m&a 2014 mid year review and outlook press briefingm&a 201. 4 mid year review and outlook...
TRANSCRIPT
M&A 2014 Mid Year Review and Outlook Press Briefing 26 August 2014 David Brown, Transaction Services Leader, PwC China and Hong Kong Christopher Chan, Advisory Partner, PwC China & Hong Kong
PwC
Foreword – explanation of data shown in this presentation (1 of 2)
• The data presented is based on information compiled by ThomsonReuters, ChinaVenture and PwC analysis unless stated otherwise
• Thomson Reuters and ChinaVenture record announced deals. Some announced deals will not go on to complete
• The deal volume figures presented in this report refer to the number of deals announced, whether or not a value is disclosed for the deal
• The deal value figures presented in this report refers only to those deals where a value has been disclosed (referred to in this presentation as “disclosed value”)
• “Domestic” means China including Hong Kong and Macau
• “Outbound” relates to mainland China company acquisitions abroad
• “Inbound” relates to overseas company acquisitions of Domestic companies，
• “Private Equity deals” or “PE deals” refer to financial buyer deals with deal value over US$10mn and/or with undisclosed deal value but invested by PEs
2
PwC
Foreword – explanation of data shown in this presentation (2 of 2)
• “VC deals” refer to financial buyer deals with deal value less than US$10mn and/or with undisclosed deal value but invested by VCs
• “Strategic buyer” refers to corporate buyers (as opposed to financial buyers) that acquire companies with the objective of integrating the acquisition in their existing business
• “Financial buyer” refers to investors that acquire companies with the objective of realizing a return on their investment by selling the business at a profit at a future date and mainly, but not entirely, comprise PE and VC funds
• In order to exclude foreign exchange impact, deal values from previous years were adjusted based on 1H2014 average Rmb/US$ exchange rate
3
Key messages
PwC
Key messages – China M&A in first half of 2014 (1 of 3)
Overall • China M&A value soared to US$183
billion in the first half of 2014.
• The number of deals remained broadly flat overall compared to the second half of 2013
• But deal sizes were bigger with 30 deals larger than US$1 billion
Domestic and Foreign-Inbound Strategic • The value of strategic M&A in H114
remained close to the record highs seen in the second half of 2013 with a total of 15 deals greater than US$1bn in size
• Investment in real estate continued to grow as Chinese property developers sought access to capital markets through back-door listings; there were also a number of sizeable technology (including internet – led by “BAT”) and FS deals
• The value of foreign inbound M&A reached a record high in recent years as multinationals looked to refine their China strategies and increase their local China presence
5
PwC
Key messages – China M&A in first half of 2014 (2 of 3)
Private Equity • New fundraising by PE investors continued at healthy levels, though Renminbi
denominated fundraising has declined
• PEs are becoming more successful in finding larger deals; the value of new investments hit a record high in H114 with 9 deals bigger than US$500 million – also a record
• As anticipated, technology and consumer focussed businesses have been important for PE, but – as for strategic investors – we have also seen an increase in deals related to real estate including commercial and logistics-related property
• In terms of exits, as expected there has been a rebound in PE-backed IPOs, but the level of trade sales and secondary exits is somewhat lower than we had anticipated
• Hong Kong and New York bourses have shown healthy growth with some IPOs switched offshore in response to difficulties in the A-share markets
• But the cumulative overhang of new investments compared to exits remains the number one challenge for the PE industry
6
PwC
Key messages – China M&A in first half of 2014 (3 of 3)
China Outbound • China outbound M&A continued to track close to the somewhat elevated levels seen
in the second half of 2013, but without touching new highs overall; there were 11 deals greater than US$1 billion, but no mega-deals in the period
• POEs continue to be an important source of outbound activity - deal values for POE outbound M&A increased to levels bettered only once previously: SOE outbound growth was slower, perhaps due to more domestic focus on SOE-reforms
• Telecommunications, technology and real estate were important sectors for POEs going overseas; POEs are seeking new markets for growth, technologies to bring back to China and diversified investment opportunities
• Developed markets in the US and Europe continue to attract investment from Chinese buyers; in particular they meet many of the investment criteria of POEs
7
Overall China M&A
PwC 9 Source: ThomsonReuters, ChinaVenture and PwC analysis
Total deal volume and value, from 1H11 to 1H14
The value of China M&A soared toUS$183 billion in the first half of 2014
Volume Value Volume Value Volume Value Volume Value Volume Value Volume Value Volume Value Strategic buyers (US$bn) (US$bn) (US$bn) (US$bn) (US$bn) (US$bn) (US$bn)
domestic 1 ,57 0 56.9 1 ,692 64.2 1 ,1 7 7 35.9 1 ,490 54.6 1 ,096 50.1 1 ,608 99.5 1 ,630 98.4 1% -1%Foreign 267 8.4 21 5 9.4 1 52 4 .1 1 34 5.3 1 23 6.8 1 52 8.5 1 51 1 3 .0 -1% 52%
Total Strategic buyers 1,837 65.3 1,907 73.5 1,329 40.0 1,624 59.8 1,219 56.9 1,760 108.0 1,781 111.4 1% 3%
Financial buyersPriv ate Equity 239 1 7 .6 263 1 5.3 1 64 8.9 1 68 1 5.2 1 62 1 8.7 205 1 6.7 1 98 27 .4 -3% 65%VC 533 1 .1 37 0 0.8 220 0.5 253 0.5 27 6 0.5 462 0.4 450 0.5 -3% 17%
Total Financial buyers 772 18.7 633 16.1 384 9.4 421 15.7 438 19.1 667 17.1 648 27.9 -3% 63%
China mainland OutboundSOE 21 5.0 27 29.0 26 1 6.6 22 24.2 28 1 8.3 31 1 9.0 35 20.9 13% 10%POE 7 9 3 .4 7 9 6.3 7 0 8.2 7 3 1 8.0 53 7 .9 88 4 .3 84 1 3 .7 -5% 219%
Total China mainland Ou 100 8.4 106 35.3 96 24.8 95 42.3 81 26.2 119 23.3 119 34.6 0% 49%
HK Outbound 94 4.5 89 3.9 67 1.9 99 11.3 88 3.9 76 5.8 100 9.2 32% 59%
Total 2,803 96.9 2,735 128.8 1,876 76.2 2,239 129.0 1,826 106.1 2,622 154.2 2,648 183.1 1% 19%
% Diff volume 1H14 vs.
2H13
% Diff value
1H14 vs. 2H13
1H11 2H11 1H12 2H12 1H13 2H13 1H14
* Excluding Citic Pacific’s acquisition of Citic Limited with value of US36.6bn
*
PwC
1,570 1,692
1,177 1,490
1,096
1,608 1,630
267 215
152
134
123
152 151
239 263
164
168
162
205 198
100 106
96
95
81
119 119
0
500
1,000
1,500
2,000
2,500
1H11 2H11 1H12 2H12 1H13 2H13 1H14
Deal volume by main category
Domestic Strategic Buyers Foreign Strategic Buyers Private Equity Deals China Mainland Outbound
The number of deals remained broadly flat overall compared to the second half of 2013 …
10
Source: ThomsonReuters, ChinaVenture and PwC analysis
No.
PwC
… But deal sizes were bigger with 30 deals larger than US$1 billion
56.9 64.2
35.9 54.6 50.1
99.5 98.4 8.4
9.4
4.1
5.3 6.7
8.5 13.0
17.6 15.3
8.9
15.2 18.7
16.7 27.4
8.4
35.3
24.8
42.3 26.2
23.3
34.6
0
20
40
60
80
100
120
140
160
180
200
1H11 2H11 1H12 2H12 1H13 2H13 1H14
Deal value by main category
Domestic Strategic Buyers Foreign Strategic Buyers Private Equity Deals China Mainland Outbound
US$ billion
11
Source: ThomsonReuters, ChinaVenture and PwC analysis
Strategic buyers
PwC
The value of strategic M&A in 1H14 remained close to the record highs seen in the second half of 2013 with a total of 15 deals greater than US$1bn in size
267 215 152 134 123 152 151
1,570 1,692
1,177 1,490
1,096
1,608 1,630
8.4 9.4 4.1 5.3 6.7 8.5 13.0
56.9 64.2
35.9
54.6 50.1
99.5 98.4
0
20
40
60
80
100
120
0
500
1,000
1,500
2,000
2,500
1H11 2H11 1H12 2H12 1H13 2H13 1H14
Strategic buyer deals, from 1H11 to 1H14
Announced Deal Volume Inbound Announced Deal Volume DomesticAnnounced Deal Value Inbound Announced Deal Value Domestic
No. US$ billion
13
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
Investment in real estate continued to grow as Chinese property developers sought access to capital markets through back-door listings; there were also a number of sizeable technology (including internet – led by “BAT”) and FS deals
10.3 12.5 4.7 8.2 9.1
21.1 27.8 7.1 5.5
6.2 10.3 7.0
14.7
15.9
6.2 10.4
6.0
8.1 5.1
8.0
13.9
9.9 8.7
3.1
7.7 10.6
10.4
11.1
11.8 10.9
8.0
9.1 8.2
12.4
9.5
3.4 4.6
1.0
1.0 2.4
3.9
9.1
2.0
7.8
2.5
4.0 2.3
10.4
7.8
14.6
13.3
8.5
11.4 12.0
27.1
16.2
0
20
40
60
80
100
120
1H11 2H11 1H12 2H12 1H13 2H13 1H14
Strategic buyer deal value by industry sector
Real Estate High Technology Financial Services Industrials Materials Media and Entertainment Energy and Power Others
US$ billion
14
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
The value of foreign inbound M&A reached a record high in recent years as multinationals looked to refine their China strategies and increase their local China presence
1.4 1.5 0.4 0.7 1.2
2.4
8.3
2.8 3.2
1.1 0.2
2.9
4.3
2.0
0.1 0.3
1.2 0.2
0.1
0.5
1.2
1.0
1.2
0.2
0.5
0.2
0.0
0.8
1.5 0.3
1.0 2.5
0.8
0.0
0.1
0
2
4
6
8
10
12
14
1H11 2H11 1H12 2H12 1H13 2H13 1H14
Foreign strategic buyer deal value by region of origin
SE Asia EU UK US Africa Japan Other Asia British Virgin/Cayman Others
15
US$ billion
*
* Includes OCBC’s US$5bn acquisition of Wing Hang Bank Source: ThomsonReuters, ChinaVenture and PwC analysis
PE/VC deals
PwC
New fundraising by PE investors continued at healthy levels, though Renminbi denominated fundraising has declined
17
11.3
19.5 16.4
4.5
9.1
4.2 3.8
11.1
6.5
5.5
16.2 7.6
12.3 16.0
138 139
77
46
71 59
54
0
20
40
60
80
100
120
140
160
0
5
10
15
20
25
30
1H11 2H11 1H12 2H12 1H13 2H13 1H14
PE/VC fund raising for China investment
Renminbi Fund Size Non-renminbi Fund Size Fund Volume
No. US$ billion
* Excludes global funds investing in China
Source: AVCJ and PwC analysis
PwC
PEs are becoming more successful in finding larger deals; the value of new investments hit a record high in 1H14 with 9 deals bigger than US$500 million – also a record
18
239 263
164 168 162
205 198
17.6
15.3
8.9
15.2
18.7
16.7
27.4
0
5
10
15
20
25
30
0
50
100
150
200
250
300
1H11 2H11 1H12 2H12 1H13 2H13 1H14
Private Equity deals, from 1H11 to 1H14
Announced Deal Volume Announced Deal Value
No. US$ billion
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
As anticipated, technology and consumer focussed businesses have been important for PE, but – as for strategic investors – we have also seen an increase in deals related to real estate including commercial and logistics-related property
0.5 0.4 0.4
6.3 2.1 1.5 0.5
1.2 1.0
3.1
4.8
0.9 0.6
0.7
2.6 1.9
4.4
4.7
0.1 1.0 0.5
1.4
0.7
2.9
4.1
4.5 4.8
1.9
1.5 2.5
1.6
3.6
2.7 0.8
0.3
0.6 0.4
1.0
1.1
0.7 0.3
0.9
1.0 1.2
0.2
1.0
0
5
10
15
20
25
30
1H11 2H11 1H12 2H12 1H13 2H13 1H14
PE deal value by industry sector
Retail Industrials High Technology Real Estate Consumer relatedMedia and Entertainment Healthcare Materials Energy and Power Others
US$ billion
19
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
In terms of exits, as expected there has been a rebound in PE-backed IPOs, but the level of trade sales and secondary exits is somewhat lower than we had anticipated
96 75
64
34
6
29
59
37
54
48
44
51
34
45
3 3
3
6
5 1
2
0
20
40
60
80
100
120
140
160
1H11 2H11 1H12 2H12 1H13 2H13 1H14
PE/VC backed deal exit volume by type
IPO M&A - trade M&A - PE
20
No.
Source: AVCJ and PwC analysis
PwC
Hong Kong and New York bourses have shown healthy growth with some IPOs switched offshore in response to difficulties in the A-share markets
60
46 48
22
-
24 30
10
1 1
1
1
5
8
11
15 5
6
5
-
16
9
9
6
5
-
-
4
6
4
4
-
-
1
0
10
20
30
40
50
60
70
80
90
100
1H11 2H11 1H12 2H12 1H13 2H13 1H14
PE/VC backed IPO exit volume by bourse
Shenzhen NYSE/ NASDAQ Hong Kong Shanghai A Others
21
No.
Source: AVCJ and PwC analysis
PwC
But the cumulative overhang of new investments compared to exits remains the number one challenge for the PE industry
22
No.
365 254
425 502 332 367 450
694 712
1,011 903
473
738
198
51 89 91 97 100 91 59 46 88
212 171 98 35 47 0
100200300400500600700800900
1,0001,1001,2001,3001,4001,500
2008 2009 2010 2011 2012 2013 1H14
PE/VC deal volume vs. No. of exits
PE deals VC deals M&A exit IPO exit
Source: ThomsonReuters, ChinaVenture and PwC analysis
China mainland outbound
PwC
China outbound M&A continued to track close to the somewhat elevated levels seen in the second half of 2013, but without touching new highs overall; there were 11 deals greater than US$1 billion, but no mega-deals in the period
100 106 96 95
81
119 119
8.4
35.3
24.8
42.3
26.2 23.3
34.6
0
5
10
15
20
25
30
35
40
45
0
20
40
60
80
100
120
140
1H11 2H11 1H12 2H12 1H13 2H13 1H14
China mainland outbound deals, from 1H11 to 1H14
Announced Deal Volume Announce Deal Value
No. US$ billion
24
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
POEs continue to be an important source of outbound activity - deal values for POE outbound M&A increased to levels bettered only once previously: SOE outbound growth was slower, perhaps due to more domestic focus on SOE-reforms
25
79 79
70 73
53
88 84
21 27 26
22
28
31 35
3.4 6.3
8.2
18.0
7.9 4.3
13.7
5.0
29.0
16.6
24.2
18.3 19.0 20.9
0
5
10
15
20
25
30
35
0
20
40
60
80
100
120
140
1H11 2H11 1H12 2H12 1H13 2H13 1H14
Strategic buyer deals, from 1H11 to 1H14
POE Announced Deal Volume SOE Announced Deal Volume
POE Announced Deal Value SOE Announced Deal Value
No. US$ billion
Source: ThomsonReuters, ChinaVenture and PwC analysis
PwC
Telecommunications, technology and real estate were important sectors for POEs going overseas; POEs are seeking new markets for growth, technologies to bring back to China and diversified investment opportunities
26
China mainland outbound deals by industry sector – By value of deals (US$ billion), 1H14 vs. 2H13 US$ billion
3.3 3.2
2.6
1.5
0.9 0.7
1.6
0.2 0.0
0.2 0.0
1.0
0.0
2.9
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
1H14 POE 2H13 POESource: ThomsonReuters, ChinaVenture and PwC analysis
PwC
Source: ThomsonReuters and PwC analysis
Developed markets in the US and Europe continue to attract investment from Chinese buyers; in particular they meet many of the investment criteria of POEs
Outbound M&A deal volume by region of destination 1H14 vs. 2H13
20
North America
34 39
South America
Europe
Africa
Asia
Oceania
4 16 4
33
2
34 39
3 8
1H14
27
2 0
Russia
2H13
Outlook
PwC
Outlook – the next six to twelve months (1 of 4)
Overall • The healthy trends in China M&A will
continue into the second half of 2014
• Drivers for M&A activity include:
─ Growth in domestic M&A with SOE reform a key source of larger transactions
─ POE-led outbound M&A; and
─ An active PE market, including exit-related activity
Key industry sectors • Techonology, especially internet
─ BAT-led, both domestically and outbound;
─ Looking to expand ecosystems, acquire user traffic, acquire new business models, and improve user experience;
─ Increasingly centred around mobile, location-based services and social network-services; and
─ Hardware deals are largely outbound as Chinese companies move up the value chain
29
PwC
Outlook – the next six to twelve months (2 of 4)
Key industry sectors (continued) • Financial services:
─ Inbound interest in P&C insurance and money lenders (leasing, micro-finance, guarantee companies)
─ Outbound activity around banks, insurance, asset management and leasing targets for brand differentiation and product enhancement
─ Many Chinese institutions are refining their overseas expansion strategy and are increasingly setting up platforms in Hong Kong to do this
• Real estate:
─ Developers seeking access to capital markets through back door listings;
─ Interest in commercial and logistics-related property, less so residential;
─ Some distressed transactions; and
─ Outbound
30
PwC
Outlook – the next six to twelve months (3 of 4)
Domestic and Foreign-Inbound Strategic • Domestic M&A will show steady single
digit growth driven by:
─ Continuing consolidation in many industries to remove excess capacity;
─ SOE reforms – which will lead to some large transactions;
─ A-share listed companies looking for inorganic growth; and
─ Back-door listings in response to difficulties in achieving new IPOs
• Technology (especially internet), FS and Real Estate are hot sectors
China Outbound • POEs will continue to lead growth in
China outbound chasing:
─ New markets for growth;
─ Technologies, brands and know how to bring back to China market; and
─ Diversified investments
• SOE outbound may slow a little, as many SOEs focus on domestic reform
• SOEs in particular are increasingly building presence in Hong Kong as a platform for future outbound activity
31
PwC
Outlook – the next six to twelve months (4 of 4)
Private equity • PE activity will remain robust in the second half
• Trends in the market over the next six to twelve months will include:
─ More larger sized deals and buyouts;
─ PE involvement in outbound transactions;
─ PE participation in SOE reforms as a source of diversified capital;
─ Deals involving A-share listed companies, both as targets and as buyers of PE held assets; and
─ More exit activity from IPOs, strategic trade sales and – eventually – secondary PE sales
32
Data compilation methodology
PwC
Key messages – disclaimer
• Acquisitions of private/public companies resulting in change of control
• Investments in private/public companies (involving at least 5% ownership)
• Mergers • Buyouts/buyins (LBOs, MBOs, MBIs) • Privatisations • Tender offers • Spinoffs • Splitoff of a wholly-owned subsidiary when 100%
sold via IPO • Divestment of company, division or trading assets resulting in
change of control at parent level • Reverse takeovers • Re-capitalisation • Joint Venture buyouts • Joint Ventures • Receivership or bankruptcy sales/auctions • Tracking stock
• Property/real estate for individual properties • Rumoured transactions • Options granted to acquire an additional stake when not 100%
of the shares has been acquired • Any purchase of brand rights • Land acquisitions • Equity placements in funds • Stake purchases by mutual funds • Open market share buyback/retirement of stock unless part of
a privatisation • Balance sheet restructuring or internal restructuring • Investments in greenfield operations • Going private transactions
Included Deals Excluded Deals
34
Statistics contained in this presentation and the press release may vary from those contained in previous press releases. There are three reasons for this: ThomsonReuters and ChinaVenture historical data is constantly updated as deals are confirmed or disclosed; PricewaterhouseCoopers has excluded certain transactions which are more in the nature of internal reorganisations than transfers of control; and exchange rate data has been adjusted.
Thank you!
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. © 2014 PricewaterhouseCoopers.All rights reserved. PwC refers to the China or Hong Kong member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.