pwc private equity/venture capital 2014 ... · capital 2014 review and 2015 outlook 5 february 2015...
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PwC Private Equity/Venture Capital 2014 Review and 2015 Outlook
5 February 2015
PwC
Table of contents
Fundraising 3
Investments 8
Exits 17
Key messages 24
2015 outlook & eight mega-trends 27
PwC
Fundraising
3
PwC
Fundraising by PEs remained healthy, with the strongest US$ fundraise since 2008 and a slight uptick in renminbi fundraising.
4
Source: AVCJ and PwC analysis
PE/VC fund raising for China investment* * Excludes PEs investing in China from non-region specific funds
Renminbi Fund Size
Non-renminbi Fund Size
Fund Volume
4.9 6.8
20.3
30.7
20.8
13.3 15.6
50.0
9.7
15.6
17.6
21.6
19.8
28.4
172
165
249
277
123 130
96
0
10
20
30
40
50
60
0
50
100
150
200
250
300
2008 2009 2010 2011 2012 2013 2014
No. US$ billion
PwC
In 2014, the volume of fundraising went down. However, the renminbi fund size increased by 17% compared to 2013, while the non-renminbi fund size grew by a solid 43% YoY. Non-renminbi funds has rebounded more rapidly than renminbi funds in terms of fundraising value since 2011. As a whole, the proportion of renminbi fundraising has gone down.
41%
57% 64%
49% 40% 35%
59%
43% 36%
51% 60% 65%
0%
20%
40%
60%
80%
100%
2009 2010 2011 2012 2013 2014
5
Funds: The growth of Renminbi funds (2009 – 2014)
Source: AVCJ and PwC analysis
Renminbi Fund Size
Non-renminbi Fund Size
PwC
2004 - 2014, Fundraising for the China and Hong Kong markets dominate Asian PE with around US$365 billion raised (not including allocations from non-China specific funds).
365
77 62 51
37 37 25
0
50
100
150
200
250
300
350
400
China/HK Japan India S Korea Singapore Australia Others
US$ billion
6
Source: AVCJ
Total funds raised by fund country, with geographic preference in Asia (2004 - 2014)
PwC
2014, funds raised in China accounted for 9% of the fund raised globally, three percentage points up compared to 2013, almost back to 2012 levels.
318 294
341
390
532
486
17 36 48 42 33 44
0
100
200
300
400
500
600
2009 2010 2011 2012 2013 2014
US$ billion
World
China
7
Funds: PE/VC funds raised in China vs ROW (2009 – 2014)
Source: AVCJ, Preqin and PwC analysis
PwC
Investments
8
PwC
2014 was a banner year for new investments by PEs with record volumes (up 51%) and values (up 101%); participation in SOE reforms and - for the first time at scale - outbound deals involving Chinese GPs and financial buyers underpinned this performance.
9
Private equity deals (2008 – 2014)
Source: ThomsonReuters, ChinaVenture and PwC analysis
369
264
434
529
358 392
593
22.0 22.8
27.0
41.0
34.3 36.4
73.2
0
10
20
30
40
50
60
70
80
0
50
100
150
200
250
300
350
400
450
500
550
2008 2009 2010 2011 2012 2013 2014
No. US$ billion
Announced Deal Value
Announced Deal Volume
PwC
… In 2014, the total VC deal volume shot up by 81% compared to a year ago, reaching a record high since 2008.
10
Venture Capital deals by volume (2008 – 2014)
Source: Thomson Reuters, China Venture, AVCJ, and PwC analysis
694 712
1011 903
473
738
1334
0
200
400
600
800
1000
1200
1400
1600
2008 2009 2010 2011 2012 2013 2014
Deal Volume
PwC
China has been the single largest PE investment destination in Asia since 2008 and accounted for 41% of Asian PE deal values in 2014.
10 11 17 16 16 27 34
26 21 35 3
8
17 16
8 7
17 9 9
14
8
2 3
8
18
11 5
9 9 7 9
10 17
8
5
8
9 6
6
3
2
6
4
8
4 4 8 9
11
3
8
16
23
12 11
8 11 7 7
8
0
20
40
60
80
100
120
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
US$ billion
Others
South Korea
Japan
India
Australia
Hong Kong
Mainland China
11
Source: AVCJ
Deals: Deal values by Asian country (2004 – 2014)
PwC
Although, globally, China has a much smaller share. China deal value increased by 103% in 2014 compared to 2013. Meanwhile, globally, there was only a 10% increase in deal value.
113
236
267 267
302
332
23 27 41 34 36
73
0
50
100
150
200
250
300
350
2009 2010 2011 2012 2013 2014
US $ billion
World
China
12
Source: AVCJ, Preqin and PwC analysis
Deals: Deal values China vs ROW (2009 – 2014)
PwC
PE deals in technology and consumer-related sectors accounted for more than half the total reflecting investment plans intended to align with the strategic direction of the wider economy …
23 34 55 36 49
224
54 98
126 74 73
102
50
89
99
46 85
85
20
47
30
46 33
35
20 24
22 19 49 62
0
100
200
300
400
500
600
700
2009 2010 2011 2012 2013 2014
Others
Retail
Materials
Energy and Power
Real Estate
Media and Entertainment
Financial Services
Healthcare
Industrials
Consumer related
High Technology
No.
13
Source: Thomson Reuters, ChinaVenture and PwC analysis
PE deal volume by industry sector
PwC
… and a similar trend was seen in deal values: in total there were 15 PE deals valued at more than US$1bn in 2014, another record.
14
Source: Thomson Reuters, ChinaVenture and PwC analysis
PE deal value by industry sector
0.3 0.8 0.6 0.9 0.5 0.0
15.7
1.0 0.5 1.2 1.5 3.3 6.3
13.6
3.2 3.1 7.9 9.4 3.5
4.3
10.4
3.0
1.2 2.0
3.9
9.8
7.1 6.3
3.0
4.4
9.6
0.4 11.5
3.0
7.8
12.3 2.6
4.0
2.4 1.0 1.1
3.5 0.9
1.7
2.6
0
10
20
30
40
50
60
70
80
2008 2009 2010 2011 2012 2013 2014
US$ billion
Others
Energy and Power
Healthcare
Telecommunications
Raw Materials
Media and Entertainment
Financial Services
Industrials
Real Estate
Consumer related
High Technology
Retail
PwC
Outbound investment by local PEs almost doubled in volume terms …
15
Source: Thomson Reuters, ChinaVenture and PwC analysis
No.
China mainland PE backed outbound deal volume by PE category
4 10 9
27 26 25
49
0
10
20
30
40
50
60
2008 2009 2010 2011 2012 2013 2014
PwC
… and outbound deal values also reached a record high; PEs typically look for overseas businesses which have a strong China-angle in their growth strategies.
16
Source: Thomson Reuters, ChinaVenture and PwC analysis
China mainland PE backed outbound deal value by PE category
1.7
3.7
1.4
8.2
10.3
1.1
14.3
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
2008 2009 2010 2011 2012 2013 2014
US$ billion
PwC
Exits
17
PwC
The second half of 2014 saw a performance equal to the first half. However, if we see it as a whole, the cross-board IPOs backed by PE funds made a strong comeback in 2014. Noticeably, overseas IPOs took the majority of the proportion.
64
34
6
29
59 55
52
62
80
56
55 56
4
4
4 7
3 4
0
20
40
60
80
100
120
140
1H2012 2H2012 1H2013 2H2013 1H2014 2H2014
18
No.
Source: AVCJ and PwC analysis
PE/VC backed deal exit volume by type (2012 – 2014 half yearly)
M&A - trade
IPO
M&A - PE
PwC
As expected, there was a rebound in the number of PE exits; trade sale exits by M&A hit a record high, but IPO activity – although at a three year best - remains well below the levels seen in 2010/11.
19
No.
Source: AVCJ and PwC analysis
PE/VC backed deal exit volume by type
M&A - trade
IPO
M&A - PE
46
88
212
171
98
35
114 44
84
83
91
92
85
111
7
5
8
6
8
6
7
0
50
100
150
200
250
300
350
2008 2009 2010 2011 2012 2013 2014
PwC
The resurgence of Chinese IPOs was due to the CSRC lifting the listing freeze. However, the world’s biggest IPO, a Chinese company, listed on NYSE rather than one of the Chinese exchanges.
20 25
12 8 9 18
14
7
2
3 5
18
14
6
4
25
0
10
20
30
40
50
60
70
2009 2010 2011 2012 2013 2014
US$ billion Including this Chinese company’s US$21.8 bn IPO exit in NYSE
20 20
Exits: China PE/VC backed IPO exits — amounts raised by bourse (2009 – 2014)
Source: AVCJ
NYSE/NASDAQ
Shenzhen
Other
Shanghai A
Hong Kong
PwC
A-share listings, although rebounding, nevertheless remain somewhat challenging and overseas listings in Hong Kong and New York are important exit routes.
21
Exits: China PE/VC backed IPO exits — number of exits by bourse (2009 – 2014)
Source: AVCJ
NYSE/NASDAQ
Shenzhen
Other
Shanghai A
Hong Kong 21
48
118 106
70
-
45 12
27
39
26
11
29
38
2
-
11
18
11
-
17
4
7
30
11
2
6
13
0
50
100
150
200
250
2008 2009 2010 2011 2012 2013 2014
PwC
In 2014 China bounced back to join level with the US in terms of volume of PE /VC backed IPOs after a fall in 2013.
13
66 50 49
81
115
88
214
172
98
35
114
0
50
100
150
200
250
2009 2010 2011 2012 2013 2014
No.
US
China
22
Exits: PE/VC backed IPO exits China vs US (2009 – 2014)
Source: AVCJ ,Thomson Reuters and NVCA
PwC
The longer term overhang of new investments compared to exits continues to present a challenge to the PE industry.
23
Source: Thomson Reuters, ChinaVenture, AVCJ and PwC analysis
No.
PE/VC deal volume vs number of exits
VC deals
PE deals
M&A exit
IPO exit 694 712
1,011 903
473
738
1,334
369 264
434 529
358
392
593
51 89 91 97 100 91 118 46 88
212 171 98 35 114
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2008 2009 2010 2011 2012 2013 2014
PwC
Key messages
24
PwC
Key messages
25
Fundraising
• Fundraising by PEs remained healthy, with the strongest US$ fundraise since 2008 and a slight uptick in renminbi fundraising.
• 2004 - 2014, Fundraising for the China and Hong Kong markets dominate Asian PE with around US$365 billion raised (not including allocations from non-China specific funds).
Investments
• 2014 was a banner year for new investments by PEs with record volumes (up 51%) and values (up 101%); participation in SOE reforms and - for the first time at scale - outbound deals involving Chinese GPs underpinned this performance.
• In 2014, the total VC deal volume shot up by 81% compared to a year ago, reaching a record high since 2008.
• Although, globally, China has a much smaller share. China deal value increased by 103% in 2014 compared to 2013. Meanwhile, globally, there was only a 10% increase in deal value.
• PE deals in technology and consumer-related sectors accounted for more than half the total reflecting investment plans intended to align with the strategic direction of the wider economy; a similar trend was seen in deal values: in total there were 15 PE deals valued at more than US$1bn in 2014, another record.
PwC
Key messages
26
Exits
• As expected, there was a rebound in the number of PE exits; trade sale exits by M&A hit a record high, but IPO activity – although at a three year best - remains well below the levels seen in 2010/11.
• In 2014 China bounced back to join level with the US in terms of volume of PE or VC backed IPOs after a fall in 2013.
• The longer term overhang of new investments compared to exits continues to present a challenge to the PE industry.
PwC
2015 outlook & eight mega-trends
27
PwC
The scale of PE activity in China will remain robust in 2015. There are exceptionally strong tailwinds for the PE industry in China over the medium term (1 of 2)
The eight mega-trends
• Demand for capital in China’s private sector: PE has emerged as a key provider of capital to the liquidity starved private sector in China with real policy support as well as new regulations. The state-owned sector may also start to come into play as part of the ongoing SOE reforms.
• Consolidation: But there will be winners and losers in the sector - high quality, professional PEs will thrive.
• Flight to quality: Within China, the days where PEs could throw money at deals and expect a “rising tide to float all boats” have gone; careful and professional diligence is vitally important.
• Outbound, and emergence of China’s home grown global PEs: Yuan denominated PE fund raising is here to stay and the big players in China will emerge to compete with their global peers; we are already seeing a step-up in outbound M&A involving some of the pre-eminent Chinese PEs and the outbound trend is happening much faster than many people predicted or even realise
28
PwC
The scale of PE activity in China will remain robust in 2015. There are exceptionally strong tailwinds for the PE industry in China over the medium term (2 of 2)
• The buy-out trend: there are an increasing number of buy-out opportunities and more PEs are looking to do control transactions.
• Quantum leap in exit activity: The industry as a whole is moving into an “exit phase”; the backlog of exits represents a real challenge for the sector; it is more than IPO markets can absorb, and trade and secondary sales by M&A will become more frequent.
• Importance of A-shares: The A-share market has been and will continue to be an important exit route for PE.
• The “wall of money”: Unlike in developed markets, Yuan denominated PE fundraising has hitherto been dominated by retail investors; this is changing as institutions in China including securities and insurance companies are granted permission to invest in PE; the resulting theoretical “wall of money” which could become available for PE investment over the medium term is measured in hundreds of billions of renminbi.
29
Thank you
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