MoneyTree™ China TMT Report Q1/Q2 2016

In the first half (H1) of 2016, private equity and venture capital (PE/VC) investment in the Telecommunications, Media and Technology (TMT) industry maintained the strong momentum of H2 2015, and remained on an upward trajectory. In H1 2016, total TMT deal value surpassed all other industries, accounting for over 50% of overall industry investment. 

In Q1, both the deal value and volume rose notably compared to the previous quarter, and the single-average-deal value increased by 89% compared to Q4 2015.  In Q2, deal value in the TMT industry broke the historical record, and was higher than the total deal value in H2 2015, maintaining the momentum.

In H1 2016, the Internet continued to be the best performing TMT sector, with the highest deal volume and value.  Investments in TMT during H1 2016 tended to be concentrated in Internet Finance, E-commerce and Mobile Services, each of which pertain to smart, modern lifestyles.

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In H1 2016, overall PE/VC investments defied expectations by maintaining high growth. In Q2 2016, total deal value exceeded US$40 billion for the first time, an increase of almost 200% from Q1 2016. The trend closely relates to the frequent occurrence of huge investments in unicorn companies. Strategic investors made investments to occupy positions in the market. The TMT industry attracted over 50% of the total deal value in H1 2016, while Q2 total deal value exceeded US$20 billion for the first time, indicating just how hot the industry has been compared with others over the period.

In H1 2016, average deal value in the TMT industry increased from over US$4 million to US$36 million. The 800% rise indicates that investors have paid increasing attention to the TMT industry. In H1 2016, there were more than 20 investments with a single-deal value of over US$100 million. Further, the level of investment value escalated, with many deals seeing an investment value of over US$1 billion. Both the scale and range of investments gradually increased as unicorn companies emerged and newly-established companies developed into more mature companies. 

In H1 2016, the core investment sectors in the TMT industry were predominantly in Internet Finance, E-commerce and Mobile Services, each being closely linked to smart, modern lifestyles. Notably, the majority of large investments were additional investments in companies with high valuations, rather than investments in emerging enterprises, reflecting investors’ prudence. We expect to see a continuation of large investments.

With the resumption of IPOs in H2 2015, the number of IPOs increased gradually, but the level still didn’t surpass that of strategic sales. In H1 2016, the number of strategic sales exceeded 60% of total exits, suggesting that there had been little if any affect from the resumption of IPOs. IPOs in A-shares are still facing a long waiting period at present, which is a big challenge for TMT companies that have seen relatively big fluctuations and this is a key factor underpinning the recent trends by TMT companies considering strategic sales, and other exit methods.