity In Asia
1
Headlines
$5.67 billion of fresh capital came into Asian private equity (excluding Australia and New Zealand), a 55.5% increase over the first half of 2004
– CVC Capital Partners announced closing of a $1.98 billion Asia Pacific Fund in May 2005
– J.P. Morgan Partners Asia closed a $1.58 billion regional fund in September 2005
Buyout funds accounted for $3.2 billion or 56% of the new capital, followed by $1.7 billion growth / expansion capital and $850 million technology funds
Corporations and public pension funds contributed 37% and 25% of the total, respectively, compared to 30% and 3% in the first half of 2004
Over 50% of new funds will be invested across Asia with the residual to be disbursed in country specific investments
98 investments worth $5.1 billion were transacted, a 19% increase over the first half of 2004
87 divestments were recorded, a 32% increase over the same period last year
The Greater China Region* attracted the largest of the region specific funds, reaching $875 million or 15% of the total
China is the most-favored market, accounting for $566.6 million new private equity money and $765 million investments through 22 transactions
2005 Year To Date
* The Greater China Region includes Taiwan, Hong Kong, and People’s Republic of ChinaSource: Asia Private Equity Review, 2005
2
Private Equity Trends In Asia
Annual Fund Pool
$5.1
$1.1$2.2
$2.8
$5.1
$1.0
$1.5
$2.1
$3.7
$0.5
$0.9
$0.6
$0.5
$1.2
0
1
2
3
4
5
6
7
8
9
2001 2002 2003 2004 Jun-05
Australia & New Zealand Japan Asia (excluding Japan)
Source: Asia Private Equity Review, 2005
(US $Billions)
3
Geographical Focus Of New Asian Private Equity Funds
GCR*
China
Japan
S. Korea
India
Taiwan
Buyout Growth / Expansion Technology
$2.73
$0.20
$0.15
$0.10
$0.05
$0.71
$0.28
$0.21
$0.30
$0.10
$0.07
$0.17
$0.29
$0.31
$0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00
$0.01
* The Greater China Region includes Taiwan, Hong Kong, and People’s Republic of China** Pan-Asia funds are those not limited to investing in particular regions or countries in AsiaSource: Asia Private Equity Review, 2005
January - June 2005(US $Billions)
Country-Specific
Region-Specific
Across-Asia Pan-Asia**
Total: $5.67 Billion
4
Distribution Of New Funds By Type*
Japan Only
$0.00 $1.00 $2.00 $3.00
Asia / Pacific Excluding Japan
$0.00 $2.00 $4.00 $6.00
Jan - Jun 2005
Buyout
Growth / Expansion
Technology
Debt
Infrastructure
(6) (12) (8)
(1) (13) (3) (3) (1)
* Numbers in ( ) denote number of fundsSource: Asia Private Equity Review, 2005
(2) (3)
(7) (2)
(US $Billions)
Total: $5.15B
Total: $1.58BJan - Jun 2004
Jan - Jun 2005
Jan - Jun 2004Total: $2.03B
Total: $0.52B
5
Fundraising – Source Of Funds
By Geography
49%
36%
14%
1%100% Europe
US
Japan
Asia
By Organization
38%
25%
17%
12%
3%
1%1%
5%
Corporates
Public Pensions
Financial Institutions
Government Organizations
Insurance Companies
Fund of FundsMultilaterals
Others
Source: Asia Private Equity Review, 2005
80%
60%
40%
20%
0%
January - June 2005
6
Invested Asian Private Equity
By Geography
$1.53
$0.77
$0.74
$0.60
$0.53
$0.35
$0.19
$0.06
$0.01
$0.01
$0.003
$0.30
$0.003
$0.00 $0.50 $1.00 $1.50 $2.00
Japan
China
S. Korea
USA
India
Australia
Singapore
Malaysia
Thailand
Vietnam
Taiwan
UK
Switzerland
By Industry
IT & Telecom
Healthcare
Infrastructure
Consumer Goods
Industrial Manufacturing Goods
Services
Banking and Finance
Food and Beverage
Construction
Energy / Natural Resources
$1.17
$1.02
$0.51
$0.46
$0.46
$0.41
$0.30
$0.30
$0.25
$0.10
$0.10
$0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40
Media
Source: Asia Private Equity Review, 2005
January - June 2005(US $Billions)
Total: $5.09B
7
Exits
Divestment Profile: Asia (January – June 2005)
Number of Divestments: 87
IPO38%
Trade Sale57%
Others5%
IRRs Range*
449%1st Quartile
101%
97%2nd Quartile
54%
52%3rd Quartile
24%
23%4th Quartile
-38%
* Excluding Xinyi GlassSource: Asia Private Equity Review, 2005
8
Hong Kong
Taiwan
India
China
Representative Private Equity Investments In Asia
Date Announced Target Name Acquirer Name
Transaction Value
(US $Millions)
Jan-05 Hanfeng Power Plant CITIC Group; Huaneng PowerInternational Inc.
$450
Aug-05 China Pacific Life Insurance The Carlyle Group $400
Mar-05 Lenovo Group Ltd TPG, GA, Capstar, GapCo, Newbridge $350
Mar-05 MediaNation Inc JCDecaux Pearl & Dean Ltd $52
Aug-05 Hopson Development Holdings Limited
Aranda Investments Pte Limited; Tiger Global LP (formerly Tiger Technology LP)
$126
Aug-05 Best Quality Ltd Ace Level Investments Ltd $66
Sep-05 Media Partners Intl Hldg Inc JCDecaux Pearl & Dean Ltd $92
Sep-05 Top Regent(Asia)Ltd Ace Cosmos Finance Ltd $103
Aug-05 First Securities Co Ltd Taiwan Intl Securities Corp $80
Aug-05 Global Securities Finance CorpTaiwan Intl Securities Corp $257
Sep-05 Taiwan Yunda Sec Invest TrustYuanta Core Pacific Sec Co Ltd $68
Jul-05 Aircel Ltd Clarity Partners LP $75
Jul-05 Associated Cement-Refractory ICICI Venture Funds Mgmt Co $59
Jul-05 BPL Communications Ltd Essar Teleholdings Ltd $997
Sep-05 Shriram Hldgs(Madras)Pvt Ltd Newbridge Capital LLC $100
Deal Type
Minority Investment
Minority Investment
Minority Investment
Acquisition
Minority Investment
Control Investment
Control Investment
Acquisition
Acquisition
Acquisition
Control Investment
Minority Investment
Acquisition
Control Investment
Minority Investment
Source: MergerMarket / Thomson One Banker
9
South Korea
Singapore
Japan
Representative Private Equity Investments In Asia
(US $Millions)
Date Announced Target Name Acquirer Name
Transaction Value Deal Type
Jan-05 BENEX Corp Tokio Marine Capital Co Ltd $97 AcquisitionJan-05 Daikyo Inc ORIX Corp $223 Minority InvestmentFeb-05 Sankei MKS Partners Ltd $153 Control InvestmentFeb-05 Seibu Railway Co Ltd M&A Consulting $4,113 AcquisitionMar-05 Daiei Inc Marubeni Retail Investment, DRF $590 Minority InvestmentMar-05 SDS Biotech KK SDS Biotech Holdings $96 AcquisitionMay-05 Recruit Co Ltd Advantage Partners, Aozora Bank $511 Minority InvestmentMay-05 Recruit Cosmos Co Ltd 13 investors led by Unison Capital Partners $339 Control InvestmentMay-05 SMBC Capital NIF Ventures Co Ltd $131 AcquisitionJun-05 Fujita Corporation Goldman Sachs Capital Partners,
Mori Trust Co. Ltd$384 Control Investment
Jul-05 Gakken Credit Corp NIF Capital Partners B $71 Control InvestmentAug-05 Shionogi Qualicaps Group The Carlyle Group, LLC $227 AcquisitionAug-05 Pokka Corp Advantage Holdings and management $209 AcquisitionSep-05 World Co Ltd Harbor Holding Alpha Co $1,960 Acquisition
Jan-05 Fila Korea Ltd Yoon Yoon-soo and management $130 AcquisitionJul-05 Hyundai Autonet Company Hyundai Motor Corporation; Siemens AG $233 Minority Investment
May-05 Parkway Holdings Ltd Newbridge, TPG-Axon Capital $188 Minority InvestmentJul-05 Raffles Holdings Ltd Colony Capital, LLC $1,014 AcquisitionJul-05 BIL International Ltd Guoco Group Ltd $707 Acquisition
Aug-05 MobileOne Limited SunShare Investments Sdn. Bhd. $157 Minority InvestmentAug-05 Asia General Holdings Ltd Southern Bank Bhd $551 Minority InvestmentSep-05 Mentor Media Ltd MM Holdings Ltd $100 Acquisition
Source: MergerMarket / Thomson One Banker 10
* A private equity firm that is tied to a larger organization, typically a bank, insurance company or corporate** Pan-Asia funds are those not limited to investing in particular regions or countries in Asia*** Started by Michael Kim, Carlyle Group's former co-head of buyouts in AsiaSource: Asia Private Equity Review, 2005
Fund Raising / Raised
Target 1st Close2nd/ Final
Close Captive* Buyout TechnologyGovernment Sponsored
Pan-Asia**
ADM Capital Adam Maculus Fund $500 $138Crest Capital Partners Value Monetization Fund $100 $33CVC Asia Pacific Ltd CVC Capital Partners Asia Pacific II, LP $1,000 $1,975
General Enterprise ManagementServices Ltd.
GEMS III Fund $300-500
H&Q Asia Pacific Asia Pacific Growth Fund V $500 $100HSBC Private Equity (Asia) HSBC Technology Asian Ventures Fund
Ltd $40-80 $40
Inter-Asia Venture Management InterAsia Capital $150JAIC Asia Capital Pte Ltd & UOBBioventures Management
UOB JAIC Venture Bio Investments $20 $12
Kendall Court Capital Partners Kendall Court Mezzanine (Asia) Fund I
$75 $35
MBK Partners*** MBK Partners LP $1,000 $750 Morgan Stanley Private Equity $500
Navis Capital Partners Navis Asia Fund IV, LP $250-300 Undisclosed Olympus Capital Holding Asia Olympus Asia Regional Fund $500 $180Pangaea Capital Management Pangaea Asia Special Investor Fund
$300
Pangaea Capital Management Pequot Pangaea Asia Opportunities Fund
$300
Pangaea Capital Management $900
TaiAn Technology Corp. Qi Hang Venture Capital
NT$1B (US$32m)
NT$1B (US$32m)
SEAVI Advent Corp SEAVI Advent IV Fund $100 $18 $70
1st FundLaunched
2005Fund NameGeographical Focus & Firms
Fund NatureStatus
January - June 2005(US $Millions)
11
Fund Raising / Raised
January - June 2005(US $Millions)
Target 1st Close2nd/ Final
Close Captive* Buyout TechnologyGovernment Sponsored
Greater ChinaAsiaTech Ventures Ltd AsiaTech Knowledge IV $100 AsiaVest Partners TCW/YFY AsiaVest Opportunities Fund IV $300 $100 $270 London Asia Capital & GlobalEmerging Markets
Creater China Fund $200
SAIF Advisors SAIF II $500 $640
Shaw, Kwei & Partners Asian Value Investment Fund II $50 $25 $50WI Harper Group WI Harper INC Fund VI $100-150
1st FundLaunched
2005Fund NameGeographical Focus & Firms
Fund NatureStatus
* A private equity firm that is tied to a larger organization, typically a bank, insurance company or corporateSource: Asia Private Equity Review, 2005
12
Fund Raising / Raised
January - June 2005(US $Millions)
Target 1st Close2nd/ Final
Close Captive* Buyout TechnologyGovernment Sponsored
ChinaActis Capital Actis China Fund $200 undisclosedBioVeda Capital BioVeda China Fund $40 $40 CDH Investments CDH China Growth Capital Fund II $310 $162
China Enterprise Capital Ltd. China Enterprise Capital Fund $100 $30 $70
China Renaissance Capital Investment Inc. $1,000
Colony Capital / Shanghai IndustrialInvestment Corp
Yangtze Special Situations Fund $500 $100
Fortune Venture Investment Group Nanjing Fortune Communications Fund RMB200m(US$24m)
RMB30m(US$3.5m)
Gobi Partners, Inc. Gobi Fund, Inc. $75 $30 Infinity Venture Capital Fund Infinity-CSVC Ventures LP $75 Intel Capital Intel Capital China Technology Fund $200 Kingsway Group Golden China Resources Corporation $50 $17
MVC Corp $28 $28 SAIF Advisors Ltd. SAIF Growth Venture Capital $20 $20 Shenzhen Capital Group Co. China Dragon Fund $100-150 Shenzhen Capital Group Co. / Platium Neuron Ventures
China Isreal Venture Capital
$80
Softbank Investment Corp / TemasekHoldings
New Horizon Fund
$100 $100
SZVC-UOB Venture Management Co. SZVC II $50 Tsinghua Venture Corp. China Environment Fund 2004
1st FundLaunched
2005Fund NameGeographical Focus & Firms
Fund NatureStatus
* A private equity firm that is tied to a larger organization, typically a bank, insurance company or corporateSource: Asia Private Equity Review, 2005
$30 $15
13
Fund Raising / Raised
January - June 2005(US $Millions)
Target 1st Close2nd/ Final
Close Captive* Buyout TechnologyGovernment Sponsored
KoreaBogo Fund $988
H&Q Asia Pacific $400 $200 Hana Bank, Cambridge Capital PartnersIMM Private Equity
Hana-Cambridge-IMM Private Equity Partners $100-150
$50
Ilshin Investment Global Star Korea Fund $100-200 $50 JAFCO Asia Korea SME Fund $50 Mirae Asset Venture Investment Mirae Asset Partners No. 1 Private
Equity $96
Shinhan Private Equity $150
STIC Ventures STIC Pioneer Fund $19.2 $9.6Woori Capital Woori No. 1 Private Equity Fund $201
1st FundLaunched
2005Fund NameGeographical Focus & Firms
Fund NatureStatus
Individuals Investors**
* A private equity firm that is tied to a larger organization, typically a bank, insurance company or corporate** Led by Byeon Yang Ho, a former official from the Ministry of FinanceSource: Asia Private Equity Review, 2005
14
Fund Raising / Raised
January - June 2005(US $Millions)
Target 1st Close2nd/ Final
Close Captive* Buyout TechnologyGovernment Sponsored
JapanArise Capital Partners, Inc. Arise No. 1 LP $96 Biofrontier Partners Biofrontier Global II Investment
Enterprise Partnership$48-95
Biotech-Healthcare Partners $50-70 Biovision Capital Corp Biovision Lifescience Fund No. 1 $25 CITIC Provident Capital Management Ltd. CITIC Japan Partners LP $190 $140 $168 DLIBJ Asset Management & PolarisPrincipal Finance
$287
Dowa Mining Co. Dowa Techno Fund $45 Globis Capital Partners Globis Fund III LP $181 Japan Asia Investment Co. JAIC - Bio No. 2 LP $28.2 $20 Japan Asia Investment Co. JAIC Corporate Rehabilitation No. 1 $16.6 $8.3 JBF Partners $96 Longreach Group Longreach Capital Partners $500 $170 Mizuho Capital Co. Ltd. Mizuho Capital No. 2 LP $191 $149 NIF-PAMA Management NIF-PAMA Japan Private Equity Fund $300-500 $125 $132
SBI Ventures KK SBI BB Media Investment Corp Limited
Liability Fund $463 $185
Technology Alliance Investment Ltd. Innovation Carve Out Fund $138 $138
1st FundLaunched
2005Fund NameGeographical Focus & Firms
Fund NatureStatus
* A private equity firm that is tied to a larger organization, typically a bank, insurance company or corporateSource: Asia Private Equity Review, 2005
15
Private Equity In China
16
Market Dynamics
SOEs
Hundreds of SOEs are considering selling, restructuring, or privatizing portions of their assets
This sector is dominated by insiders and difficult for foreigners to penetrate
Established Private Businesses
Typically manufacturing companies for export or for domestic markets
Entrepreneurs open to foreign capital for expansion or exit
Similar to foreign investors’ typical investment targets
The Technology Sector
China’s world-class universities, talented scientists, and strong research provide technical staff and knowledge
Typical exit is through foreign listing
Lack of sophisticated capital markets and investors makes (foreign) private equity favored option
17
M&A In China
The Number of M&A & MBO Deals in China Listed Companies
No. of M&A
No. of MBO
Source: 21st Century Business Herald
103 119168 172
94
12
5 8
8
020406080
100120140160180200
2000 2001 2002 2003 Q3'2004
02,0004,0006,0008,000
10,00012,00014,00016,00018,000
Q12003 2004
Announced Mergers and Acquisitions - China
Value US $Millions
No. of Deals
Q2 Q3 Q4 Q1 Q2 Q3 Q42003 2003 2003 2004 2004 2004
0
10
20
30
40
50
60
70
Source: Thomson Financial / 21st Century Business Herald, 2005
18
Leading Private Equity Firms in China*
* In alphabetic orderSource: Zero2IPO, 2005
Foreign
Domestic Millennium Ark Investment Co
19
Representative Private Equity Investments In China
(US $Millions)
Date Announced Target Name Acquirer Name
Transaction Value Deal Type
Jan-05 Hanfeng Power Plant CITIC Group; Huaneng PowerInternational Inc.
$450 Minority Investment
Mar-05 Huishan Dairy CLSA Private Equity, Japan AsiaInvestment
$15 Acquisition
Mar-05 Sichuan New HopeAgribusiness
IFC $45 Minority Investment
Apr-05 Inner Mongolia Yili Indl Co Huhehaote Investment Co Ltd $36 Minority Investment
Apr-05 Zhengzhou Yutong Bus Co Zhengzhou Yutong Group Co Ltd $13 Minority Investment
Jun-05 Shanghai Hongxing Optical HAL Investment Asia BV $26 Control Investment
Jun-05 Zhejiang Conba Pharm Co Zhejiang Zhongye Invest Co Ltd $12 Minority Investment
Aug-05 China Pacific Life Insurance The Carlyle Group $400 Minority Investment
Aug-05 Hunan Liuyang Fireworks CoLtd
Guangzhou Panda Intl Invest Co $7 Minority Investment
Aug-05 Insigma Technology Co Hangzhou Funeng Indl Co Ltd $9 Minority Investment
Aug-05 Liuzhou Liangmianzhen Co Led by Shantou Guangda $9 Minority Investment
Sep-05 Jiangsu Kanion Pharm Co Lianyungang Tianshi Investment $7 Minority Investment
Sep-05 Hans Laser Technology Co Shenzhen Dazu Indl Co Ltd $6 Minority Investment
Sep-05 Ningbo Beifa Group Standard Chartered Private Equity Ltd. $17 Minority Investment
Sep-05 Shanghai Feilo Acoustics Co Shenzhen Tsinghua Lihe Venture Capital Investment Co
$32 Minority Investment
Sep-05 Wuxi Worlbest Treeful Pharma Pharmaniaga Pegasus Seychelles $6 Minority Investment
Sep-05 Yuetan Supermarket China Resources Entrp Ltd $16 Acquisition
Sep-05 Zhejiang CikelongSupermarket
China Resources Entrp Ltd $35 Acquisition
Oct-05 Team & Sports Ltd Umbro PLC $12 Minority Investment
Source: MergerMarket / Thomson One Banker
20
Representative Strategic Investments In China
Date Announced Target Name Acquirer Name
Transaction Value
(US $Millions)
Jan-03 PuDong Development Bank Citigroup $72
Dec-03 Industrial Bank Hang Seng Bank $208
Aug-04 Bank of Communications HSBC $1,750
Jan-05 Huaan Securities Merrill Lynch $32
Mar-05 Bank of Beijing ING Group $215
Apr-05 China Dragon Fund Management UBS Asset Management NA
Jun-05 China Construction Bank Bank of America $3,000
Sep-05 Beijing Securities UBS Warburg $210
Sep-05 Bank of China UBS Warburg $500
Sep-05 Bank of China Temasek Holdings $3,100
Sep-05 Bank of China Royal Bank of Scotland, Merrill Lynch, Li Ka Shing Foundation
$3,100
Sep-05 Industrial and CommercialBank of China
Goldman Sachs, Allianz, American Express
$1,100
Sep-05 Tianjin Bohai Bank Standard Chartered Bank $123
Sep-05 Huaxia Bank Deutsche Bank $330
Source: WSJ.com / Forbes.com
21
Venture Capital In China
22
Venture Capital Investment Trend In China
$542.53
$332.21
$438.06 $466.71$402.45
111
8180
51
66
$0
$100
$200
$300
$400
$500
$600
2003H1 2003H2 2004H1 2004H2 2005H1
0
20
40
60
80
100
120
Amount InvestedNumber of Deals
Source: Zero2IPO, 2005
(US $Millions)
23
What Are Investors Looking For In China…
Telecom, Media, and Technology (TMT)
– Web2.0 Blog, SNS, Online Dating/Community, RSS, Podcasting, IM, P2P, Search
– IPTV
– Mobile Contents/Applications Mobile Gaming, Mobile TV/Video/Radio, Flash Clips, Mobile Blog, Mobile
Dating/Community, Mobile Search, Mobile Commerce, Mobile Advertising
– E-Commerce B2B, C2C, B2C, C2B, Online/Mobile Payment
– Media Contents
Traditional Industries
– Fast Moving Consumer Goods/Health Products
– Financial services
– Chain Stores
– Education/Training
– Others…
Source: Zero2IPO, 2005
24
Investments By Industry
Other High-tech7.4%
Services9.9%
Traditional14.8% IT
63.0%
Healthcare4.9%
Healthcare0.4%Other High-
tech21.5%
Services13.6%
Traditional11.5%
IT53.0%
By Number of Deals By Amount Invested
Source: Zero2IPO, 2005
January - September 2005
25
Investments By Deal Stage
Pre-IPO2.5%
Start-up28.4%
Growth38.3%
Expansion12.3%
Mature6.2%
Unknown12.3%
Unknown9.6%
Pre-IPO20.3%
Mature27.1%
Expansion19.2%
Growth17.0%
Start-up6.8%
Number of Deals Amount Invested
Source: Zero2IPO, 2005
January - September 2005
26
Invested Capital By Industry
$0.05
$1.21
$1.50
$1.77
$3.37
$6.40
$7.00
$30.57
$40.40
$46.15
$51.28
$80.00
$129.27
0 $20 $40 $60 $80 $100 $120 $140
Environmental Protection
Computer Hardware & Peripherals
Software
IT Services
Internet
Services
Telecommunications
New Energy
Traditional
IC
New Materials
Healthcare
Opto-electronics
Source: Zero2IPO, 2005
January - September 2005(US $Millions)
27
Number Of Deals By Industry
1
1
1
1
2
4
4
5
7
8
12
16
19
0 2 4 6 8 10 12 14 16 18 20
IT Services
Computer Hardware & Peripherals
Environmental Protection
New Energy
Opto-electronics
New Materials
Healthcare
Software
IC
Services
Traditional
Telecommunications
Internet
Source: Zero2IPO, 2005
January - September 2005
28
Average Deal Size By Industry
$0.44
$0.60
$0.67
$1.50
$1.60
$2.38
$3.85
$4.37
$6.84
$7.00
$8.62
$80.00
0 $10 $20 $30 $40 $50 $60 $70 $80 $90
Environmental Protection
Healthcare
Opto-electronics
Software
Computer Hardware&Peripherals
New Materials
Internet
Traditional
IC
Services
IT Services
Telecommunications
New Energy
Source: Zero2IPO, 2005
January - September 2005(US $Millions)
29
Invested Capital By Geography
$38.93
$0.60
$0.93
$1.00
$1.29
$7.08
$17.55
$23.09
$24.33
$25.03
$90.87
$171.75
0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200
Unknown
Anhui
Hubei
Chongqing
Zhejiang
Hunan
Shandong
Shenzhen
Guangdong (excluding Shenzhen)
Shanghai
Jiangsu
Beijing
Source: Zero2IPO, 2005
January - September 2005(US $Millions)
30
Number Of Deals By Geography
5
1
1
1
2
5
6
7
8
10
13
22
0 5 10 15 20 25
Unknown
Hubei
Hunan
Chongqing
Anhui
Jiangsu
Zhejiang
Shenzhen
Guangdong(Shenzhen excluded)
Shanghai
Shandong
Beijing
Source: Zero2IPO, 2005
January - September 2005
31
Investments By Fund “Nationality”
Type of VCNumber of
Deals Percentage
Number of Deals with Disclosed Amount
Disclosed Amount Percentage
Average Deal Size
Foreign 35 43.20% 32 $262.95 65.30% $8.22
Domestic 39 48.10% 39 $81.07 20.10% $2.08
Sino-Foreign Co-Investment
7 8.60% 7 $58.43 14.50% $8.35
Total 81 100.00% 78 $402.45 100.00% $5.16
Source: Zero2IPO, 2005
January - September 2005(US $Millions)
32
Representative Chinese Venture Capital Deals
CompanyAmount Invested Business Investors
SunTech $80 Solar Cell and Module Actis, Goldman Sach, DragonTech, Natexis
Harbour Networks $37 Telecom Equipment TVG, Warburg, DragonTech
Acorn International
$35 TV Shopping SAIF Partners
ChannelSoft $31.5 Telecom SoftwareWalden International, China Science & Merchants
Allyes.com $30 Online Advertising IDGVC, Oak Investment Partners
JoyMedia $20 Media Contents SAIF Partners
ATA $14 Testing Service SAIF Partners
Bokee $10 Blog ServiceGGV, SAIF Partners, BVP, Mobius Venture Capital
Source: Zero2IPO, 2005
January - September 2005(US $Millions)
33
Select Emerging Venture-Backed Companies
Ganji.comThe leading classified localized information service in China
TianyaClub.comThe largest online community in China.
XiaoIThe leading intelligent information search engine service provider.
BlogCN.comThe leading blog hosting service provider in China.
HeiYouThe leading Social Networking Service Provider in China.
Qikan.comThe leading online magazine subscription service provider in China.
ME-YOUThe leading mobile multimedia instant messenger service provider.
Panorama StockThe content provider of professional international photos
FonenetThe wireless value-added service provider.
Source: Zero2IPO, 2005
34
Fundraising And Exit Performance
7 VCs closed new funds in the first half of 2005.The total amount raised was US$1.65billion, more than twice that of last year
17 VCs accomplished 19 exits from16 companies in the first half of 2005.The amount total exit is US$153million, lower than that of the first half of 2004
Source: Zero2IPO, 2005
35
Exit Of Venture Investments In China
Exit Route Number of Exits Percentage Amount Exited Percentage
IPO 65 26% $574.63 51%
M&A 19 8% $151.67 13%
Trade Sale 122 49% $296.97 26%
MBO 13 5% $6.28 1%
Liquidation 2 1% $1.75 0%
Other 11 4% $31.75 3%
Unknown 18 7% $62.55 6%
Total 250 100% $1125.6 100%
Source: Zero2IPO, 2005
2002 - 2004(US $Millions)
36
$ Value Of Those Exits
$218
$106
$802
106%
268%
0
100
200
300
400
500
600
700
800
900
2002 2003 2004
0%
50%
100%
150%
200%
250%
300%
Amount Exited Growth Rate
Source: Zero2IPO, 2005
2002 - 2004(US $Millions)
37
Venture Capital Return Rate In China
IRR Number of Exits Percentage
Very High (Above100%) 22 11%
High (Between 30% to 100%) 28 15%
Average (Between 20% to 30%) 28 15%
Below Average (Between 10% to 20%)
31 16%
Low (Between 0%to 10%) 37 19%
Very Low (Between -10% to 0%) 10 5%
Poor (Below -10%) 3 2%
Unknown 33 17%
Total 192 100%
Source: Zero2IPO, 2005
2003 - 2004
38
Venture-backed IPOs In 2005
CompanyListing Date Market Industry
Amount Raised Investors
Baidu.com 08/2005 NASDAQ Internet $109 DFJ, IDG, TDF, etc
Focus Media 07/2005 NASDAQ Media $171CDH, SoftBank, DFJ, , TDF, WI Harper, 3i,etc
GST 06/2005 HK Main Board Software $44 3i, etc.
Asia Silk 05/2005 SESDAQ Traditional $5 Sun Ventures
Longcheer 05/2005 SGX Telecom $18.37 DFJ, etc
TechFaith 05/2005 NASDAQ Telecom $141.8Intel Capital, Qualcomm Ventures, etc.
Hurray! 02/2005 NASDAQ Telecom $70.52 GGV, Fidelity, etc
Source: Zero2IPO, 2005
January - September 2005(US $Millions)
39
IPO Pipeline
2002 2003 2004 2005 Strong IPO Pipelines
……2006-2008
Source: Zero2IPO, 2005
40
Acquirer Acquiree
Venture-Backed M&A In China
Index Corporation
Source: Zero2IPO, 2005
January - September 2005
41
Potential Acquirers
Type I:China-based Public Companies
Type II:Private Venture-backed Companies
Type III:Foreign Giants
Source: Zero2IPO, 2005
42
Active VC Firms Year To Date
GSR Ventures
Localization of Top International VC Firms
New Emerging VCs in China
Rising Stars in Year 2005
Strong Investment Activities As Ever
The IPO Winners
Source: Zero2IPO, 2005
43
2004 Zero2IPO Top 10 VCs
Eight of the Top 10 VCs in the year 2004 have raised new funds
The Top 10 ranking list in the year 2005 are expected to have significant changes from that in 2004
Domestic VCs may still lag behind in the next one or two years
1 Softbank Asia Infrastructure Fund
2 IDG Technology Venture Investment
3 Doll Capital Management
4 CDH Investment
5 New Margin Ventures
6 The Carlyle Group Asia
7 Warburg Pincus Asia
8 Legend Capital
9 Acer Technology Ventures
10 Shandong Hi-Tech Investment
Source: Zero2IPO, 2005
44
Regulations And Industry Dynamics
SAFE circulars imposed negative effects on overseas IPO and the venture capital industry in China
Investment volume might slightly decline in 2005
Foreign VCs still dominate China venture capital industry at least in the next five years
Venture-backed IPO and M&A activities are expected to be more active in China
TMT industry became a primary focus for China venture capital industry and healthcare is under-invested but has great potential
Competition among VCs will be stronger especially on expansion and later stage deals; the top 10 VC rankings may have significant changes in 2005
More VC firms compete on experienced VC fund managers and investment professionals
Source: Zero2IPO, 2005
45
State Of The Chinese Technology Capital Markets
46
5
10
15
20
2000 2001 2002 2003 2004 2005
Number of M&A Exits
0
5
10
15
20
2000 2001 2002 2003 2004 2005
OtherDual ListingSingaporeNasdaqHK GEMHong Kong
Chinese Technology Companies Have Historically Gone Public On The NASDAQ
IPO M&A
2000 19 20
2001 2 10
2002 2 4
2003 1 7
2004 16 5
2005 6 8
Total 46 54
Exit Strategy
In 2004, Nearly 50% Of Chinese Technology Companies Listed Solely On The NASDAQ
IPO Exit
M&A Exit
Dual Listing includes all companies listed on more than 1 exchangeOther includes Shenzhen, Tokyo, Shanghai and New YorkSource: SDC. Excludes transactions where IPO gross proceeds and M&A deal values were < $25 million
0
47
U.S. Listed Chinese Technology Companies Are Growing Rapidly
The Number Of NASDAQ And NYSE-Listed Companies In China Have Doubled Since December 2003
11 1112
13
26*
30*
0
10
20
30
40
50
60
70
80
Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Current
0
5
10
15
20
25
30
35
Num
ber of C
ompanies
(Mar
ket C
ap in
$B
)
* 5 companies are listed on the NYSE. The remaining are listed on the NASDAQ
Aggregate Market Cap: Telecom
Aggregate Market Cap: Non-Telecom
Number of NASDAQ and NYSE-listed Companies in China
48
Chinese Technology Capital Markets Activity In 2004 and 2005 YTD
* As of 5/30/05. Source: Broadview’s IPO Database / Hoover’s IPO Central / Capital IQ
Issue Date Name Offering TypeOffering Amount
TTM Revenue
TTM Revenue Growth
Quarters of Profitability
TTM EBITDA Margin
% Change From
Offering*TMC / TTM Revenue TTM P/E
8/5/05 Baidu.com IPO 109.1 16.8 253% 6 34% 169% NM NM
7/13/05 Focus Media Holding IPO 197.5 43.8 1,067% 8 42% 35% 14.73 x 22.86 x
5/5/05 China Techfaith Wireless IPO 141.8 59.0 510% 6 47% (39%) 14.60 x 31.30 x
2/3/05 Hurray! IPO 70.5 54.4 131% 6 37% (2%) 2.85 x NM
12/16/04 Ctrip.com Follow-On 92.8 36.6 121% 10 44% 37% 18.29 x 52.92 x
12/14/04 The9 IPO 103.3 3.4 183% 7 11% 19% 92.11 x 76.96 x
12/2/04 Ninetowns IPO 105.6 21.1 43% 15 66% (54%) 14.14 x 23.70 x
11/10/04 China Netcom Group IPO 1,141.1 7,663.4 10% 14 52% 40% 1.74 x 9.70 x
10/27/04 eLong IPO 62.1 13.3 94% 0 4% (6%) 20.48 x NM
10/22/04 Shanda Convertible Debt 275.0 102.7 161% 10 43% NA 15.56 x 48.43 x
10/15/04 China Finance IPO 80.6 3.5 122% 8 1% (56%) 37.08 x 77.84 x
10/7/04 Hutchison Telecom. IPO 808.7 1,597.8 32% 2 27% 31% 3.32 x 67.84 x
9/28/04 51job IPO 73.5 45.9 77% 10 25% (4%) 21.14 x 143.43 x
7/8/04 Kongzhong IPO 100.0 14.3 3,798% 5 41% 34% 12.67 x 30.00 x
5/13/04 Shanda IPO 152.4 72.6 84% 8 43% 150% 26.27 x 59.82 x
3/12/04 SMI IPO 1,712.9 365.8 627% 1 48% (55%) 7.89 x NM
3/5/04 TOM Online IPO 175.0 77.1 157% 4 30% 24% 5.60 x 13.90 x
3/4/04 Linktone IPO 86.0 15.5 285% 4 31% (20%) 3.94 x 22.60 x
High 1,712.9 7,663.4 3,798% 15 66% 169% 92.11 x 143.43 xMedian 107.4 44.9 144% 6.5 41% 19% 14.60 x 39.87 xLow 62.1 3.4 10% 0 4% (56%) 1.74 x 9.70 x
(US $Millions)
49
Typically, Chinese Technology IPOs Have U.S. Comparables…But With Unique Chinese Attributes
Valuation Drivers U.S. Comparable Exists Strong Revenue Growth Higher Customer Retention Recurring Revenue Streams Higher Operating Margins
Total Projected 2005 Enterprise Value / Revenue
Total Projected 2005 P/E
Internet Media Online Travel Semi Foundry Recruiting Online GamingFinancial
Intelligence
Wireless Value-Added
Services
11.71 x
6.18 x
0.66 x
14.96 x
4.66 x 2.61 x 3.45 x 3.72 x 4.44 x6.49 x
4.77 x 5.70 x 6.38 x3.02 x
Yahoo Sina Expedia Ctrip TSMC SMIC Monster 51Job EA Shanda Factset China Finance
JAMDAT Linktone Google Baidu
Online Search
21.76 x
54.96 x
Internet Media Online Travel Semi Foundry Recruiting Online GamingFinancial
Intelligence
Wireless Value-Added
Services
56.85 x
29.95 x16.18 x
42.20 x
14.80 x
NM
32.72 x
54.33 x
35.95 x
17.58 x24.64 x
29.33 x 27.28 x20.39 x
Yahoo Sina Expedia Ctrip TSMC SMIC Monster 51Job EA Shanda Factset China Finance
JAMDAT Linktone Google Baidu
Online Search
54.43 x
267.11 x
50
(US $Millions)
Private Equity / VC Investment Activity For Chinese Technology Companies Continues To Be Strong
Date Company Capital Raised Investor(s)Sep-05 Allyes $30.0 IDG, Oak Investment PartnersSep-05 Actions Semiconductor $80.0 (secondary) NEA, Intel Capital, HSBC, GIC, Shanghai Industrial, RimAsiaSep-05 Bokee NA Granite, Softbank, Bessemer, MobiusAug-05 Oriental Wisdom $8.0 Granite, TDFAug-05 SmartPay NA RRE Ventures Jul-05 A-Max Technology $60.0 General AtlanticJul-05 Mopsite $10.0 AccelJun-05 BeyondSoft $6.0 Japan-China BridgeJun-05 Target Media $20.0 Carlyle GroupJun-05 Fiberxon $20.0 Apax, GreylockJun-05 Worksoft $6.0-7.0 Legend, Doll CapitalMay-05 9you $5.0 Dragon GrooveMay-05 Tengwu Digi-Tech NA IDG, SumitomoMay-05 163888.net $0.2 IDGMay-05 Netmovie $4.0 IDGApr-05 Digital Media Group $6.0 Gobi Partners, NTT DoCoMo, DentsuApr-05 Zhongsou $16.0 Legend, Fidelity, IDGApr-05 Emay Softcom $10 IDGMar-05 Gasoft $7.6 Union Fortune InvestmentMar-05 Zhongsou $6.0 IDG, Legend CapitalMar-05 Lenovo $350 TPG, General Atlantic, NewbridgeMar-05 wap.3g.net.cn NA IDGMar-05 Pollex Mobile NA Jafco, IntelMar-05 HiChina / MyMai $12.1 IDG, NewbridgeMar-05 Harbour Networks $37.0 TVG Capital, Temasek, Warburg Pincus, DragonTechFeb-05 Easyeb NA Carlyle GroupJan-05 PRCEdu NA McGraw-Hill, TigerJan-05 Blogchina $0.6 Softbank, ShandaJan-05 V516.com $3.0 Rensheng FundJan-05 LinkRich $3.0 Siemens Mobile Acceleration, Morningside TechDec-04 Dangdang $11.0 Tiger TechDec-04 9you $14.0 Carlyle, China Merchants, Fortune, Sino-Korea WirelessDec-04 eFriendsNet / Yeeyoo $0.5 KongzhongDec-04 GST $20.0 3iDec-04 Huaya Microelectronics $13.0 Carlyle, Chengwei Ventures, Pacific VentureNov-04 Focus Media $30.0 Goldman Sachs, 3iNov-04 Soutec $16.9 NAOct-04 HiSoft $20.0 Granite, Intel, International Finance, JAFCOOct-04 Any8.com $5.0 IDGSep-04 Target Media $15.0 CarlyleAug-04 Smartpay $8.3 2b Holdings, strategic investorsAug-04 Great Wall Software $3.5 IDG, Qualcomm, Tom Online
Representative Chinese Technology Investments Over The Past 12 Months
While the majority of investment activity has been in the sub-$20 range, investors are increasingly gaining a higher level of comfort and looking to put more money into larger enterprises
VC firms raised nearly US$700 million in 2004 for investing in Mainland China
51
While Cross Border M&A Market In China Is Nascent, Deal Frequency Is On The Rise
Representative Chinese Technology M&A/Strategic Investments
Date Announced Target Name Acquiror Name
Transaction Value M&A Type
Sep-05 Chinasoft International Microsoft and International Finance Corp 35.0 Minority Investment
Sep-05 Langchao Group Microsoft 25.0 Minority Investment
Aug-05 Alibaba.com Yahoo! 1,000.0 Minority Investment
Jul-05 Soufun Trader Classified Media 22.5 Minority Investment
Jun-05 Longshine Amdocs 30.0 Acquisition
Apr-05 PCHome CNET Networks Inc. 11.0 Acquisition
Mar-05 Three-Five System International DisplayWorks 10.4 Acquisition
Feb-05 ChinaHR Monster.com 50.0 Minority Investment
Jan-05 PRCInvestment.com Reed Elsevier Conf. Acquisition
Jan-05 PRCEDU Corporation McGraw-Hill Education 18.0 Minority Investment
Jan-05 C-Valley THQ Wireless Conf. Minority Investment
Dec-04 Digital Media Group NTT DoCoMo 4.2 Minority Investment
Dec-04 eLong IAC/InterActiveCorp 167.0 Control Investment
Nov-04 Konka Thomson 18.9 Minority Investment
Oct-04 Zhongguancun On Line Corp CNET Networks Inc. 15.0 Acquisition
Oct-04 Fengniao Photography On LineCNET Networks Inc. 1.0 Acquisition
Aug-04 Joyo.com Ltd Amazon.com Inc 75.0 Acquisition
Jun-04 Ctrip.com Rakuten, Inc. 109.6 Minority Investment
Jun-04 Baidu.com Google Inc. 10.0 Minority Investment
Nov-03 3721 Network Software Co Ltd Yahoo! 120.0 Acquisition
Jun-03 EachNet.com eBay Inc 150.0 Acquisition
Key issues Few “willing” sellers Price expectations Post-acquisition
management and integration Cultural fit
(US $Millions)
52
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