The newly released report by PwC, Innovation and Upgrading, Quality is Essence, outlines the development of RMB funds in the past three years. Driven by strong prospects in the technology industry, buoyant mergers and acquisitions (M&A) activities, and the government’s encouragement of mass entrepreneurship and innovation, RMB funds are exploring new opportunities in disruptive sectors with a focus on precision management and investment
According to third-party statistics, as the domestic stock market reopened in 2014, China’s PE/VC market gradually recovered from fundraising, investing, to exiting, with fast-growing RMB funds becoming a dominant force in 2015 and 2016. In 2016, RMB funds accounted for over three quarters of newly raised Chinese PE/VCs. Driven by expectations from a fast growing technology sector, rising demand for fundraising was generated by heightened consolidation and accelerated expansion in Fintech and payment sectors. PE/VCs have shown interests in opportunities from internet, finance, information technology, telecommunications, biotechnology and healthcare industries.
While M&As and share transfers remain major channels to exit, RMB funds are increasingly seeking exits in state-owned enterprises’ (SOE) mixed ownership reform and China’s overseas listed companies’ returning to A-share market. In addition, the National Equities Exchange and Quotation (NEEQ) market provided another alternative for exiting. RMB funds participated in the additional share issuance of NEEQ-listed companies, and benefited from increasing trading activities across the platform.
The Report indicated that the popularity of RMB funds are gradually moving from traditional financial investors to strategic investors, with focus on professional fields and value-added services. Fund managers are placing greater emphasis on the concentration and consolidation of sectors of target companies, aiming to secure stable returns in both primary and secondary markets. Investors have shown interests in early-staged funding, with longer shareholding periods. Beyond holding a position in the Board of Directors and being responsible for financial management, fund managers today demand greater engagement in corporate management. They even explore opportunities to participate in controlling shareholding projects and directly navigate companies’ management and development.
Funds Audit Partner, PwC China Private Equity Group
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