2020 China Investment and Financing Report: IPOs have exploded, the number of venture capital has returned to 2014 levels, high valuations and mergers and acquisitions may become inevitable

2020 China Investment and Financing Report: IPOs have exploded, the number of venture capital has returned to 2014 levels, high valuations and mergers and acquisitions may become inevitable

#China #Investment #Financing #Report #IPOs #exploded #number #venture #capital #returned #levels #high #valuations #mergers #acquisitions #inevitable

Author: Danya Qiong, plums month

Editor: Shi Yaqiong

**

2020 is the year when IPOs broke out. The opening of the registration system for the Sci-tech Innovation Board created a large number of exit opportunities. Mid-to-late stage projects are favored by primary market capital. It can be seen that in 2020, the average self-transaction value of each investment will reach approximately 226 million yuan, +52.9% year-on-year, a record high.

High-quality startup companies and entrepreneurs are themselves a scarce resource. In 2020, this level of scarcity will continue to increase. In 2020, the seed round, angel round, and A round of investment and financing transactions in the primary market will show a situation where both the quantity and the amount have dropped, which is different from the previous decrease in the number and the increase in the amount.It is foreseeable that in the future, outstanding entrepreneurs and start-up companies will be even more scarce.

These are just small puzzles of the capital market dynamics in the primary market in 2020. In order to restore the complete 2020 venture capital ecology, we have also comprehensively sorted out industry data. The following is the text.

Overview of investment and financing in the primary market

According to our statistics:

· A total of 5364 investment and financing transactions occurred in 2020 (-7.3% year-on-year), with a total amount of 1,12128 billion yuan (+41.7% year-on-year). On average, 15 transactions are concluded every day, with a transaction value of 3.3 billion yuan. The average transaction amount was about 226 million yuan (+52.9% year-on-year), a record high.

· In early 2020, the number and amount of investment and financing dropped sharply. There were 970 seed angel rounds of financing, totaling 16.2 billion yuan, a decrease of 420 and 6.9 billion yuan compared with 2019. There were 904 Series A financings, totaling 77.6 billion yuan, a decrease of 469 and 13.6 billion yuan compared with 2019.

· In 2020, corporate services and medical health will remain the biggest hot spots of the year.

· In 2020, the total value of investors’ exit income will reach 1,295.9 billion yuan, a 10-year high. Approximately 791.5 billion yuan of revenue (+208% year-on-year) was obtained through 602 IPOs, and approximately 504.3 billion yuan was obtained through 999 mergers and acquisitions (-9.3% over the same period).

In 2020, the average transaction amount per transaction will reach 226 million yuan, a record high

(Photo source of 2012-2020 China Private Equity Transaction Trend: Whale Standard)

(2012-2020 China private equity transaction trend data source: Whale Standard)

In 2020, a total of 5364 investment and financing transactions occurred nationwide, with a total transaction value of RMB 1,12128 billion. On average, 15 transactions are concluded every day, with a transaction value of 3.3 billion yuan.

From the perspective of the number of transactions, the downward trend will continue in 2020 and has fallen to the level before 2014. However, it is worth noting that behind the “difficulty in financing” high-quality companies have obtained higher premiums, with an average transaction amount of 226 million yuan, a record high. 2016 was the year with the highest amount of financing in the past 10 years. Compared with 2016, the average transaction amount in 2020 has increased by more than 5.5 times.

(Image source of 2019-2020 China Private Equity Transaction Trend: Whale Standard)

(Source of comparative data for China’s private equity transactions in 2019-2020: Whale Standard)

It is worth noting that after Q1, the amount of financing declined by about 20% per month, and began to rebound from Q2, reaching a peak in December. 

Another trend worthy of attention is that although the number of investment transactions in Q1 declined, the amount of investment transactions throughout the year showed a sharp upward trend. This means that the polarization of assets has become more serious, and the leading companies have obtained higher premiums, which also echoes the trend mentioned above.

The number and amount of financing in early 2020 has dropped significantly

(The distribution of the number of private equity transactions in China from 2012 to 2020. Picture source: Whale Standard)

(Comparison of the distribution of the number of private equity transactions in China from 2019 to 2020. Data source: Whale Standard)

In 2020, there will be a total of 970 seed angel financing rounds, 904 round A rounds, 538 round B rounds, 273 round C rounds, and 181 round D rounds and beyond.

Compared with 2019, the number of early-stage financings in 2020 has continued to drop sharply, and has fallen below the 2012 level. The seed angel round has decreased by 420, the A round has decreased by 469, and the B round has decreased by 95. The later period of financing increased slightly, with an increase of 20 in Series C and 33 in Series D and above. Other types of financing rose sharply by 508.

(2012-2020 China’s private equity transaction amount round distribution picture source: Whale Standard)

(2012-2020 China’s private equity transaction amount round distribution data source: Whale Standard)

(Comparison of the distribution of China’s private equity transaction amount from 2019 to 2020, data source: Whale Standard)

In 2020, the seed angel financing will be about 16.2 billion yuan, the A round of 77.6 billion yuan, the B round of 82.3 billion yuan, the C round of 89.9 billion yuan, and the D round and subsequent financings of 137.2 billion yuan.

Compared with 2019, the amount of early-stage financing in 2020 will continue to drop sharply. The seed angel round will decrease by about 6.9 billion yuan, the A round will decrease by 13.6 billion yuan, and the B round will decrease by 1 billion yuan. The amount of financing increased slightly in the later period. The C round increased by 18.9 billion yuan, and the D round and above increased by 27.2 billion yuan. Other types of financing rose sharply by 332.8 billion yuan.

Corporate services and healthcare are still the biggest hot spots of the year

(The distribution of the number of transactions in various industries in China from 2012 to 2020. Picture source: Whale Standard)

(The distribution of the number of trading hours in various industries in China in 2020 (part of the field) Data source: Whale Standard)

Corporate services and healthcare are still the biggest trading hotspots. In 2020, a total of 1,361 transactions occurred in the corporate services sector, a decrease of 4.1% over the same period. In 2020, a total of 1,211 transactions occurred in the medical and health sector, an increase of 20.4% over the same period.

It is worth mentioning that the number of transactions in the optoelectronics sector increased by 21.7%. Areas where the number of transactions have fallen more include finance (-28.9%), education (-23.2%) and artificial intelligence (-17.9%).

Benefiting from the open registration system of the Sci-tech Innovation Board, investors’ exit income in 2020 will hit a 10-year high

(Image source of 2012-2020 Chinese corporate exit amount trend: Whale Standard)

(Data source for the number and amount of withdrawals of Chinese companies from 2012 to 2020: Whale Standard)

In 2020, the total value of investors’ exit income will reach 1,295.9 billion yuan, a 10-year high.

Approximately 791.5 billion yuan of revenue was obtained through the IPO, an increase of 208% over the same period. In terms of quantity, the total number of A-shares, Hong Kong stocks and Chinese concept stocks IPOs in 2020 has risen sharply to 602, ranking second in the past 10 years, second only to the level of 645 IPOs in 2017.

The income of about 504.3 billion yuan was obtained through mergers and acquisitions, a decrease of 9.3% over the same period. The total number of mergers and acquisitions in 2020 is nearly 1,000, ranking second in the past 10 years, second only to the level of 1,021 in 2018. Mergers and acquisitions are also becoming an important way for investors to exit.

(Source of comparative data on the exit amount of Chinese companies from 2019 to 2020: Whale Standard)

(Source of comparative data on the number of exits of Chinese companies from 2019 to 2020: Whale Standard)

PricewaterhouseCoopers released the “2020 IPO Market Review and 2021 Market Outlook” report on January 4, showing that the number of A-share IPOs and financing in 2020 has increased significantly over the same period last year, with a total of 395 new shares listed (a year-on-year increase of 97% ), the total amount of financing was 471.9 billion yuan (a year-on-year increase of 86%), setting a new high for IPO financing since 2011. Thanks to the implementation of the registration system, there will be 145 IPOs on the Sci-tech Innovation Board and 107 IPOs on the ChiNext in 2020, both exceeding the number of 89 IPOs on the Shanghai Main Board. In 2020, the sci-tech innovation board financing amount is as high as 222.6 billion yuan, while the sum of the financing amount of the main board, the growth enterprise board and the small and medium-sized board is 249.3 billion yuan. Among the top ten companies in terms of IPO financing, seven are on the Science and Technology Innovation Board. In addition, there are 195 IPOs in Hong Kong stocks and 43 IPOs in China’s concept stocks.

Several observations and predictions

1. High-quality projects in the Pre-IPO round will also be sought after

2020 is the year when IPOs broke out. The opening of the registration system for the Sci-tech Innovation Board created a large number of exit opportunities. Mid-to-late stage projects are favored by primary market capital. It can be seen that in 2020, the average self-transaction value of each investment will reach approximately 226 million yuan, +52.9% year-on-year, a record high. Of course, this strategy may also bring more certain returns to the organization.In 2020, the total value of investors’ exit income will reach 1,295.9 billion yuan, a 10-year high.Approximately 791.5 billion yuan of revenue was obtained through the IPO, an increase of 208% over the same period.

2. Excellent entrepreneurs and start-up companies are more scarce, even in a bubble environment, there is still the possibility of rising valuations

High-quality start-up companies and entrepreneurs are themselves scarce resources. In 2020, this level of scarcity will continue to increase. In 2020, the seed round, angel round, and A round of investment and financing transactions in the primary market will show a situation where both the quantity and the amount have dropped, which is different from the previous decrease in the number and the increase in the amount. It is foreseeable that in the future, outstanding entrepreneurs and start-up companies will be even more scarce. Although the primary market is considered to have a bubble, scarce resources and short supply mean that high-quality projects have stronger bargaining power.

3. The survival pressure of non-head companies may further intensify

For companies, the efficiency of making money and the cost of capital will greatly affect the company’s survival status. With the explosion of IPOs, leading companies can efficiently obtain large amounts of low-cost funds in the secondary market. Low-cost funds mean that they can purchase production factors on a larger scale, improve production efficiency, and use funds to purchase assets to expand their scale. On the track, the gap between listed companies and non-listed companies may further widen.

4. M&A will be further expanded

The total number of mergers and acquisitions in 2020 is nearly 1,000, ranking second in the past 10 years, second only to the level of 1,021 in 2018. Mergers and acquisitions are also becoming an important way for investors to exit. As mentioned in point 3, companies with low capital costs are likely to expand their scale through mergers and acquisitions after obtaining a large amount of capital. On the track, the long-tail company may have to consider the option of being acquired. Overall, the number of mergers and acquisitions will further increase.

.


Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *