Business / Industries

PE market's deal value jumps to $69b in 2015, says Bain & Co

By Wu Yiyao in Shanghai (China Daily) Updated: 2016-04-27 07:50
China's private equity market's combined deal value jumped 56 percent year-on-year to $69 billion in 2015, a report released on Tuesday by the global management consulting firm Bain & Co said.

The growth was driven by a surge in multibillion-dollar deals and an increase in opportunities in the internet sector, the Boston-based company said.

The report, however, noted that PE activity in 2016 may cool down and struggle to match the fast growth of 2015 amid slowing economic growth.

Strong growth is anticipated for some sectors including wealth- and health-driven consumption, internet financial services and Made in China 2025-themed opportunities such as robotics, electric vehicles and outbound mergers and acquisitions, the report said.

Analysts said the PE market is seeing increasing participation from institutional investors including banks and insurers that in the past rarely stepped into the field. Institutional investors participated in 14 out of the top 20 deals in China, including insurers such as Ping An Insurance Group Co of China Ltd and Taikang Life Insurance Co Ltd, and lenders such as Shanghai Pudong Development Bank Co and the China Development Bank.

China's PE outbound deal size increased from $7 billion in 2014 to $11 billion in 2015, with more than 60 percent of the deals focusing on technology and internet sectors.

"Over the past 16 years, private equity in China has cycled through various stages-from the early golden days of growth between 2001 and 2007 to increased austerity in 2012 and 2013. The market is going to be increasingly diversified and require differentiated capabilities to continue generating strong returns," said Kiki Yang, a partner in Bain's global private equity practice.

Despite the challenges, researchers said China is still one of the most attractive markets in the Asia-Pacific region as PE fund managers are looking for new opportunities to diversify their portfolios and some of China's enterprises and projects are presenting great potential to bring about considerable returns to investors.

A note from the investment research firm ChinaVenture said in the future capital will refocus on enterprises with good performance, convincing and effective business model and good returns.

"Enterprises shall improve their capacities, enhance efficiencies, integrate supply chains and enhance quality of products and services in order to win capitals. The time for cash-burning game is almost over," the note said.

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