Active Chinese PE Investment Market: US$35.59B Raised During 2007

BEIJING, Jan. 22 /Xinhua-PRNewswire/ -- The Chinese Private Equity market
started wooing international capital at a time of increased global
subordinated debt crisis and sustained rapid growth of Chinese economy.
Zero2IPO Research Center -- the research wing of Zero2IPO -- recently
released new findings in the "China Private Equity Annual Report 2007." The
report says that Chinese PE market witnessed great vigor. Sixty-four newly
raised funds targeting Asia (including China) raised US$35.58B during 2007.
The total funds rose by 150.7% when compared with US$14.20B for 2006. In all,
177 Chinese enterprises received US$12.82B PE investment.
This document provides valuable data and expert conclusions based on the
2007 annual and quarterly surveys and reports. It covers the participation of
75 PE funds.
Raised PE Funds up by 150.7%; Buyout funds in the spotlight
PE funds rapidly raised capital during 2007. Despite the slowdown of fund-
raising during the first half of 2007, the second half witnessed fast growth
and rose 65.9% when compared with the first half. The 64 new funds raised
US$35.58B -- up by 60.0% and 150.7% more than 2006 in terms of the number of
new funds and the amount raised.
The Asia-focused buyout funds were eye-catching. Eighteen buyout funds
raised US$15.67B or 44.0% of 2007 total newly raised capital. Eight buyout
funds raised US$6.44B during 2006. The new funds and newly raised capital
increased by 125.0% and 143.3% year-on-year. KKR raised US$4B for its Asian
Buyout Fund. Hopu Fund and Morgan Stanley Asia Buyout Fund each achieved
US$1B.
Growth capital funds performed well in raising funds. Twenty-three growth
capital funds raised US$8.70B representing 24.4% of 2007's total newly raised
capital.
Figure 1: Total Amount & Number of Newly Raised Funds from Q1'06 to Q4'07
(Please click the link at the bottom of the release)
Figure 2: Strategy Distribution of PE Funds Completing Fund-raising During
2007 (by fund no. and amount raised)
(Please click the link at the bottom of the release)
RMB funds play a vital role; more local funds established
The limited partnership became legal for establishing PE funds with the
enactment of the modified "Law of the People's Republic of China on
Partnership Enterprises on September 1, 2007." This lays the foundation for
the Chinese PE fund development. Twelve Chinese local funds, comprising 18.8%
of the entire funds, raised US$3.73B. Compared with 2006, the raised annual
capital and the newly raised funds rose by 145.9% and 100.0%.
Following in the footsteps of first Chinese industrial fund -- Bohai
Industry Investment Fund (founded in 2006-end) -- another five industrial
funds received approval for having established values at RMB56B. The Guangdong
Nuclear Power and New Energy Fund, Shanghai Financial Fund, Shanxi Coal Fund,
and Sichuan Mianyang High Technology Fund, and Sino-Singapore Hi-tech Industry
Investment Fund received approval.
The direct investment funds under securities companies kicked off
operations: China International Capital Corporation (CICC) and Citic
Securities were entitled to conduct direct investment. With the promulgation
and improvement of laws and regulations, Chinese PE investments face good
opportunities for development.
Figure 3: Newly Raised Funds by Investor Type
(Please click the link at the bottom of the release)

Figure 4: Capital raised by investor type (US$M)
(Please click the link at the bottom of the release)

Investment deals increase; Traditional industry stands out
The PE funds actively invested in Chinese industry during 2007. They
invested US$12.82B into 177 deals. Specifically, they invested US$4.90B during
H1'07 and US$7.91B H2'07. Compared with 2006, the deals rose by 37.2% but the
total investment amount held on par.
Data shows that apart from foreign PE funds active in China Mainland, more
and more foreign capital funds were involved in PE investment in China.
Another highlight was the Chinese local PE funds becoming competitive. Reports
predict that the Chinese PE market will become more active in terms of
cooperation and competition between the local and foreign PE funds.
The Traditional industry outstripped other industries in terms of deals
and total investment. It gained 88 deals -- 49.7% of the annual total and
US$8.33B -- 65.0% of total investment during 2007. Compared with 2006, the
total investment rose by 27.9%.
Figure 5: Overall Investment by Quarter from Q1'06 to Q4'07
(Please click the link at the bottom of the release)

Figure 6: Industrial Distribution of PE Investments by Deal Number
(Please click the link at the bottom of the release)

Figure 7: Industrial Distribution of PE Investments By Amount Invested
(US$M)
(Please click the link at the bottom of the release)
Investment strategies diversify; Bridge Capital & PIPE investments up
The strategic distribution of Chinese PE investment represents a
diversified pattern. On one hand, the Chinese PE market witnessed more bridge
capital and PIPE deals. Twenty-two bridge capital deals recorded during 2007
showed an increase of 100.0% year on year. The total PE investment in the form
of bridge capital comprised 12.4% of the total PE investment during 2007.
Compared with 2006, the proportion rose by about 4%. The US$100M bridge
capital deals include Carlyle investing in Kaiyuan Century International Hotel
Management and Merrill Lynch etc. investing in Guangzhou Hengda Real Estate
Group. Twenty-two PIPE investments took place during 2007. Compared with 2006,
PIPE investments rose by 15.8%.
On the other hand, PE funds adopted different strategies during 2007. For
example, nine mezzanine capital deals garnered US$842.80M and one turnover
capital deal secured US$600.00M.
Figure 8: PE Strategy Allocation by Deal Number
(Please click the link at the bottom of the release)

Figure 9: PE Strategy Allocation by Amount Invested (US$M)
(Please click the link at the bottom of the release)

Exits gain a 74.1% year-on-year increase with IPO still as primary option
During 2007, 94 exit events took place gaining 74.1% a year-on-year
increase. IPO is still a primary exit option. Seventy-nine IPO events
comprised 84.0% of 2007 total and increased by 71.7% compared with 2006.
Forty-six IPO events took place during 2006. Other exits include nine
secondary offers, 5 trade sales (stake transfer between financial investors)
and one M&A (financial investor transferring stake to strategic investor).
Figure 10: Exit Distribution by Option
(Please click the link at the bottom of the release)

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About Zero2IPO Group
Founded in 1999, Zero2IPO is a leading integrated service provider in the
China venture capital and private equity industry. Over the past seven years,
Zero2IPO has become an unbeatable dealflow and networking source in China.
Zero2IPO's mission is to be the preferred service provider to businesses
in the venture capital and private equity industry by offering an unparalleled
knowledge and expertise to their clients and partners. To ensure this,
Zero2IPO provides a broad and deep array of services enabling entrepreneurs
and investors to reach the next level of success.
Financial Advisory Services: Financial Advisory Services (FAS) represents
China startups seeking venture capital or private equity funding. Through its
extensive network of investors worldwide, FAS channels over US$200M to
startups each year. These startups are distributed across a broad spectrum of
industries, including biotechnology, health care services, telecommunications,
media, education, Internet and e-commerce.
Financial Information Services: Financial Information Services (FIS)
releases annual, quarterly, and customized research reports covering China
venture capital, private equity, M&A, and IPOs. Also known as the Zero2IPO
Research Center, FIS is viewed as the most trustworthy information source in
the industry. FIS reports are used by investors, LPs, investment banks,
auditing firms, law firms and entrepreneurs worldwide. Each year, FIS
publishes the China venture capital ranking results which are widely accepted
and quoted among these professionals.
Media & Network Services: Media & Network Services (MNS) strives to
provide a networking platform for entrepreneurs and investors. Since 2001, MNS
has organized more than twenty China Venture Capital & Private Equity Forums
and over sixty Z-club activities. Each year, over 5000 participants attend
these conferences and club events held in Beijing, Shanghai, Tokyo, London,
and Silicon Valley. Together, the China Venture Capital & Private Equity
Forums and Z-Club events constitute the largest networking platform for
investors and entrepreneurs in China.
Zero2IPO Capital: Formed in late 2006, Zero2IPO Capital is a venture
capital arm of the Group targeted at high-potential, high-growth China
enterprises. Leveraging Zero2IPO's vast network in China, Zero2IPO Capital
does not compete with other venture funds, but rather pursues a two-prong
investment strategy, i.e. to co-invest with active venture capital firms in
growth and late stage companies and to lead or co-lead in early stage startups
in China.
Zero2IPO Group is headquartered in Beijing with offices in Shanghai, Hong
Kong, and Silicon Valley.
About Zero2IPO Research Center
Founded in November 2001, Zero2IPO Research Center provides the cream of
business research reports and custom researches for professionals in the
Greater China Region. Our research ranges from Venture Capital, Private
Equity,
IPO, M&A to TMT industries. Zero2IPO Research Center stands tall as the most
prestigious research institute in Chinese VC and PE spheres.
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Tel: +86-10-8458-0476 x8037
Email: aileenhuang@zero2ipo.com.cn

SOURCE Zero2IPO Research Center

Aileen Huang, +86-10-8458-0476 x8037, or aileenhuang@zero2ipo.com.cn