China: 2010 is record for VC, not PE

Fundraising, M&A and exits bounced back last year from the lows of 2009, according to year-end statistics from research group Zero2IPO. But while VC reached new highs, PE has yet to return to peak levels.

Fundraising, investment and exit transactions in Chinese private equity bounced back in 2010, according to statistics released by China-focused private equity research body Zero2IPO.

On the private equity side, a total of $27.62 billion was raised in 2010. While this is more than double the amount raised in 2009, it accounts for less than half of the funds raised in 2008, according to the report. It also coincides with a decrease in the size of new funds. About three quarters of the funds raised garnered less than $200 million each, whereas in 2009, only two-thirds of the funds raised fell below the $200 million mark.

In terms of the split between USD and RMB-denominated vehicles, last year 71 RMB-denominated funds raised a total of $10.68 billion, while 11 USD funds raised $16.94 billion, the report noted.

On the investment front, 363 private equity deals closed last year in China, worth a total of $10.38 billion. While the number of transactions has tripled from 2009, the average investment size hit a record low at $28.6 million per deal. The previous peak of private equity investment activity was in 2006, when the year recorded a total transaction volume of $12.97 billion.

In terms of divestment, IPO also remains the main route for private equity exits. Among 167 exit transactions completed in 2010, 160 were achieved by IPO. Notably in 2010, there was a wave of Chinese companies listing on US exchanges – with 24 enterprises listed on the New York Stock Exchange and 13 on NASDAQ.

On the other hand, a total of 158 new venture capital funds raised an all-time high of $11.17 billion, up 90.7 percent year on year, according to the report. The amount raised for VC last year even climbed by 52.8 percent from its previous peak in 2008. 

China’s VC market also notched up more than 800 investments for the first time. Of these, the 667 deals which disclosed details accounted for an aggregate consideration of $5.39 billion, doubling the amount known to be invested in VC in 2009.

The exit environment for VC in China also greatly improved in 2010, according to Zero2IPO: in fact, the year registered 388 venture capital exits, up from 123 in 2009. The exit environment has been eased by the opening of ChiNext, China’s Shenzhen-based equivalent to the Nasdaq stock exchange, in 2009. Last year, a total of 331 VC exits were achieved through initial public offering (IPO), the report said.