Exit Strategies - CVCF May 2005

Exit Strategies For Chinese Technology

Companies

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NEW YORK

SILICON VALLEY

BOSTON

LONDON

BROADVIEW INTERNATIONAL

A DIVISION OF JEFFERIES & COMPANY, INC

May 2005

About Jefferies Broadview

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33

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Jefferies Broadview 全面性投资银行业务

企业合并收购 2004 年至今承办的全球

高科技企业合并与收购业务总额综合排名第二，交易额 5 亿美元以下排名第一 1

从 1997 至今，完成了 200 个并购项目，总成交额超于 500 亿美元

股票

纳斯达克市场股票交易量第一（超过每日公布交易量 12% ）；处理纽约股票交易所每日交易量 11%

近 10 年来，通过股票公开发售为客户融资超于 200 亿美元

债券

最大的中级市场高收益债券发售商

可兑换债券五大交易商之一

股票市场

Equity

证券

研究

Research

企业

合并

收购

M&A 债券

Debt

证券研究

100 多位分析师，研究 400 多家公司 , 超过 70% 的公司为中型企业（市场价值为 25 亿美元以下）

1 数据来源： SDC

中国高科技企业

4

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实力雄厚的纳斯达克股票交易公司

纳斯达克股票市场最大的交易商

资料来源： Autex， 2003年 7月 1 日至 2004年 6月 30 日。市场份额按公告板市场、纳斯达克全国市场、纳斯达克小市值市场总交易量加权计算，得出总交易量百分比。

规模大、业绩稳定的销售团队，共有 180 位机构投资人股票投资销售代表股票投资销售队伍–共有 150 位高级推销员

证券研究服务销售团队 – 共有 30 位高级推销员

Jefferies 的联营公司 Helfant Group, Inc.处理纽约股票交易所每日公布交易量的 11% 1.9%

1.9%

2.0%

2.3%

2.6%

3.3%

3.5%

3.6%

3.6%

12.5%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

Lehman

BAS

UBS

CSFB

Bear Stearns

Merrill Lynch

Morgan Stanley

Goldman Sachs

Citigroup

Jefferies

占总交易量的百分比

5

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全球性业务

居领先地位的机构投资经纪商和投资银行公司，具有本行业最强大的资本市场交易平台之一

为 Jefferies Group, Inc. (纽约股票交易所代号：JEF ）的主要运营子公司。该公司为一家控股公司，市值大约为 20 亿美元，在世界各地有 20 多家办事处，共有员工 2,000 名

银行业务合作伙伴： Burdett Buckeridge Young Limited

Jefferies 为 50%+ 员工拥有 Jefferies 股票在投资银行界表现第一

奥斯汀

旧金山

洛杉矶达拉斯

休士顿新奥尔良

芝加哥纳西维尔

亚特兰大里士满

波士顿斯坦福

纽约新泽西华盛顿

伦敦巴黎苏黎世

东京

悉尼 *墨尔本 *

矽谷

* 为联营公司

与 Jefferies共同经营全套投资银行业务 , 并就合并与收购、重组和股本私募提供重要咨询

在纽约、矽谷、波士顿和伦敦设有办事处高科技投资银行的主要业务部门共有 75 名高级银

行业务人员和 18 名以上常务董事风险投资基金： Broadview Capital

Partners、 Kennet Venture Partners 、AxcessNet （特拉维）、 Allen & Buckeridge （悉尼）

BroadviewJefferies

以色列 *

沃尔瑟姆

香港

$80,600,000October 2004

Initial Public OfferingCo-Manager

China Finance Online Co. Limited

$66,000,000August 2004

has been acquired by

$66,000,000August 2004

has been acquired by

$165,100,000

has divested its Handset Division to

June 2004

近期中国项目

Initial Public OfferingCo-Manager

$106,000,000

December 2004

Ninetowns Digital World Trade

Technology IPO And M&A Trends

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U.S. equity markets have been steadily rising since November 2003

− NASDAQ LTM performance of 10.8%

Fund flows in November 2004 were $12.0 billion

NASDAQ market capitalization currently at 99.7% of 52-week high

Technology Capital Markets Overview

As of December 3, 2004. Source: Jefferies Broadview capital markets

Historic Equity Mutual Funds and S&P PerformanceLTM Market Performance

Market Recovery Trends

80

85

90

95

100

105

110

115

12/05/03 01/13/04 02/19/04 03/25/04 04/30/04 06/07/04 07/14/04 08/18/04 09/23/04 10/28/04 12/03/04

(Price as a % of Base Value)

NASDAQ

10.8%

S&P 50012.2%DJIA7.4%

($60)

($40)

($20)

$0

$20

$40

$60

Sep

-91

Sep

-92

Sep

-93

Sep

-94

Sep

-95

Sep

-96

Sep

-97

Sep

-98

Sep

-99

Sep

-00

Sep

-01

Sep

-02

Sep

-03

Sep

-04

0

400

800

1,200

1,600

Funds

S&P 500

$ in Billions

88

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Post-Bubble Equity Recovery Time: 4 - 6 Years

80’S PC

0

10

20

30

40

50

60

70

80

Jan-82 Oct-82 Jul-83 Apr-84 Jan-85 Oct-85

Apple Computer

4 Year Span

60’S TRONICS BOOM

0

50

100

150

200

250

300

Apr-60 Jan-61 Oct-61 Jul-62 Apr-63 Jan-64 Oct-64 Jul-65 Apr-66

6 Year Span

Texas Instruments

70’S NIFTY FIFTY

0

20

40

60

80

100

120

140

Nov-74 Sep-75 Jul-76 May-77 Mar-78 Jan-79 Nov-79

Hewlett Packard

4 Year Span

90’S INTERNET

eBay

Sep-99 Jun-00 Mar-01 Dec-01 Sep-02 Jun-03 Mar-040

15

30

45

60

75

90

4 Year Span

00’S CHINESE INTERNET

1

10

19

28

36

45

54

63

Apr-00 Oct-00 Apr-01 Nov-01 May-02 Nov-02 May-03 Nov-03 Jun-04

SINA

4 Year Span

99

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QUARTERLY IPO ISSUANCES IPO PRICING VS. FILING RANGE

QUARTERLY FOLLOW-ON ISSUANCES FOLLOW-ON PRICING VS. FILING RANGE

US IPO vs. Follow-On Technology Market Stats

As of 12/3/2004. Source: Jefferies Broadview capital market. Technology defined per SDC Platinum high technology industry classification

Below Filing Range Within Filing Range Above Filing Range

0%

20%

40%

60%

80%

100%

Q1 ‘03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 Q2 ‘04 Q3 ‘04

Below Filing Range Above Filing Range

Q4 ‘04

0%

20%

40%

60%

80%

100%

Q1 ‘03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 Q2 ‘04 Q3 ‘04 Q4 ‘04

- -

2

7

10

17

21

3

9

12

-

5

10

15

20

25

Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q4 '03 Q1 '04 Q2 '04 Q3 '04 Q4 '04

Num

ber

of D

eals

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Am

ount Raised (m

illions)

7

16

29 30

43

21

14

11

44

-

5

10

15

20

25

30

35

40

45

50

Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q4 '03 Q1 '04 Q2 '04 Q3 '04 Q4 '04

Nu

mbe

r o

f Dea

ls

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

Am

ount R

aise

d ($m

illions)

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The IPO Market Is Strengthening

Current IPO Environment

Recent strengthening of the IPO and equity capital markets

The IPO market is stronger than it has been for over three years, particularly in technology (but the “bar” is high)

Comparable public companies are now benefiting from improved economic conditions and trading at healthier multiples, but IPO backlog has increased

US

Western Europe

Historic Tech IPOActivity

Tech IPO Activity – Number of Transactions

25 17123

370

1996

137

244

1997

171

204

1998

323

415

1999

398

289

2000

78

23

2001

20

2002

19

2003 20041

20

2003 - Q3 2004 Technology IPOs2

IPO Backlog

# IPOs

Q1 Q2 Q3 Q4 Q1 Q2 Q3

2003 2004

27

1017 13 15

24

0

20

40

60

80

100

1 Source: Broadview IPO Database. As of 12/3/04.2 Source: Capital IQ.3 Source: SDC Platinum. For the period 1/1/02-12/3/04.

Asian Companies Represent Nearly 20%

Of US Tech IPOs Since 12/9/03

IPO Issuances by Subsector3

59

Software & Internet Services

36%

IT & Network ServicesSemiconductors

12%Network

Infrastructure

8%

Computing Equipment

5%

Other

25%

14%

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The Dramatic Rationalization Of The Public Markets Has Contributed To The Market’s Health

1 Source: NASDAQ2 Source: CapitalIQ3 Source: Thomson Financial First Call

Number Of NASDAQ Listed Public Companies1

Mar 2000 – Sep 2004

(35%)(1,838)

5,000

DEC 2000

3,800

DEC 2001

3,500

DEC 2002

CHANGE’00-’04

3,300

DEC 2003

Trading Values

<Cash

<$100m

<$250m

# Companies 2

41

1,136

1,882

1%

34%

56%

% of Total

5,181

MAR 2000

3,343

SEP 2004

56% of NASDAQ Listed Public Companies Have No Research

Coverage3

1212

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1212

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The Current IT M&A EnvironmentHas Returned To 1996 Levels

M&A Activity 1992 – 9M 2004 Number Of TransactionsNorth America - IT, Media, Communications

Source: Broadview's Global Mergers & Acquisitions database

741.7

33.1 36.8 48.175.9

126.9139.6

369.0

544.3

195.7

95.771.3

116.3

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 9M 2004$0

$100

$200

$300

$400

$500

$600

$700

$800Number of Deals

Total Consideration ($B)

583

831920

1,593

2,079

2,8442,994

3,763 3,801

2,343 2,327

1,821

1,621

2,161

Median Deal Size($MM)

$8.5 $10.0 $11.0 $13.5 $12.2 $12.0 $15.0 $21.9 $28.1 $18.3 $13.5 $17.0 $16.4

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59 of These Companies Were

Venture Capital-Backed







The Venture Capital Industry Has Also Enjoyed A Recovery In Higher Value Private Company Exits

Source: Broadview's Global Mergers & Acquisitions database. North American private seller transactions.

Middle Market Transactions Will

Drive Venture Capital Returns In The

Current Environment

2000 2002 9M 2004

>$20MM 636 172 138 97

>$50MM 397 84 80 78

>$150MM 193 30 23 28

2003

Approximately 75% Of North American

M&A Deals Over US$50MM In Value

Were VC Backed For 9M 2004

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STAGE VALUE/ PROOF

Most Buyers Are Seeking Acquisitions At A Later Stage Of Company Development

Technical Feasibility

Product Functionality

Customer Acceptance

Business Model Works

Economic Model Works

Scalability Proven

5

6

Product is possible to do

Product does what it is supposed to do

Customers care

Customers are willing to pay a rational economic price

Company can be profitable

Increasingly profitable growthis possible

Size O

f Ad

dressab

le Market D

rives Valu

ation

BusinessAcquisition

3

4

ProductAcquisition

1

2

TechnologyAcquisition

Exit Considerations For Chinese Technology Companies

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10

20

30

40

50

2000 2001 2002 2003 2004

Number of M&A Exits

Chinese Companies Typically Go Public On The HK Main Board Or Seek Dual Listings

The Mix Of IPO And M&A Exits For Chinese Companies In 2004 Have Returned To 2000 Levels

IPO M&A

2000 39 43

2001 11 37

2002 11 44

2003 19 32

2004 36 34

Total 116 190

Exit Strategy

IPO Exit

M&A Exit

0

10

20

30

40

2000 2001 2002 2003 2004

Dual Listing

Other

Singapore

Nasdaq

HK GEM

Hong Kong

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 < $25MM

17

CONFIDENTIAL DRAFT However, 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

Total 40 46

Exit Strategy

In 2004, Nearly 50% Of Chinese Technology Companies Listed Solely On The NASDAQ

0

5

10

15

20

2000 2001 2002 2003 2004

Other

Dual Listing

Singapore

Nasdaq

HK GEM

Hong Kong

5

10

15

20

2000 2001 2002 2003 2004

Number of M&A Exits

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 < $25MM

IPO Exit

M&A Exit

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Chinese Technology M&A / Minority Investment Activity

Select 2003 – 2004 Transactions Involving Chinese Technology Companies

As of November 24, 2004. Source: SDC.

($Millions)

Date Announced Target Name Acquiror Name

Transaction Value M&A Type

8/19/04 Joyo.com Ltd Amazon.com Inc $75.0 Acquisition

7/26/04 eLong.com IAC/InterActiveCorp 60.0 Minority Investment

7/5/04 Davidhill Capital Inc Sina Corp 36.0 Acquisition

6/21/04 Ctrip.com Rakuten, Inc. 109.6 Minority Investment

2/27/04 Crillion Corp Sina Corp 125.0 Acquisition

2/13/04 Shenzhen Powercom Co Ltd Investor Group 26.0 Minority Investment

11/21/03 3721 Network Software Co Ltd Yahoo! 120.0 Acquisition

11/11/03 Advance Tech(Asia)Ltd InvestNet Inc 33.4 Acquisition

9/8/03 Zhuhai Multilayer PCB Co Ltd Shanghai Founder Yanzhong 28.8 Acquisition

6/11/03 EachNet.com eBay Inc 150.0 Acquisition

3/17/03 Palmweb Inc CDC Mobile Media Corp 55.0 Acquisition

3/12/03 Shanda Network Co Ltd Softbank Asia Infrastructure 40.0 Minority Investment

1919

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1919

CONFIDENTIAL DRAFT A Profile Of Chinese Tech IPOs Shows High Quality, Profitable Companies With Strong Revenue Growth

1 As of 12/1/04. Source: Broadview’s IPO Database / Hoover’s IPO Central / Capital IQ

($Millions)

Issue Date NameOffering Amount

TTM Revenue

TTM Revenue Growth

Quarters of Profitability

TTM EBITDA Margin

% Change

From IPO1

TMC / TTM

Revenue TTM P/E

12/2/04 Ninetowns $105.6 $21.1 43% 15 66% 0% 14.14 x 23.70 x

11/10/04 China Netcom 1,141.1 7,663.4 10% 14 52% 10% 1.74 x 9.70 x

10/27/04 eLong 62.1 13.3 94% 0 4% 58% 20.48 x NM

10/15/04 China Finance Online 80.6 3.5 122% 8 66% (8%) 37.08 x 77.84 x

10/7/04 Hutchison Telecom 808.7 1,597.8 32% 2 27% 4% 3.32 x 67.84 x

9/28/04 51job 73.5 45.9 77% 10 25% 181% 21.14 x 143.43 x

7/8/04 Kongzhong 100.0 14.3 3798% 5 41% 18% 12.67 x 30.00 x

5/13/04 Shanda 152.4 72.6 84% 8 43% 262% 26.27 x 59.82 x

3/12/04 SMIC 1,712.9 365.8 627% 1 48% (30%) 7.89 x NM

3/5/04 TOM Online 175.0 77.1 157% 4 30% 4% 5.60 x 13.90 x

3/4/04 Linktone 86.0 15.5 285% 4 31% (31%) 3.94 x 22.60 x

12/9/03 Ctrip.com 75.6 16.6 62% 6 37% 203% 39.78 x 76.25 x

High 1,712.9 7,663.4 3798% 14 66% 262% 39.78 x 143.43 xMedian 102.8 45.9 94% 5 37% 10% 12.67 x 59.82 xLow 62.1 3.5 10% 0 4% (31%) 1.74 x 9.70 x

20

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0

20

40

60

80

100

120

140

Dec-00 Dec-01 Dec-02 Dec-03 Current0

5

10

15

20

25

30

U.S. Listed Chinese Technology Companies Are Growing Rapidly

The Number Of NASDAQ And NYSE-Listed Companies In China And Their Aggregate Market Capitalization1 Have Doubled Since December 2003

2003-2004 IPOs

Company Listing Date

Ninetowns Dec-04

China Netcom Nov-04

eLong Oct-04

China Finance Online Oct-04

Hutchison Telecom Oct-04

51job Sep-04

Kongzhong Jul-04

Shanda May-04

SMIC Mar-04

TOM Online Mar-04

Linktone Mar-04

Ctrip.com Dec-03

1 As of 12/4/04* 5 companies are listed on the NYSE. The remaining are listed on the NASDAQ.

11 1112 13

24*

0

20

40

60

80

100

120

140

Dec-00 Dec-01 Dec-02 Dec-03 Current0

5

10

15

20

25

30Aggregate Market Cap: Telecom

Aggregate Market Cap: Non-Telecom

Number of NASDAQ and NYSE-listed Companies in China

Nu

mb

er o

f C

om

pa

nie

s

(Ma

rke

t C

ap

in

$B

)

2121

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2121

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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

Internet Media Online Travel Semi Foundry Recruiting Online GamingFinancial

Intelligence

Wireless Value-Added

Services

14.86 x

7.05 x

2.24 x

29.09 x

4.48 x2.87 x 3.36 x

6.79 x

3.63 x

10.21 x

4.92 x

11.03 x

8.52 x

2.49 x

76.00 x

26.30 x24.58 x

43.60 x

15.73 x

27.95 x

33.44 x

64.59 x

24.23 x

32.62 x

24.87 x 23.33 x

46.68 x

17.79 x

Yahoo Sina IAC Ctrip.com TSMC SMIC Monster 51Job EA Shanda Factset China Finance

JAMDAT Linktone

Yahoo Sina IAC Ctrip.com TSMC SMIC Monster 51Job EA Shanda Factset China Finance

JAMDAT Linktone

13.0 x

2.0 x 2.8 x 2.2 x

1.8 x

1.8 x

1.9 x

1.4 x

Final Thoughts

CONFIDENTIAL DRAFT

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CONFIDENTIAL DRAFT

The Changing Landscape For Emerging Growth Technology Companies

Companies Must Develop Flexible Exit Strategies To Prepare For Volatile Market Windows and

Environment

2004E IT spending up 3.9%…but a $2.1 trillion market1

IPO market thawed but uncertain…the “bar” remains high M&A continues to rebound…sector specific Regulatory / structural changes driving rationalization of US

public companies

1 Source: Gartner Dataquest Global Market Sizing – January 2004

Global Landscape

China-Specific Landscape

Largest wireless market with soon-to-be largest Internet market One of few global markets with attractive investment returns IPO/M&A window for Chinese companies will experience

cyclicality but in the long-term will be a viable exit for Chinese companies

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CONFIDENTIAL DRAFT

Chinese Company Exit Considerations

Organic Growth, Private Equity or IPO on Alternative Markets Always Exists

Primary means of liquidity for technology companies in U.S. International M&A challenging given regulatory environment Likely to be staged as a strategic investment then M&A Typically positioned as the “China strategy” of U.S. buyer

U.S./Chinese M&A Considerations

U.S. IPO Considerations

Market leader in sector with direct U.S. comparables Limited appetite for “me-too” companies unless market has

matured such that it can support duopoly or many competitors VC backing is critical for marketing China-based deals Chinese companies are held to a higher standard due to risk

2525

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2525

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MAINFRAME

The BUNCH

1960

MINI

Data General

1970

CLIENT/SERVER

1990

INTERNET

2000

“DISTRIBUTED INTERNET”

2005+1980

MICRO

So What’s Next?

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CONFIDENTIAL DRAFT

Next generation infrastructure software High ROI, customer-centric applications Technology-based services

– Profitable / scaleable e-commerce– Enhanced services that use cheap bandwidth

– VOIP– Next generation video

Power Management Security

Better, Faster, Cheaper,

Smaller, Less Power and Heat, High ROI, Uses Existing Infrastructure

The Hot Themes For 2005?

Global Landscape

China-Specific Landscape

Semiconductor devices Network communications and equipment Distance learning Social networks eCommerce

Contact Information

CONFIDENTIAL DRAFT

DAVID A. LIUManaging DirectorInvestment BankingTechnology Capital Markets

Jefferies & Company, Inc.Broadview, a division of Jefferies 950 Tower Lane, 18th FloorFoster City, CA 94404T: (650) 573-4803F: (650) 573-4801Email: [email protected]