Chinese fundraising drops 97%

Deal flow in the country in the first quarter of 2009 fell to 19 deals, marking a 54% decline compared to the same period in 2008.

In the first quarter of 2009, two China-focused private equity funds raised $500 million, representing a 97.1 percent decrease from the first quarter of 2008, according to Zero2IPO Research Centre, a Chinese venture capital and private equity service provider.

Both funds were denominated in foreign currency. Of the RMB-denominated funds in the market, none held a final close with some extending their fundraising periods, according to the study.

A total of 19 deals were made in the first three months of 2009, a 50 percent decrease from 38 deals made last quarter and a 53.7 percent decrease from 41 deals made in the same period in 2008. The total value of investments fell 83 percent to $470.3 million compared to the $2.7 billion invested in the first quarter of 2008. In the preceding quarter, investments worth $1.46 billion were made.

Of the 19 deals, 10 were made in traditional sectors for $389 million, accounting for 82.7 percent of the total investment amount. The services sector was second with five deals attracting $60 million. The healthcare sector drew two deals while the information technology and cleantech sectors had a deal each, the study said.

Beijing attracted four deals followed by Shanghai with three and Liaoning with two. Sichuan, Shenzhen, Shandong, Jiangxi, Jiangsu, Jilin, Hubei, Guangxi and Anhui drew a deal each. Jiangsu secured $223.7 million in investments, followed by Beijing at $56.6 million, Liaoning at $51.2 million and Anui at $40 million.

Seven deals valued at $134.2 million were made in the growth capital segment. Three deals or 15.8 percent of the number of deals were in real estate, an uptick from the first quarter of 2008. when such deals made up 2.6 percent of total deals.

There were four exits in 2009’s first quarter, which was twice the number of exits made in the previous quarter. However, this was still down from eight exits made in the same period in 2008. Of the four exits, three were via IPOs and one was through a trade sale.