Mergers & Acquisitions

Tech deals down in China, despite record Didi funding in April

PUBLISHED : Tuesday, 09 May, 2017, 9:52pm
UPDATED : Tuesday, 09 May, 2017, 10:53pm

Mergers and acquisitions in mainland China’s technology sector saw a year-on-year decline of 12.9 per cent in the past four months, despite the massive US$5.5 billion funding round scored by ride-hailing giant Didi Chuxing about two weeks ago, according to Mergermarket.

“The value of technology deals [on the mainland] reached US$19.9 billion across 65 transactions from January to April, down from US$22.8 billion in 73 deals recorded in the same period last year,” Mergermarket financial researcher Sophie Jin said on Tuesday.

The decrease in the size and number of deals in the first four months of the year was chiefly attributed to Beijing’s tough capital controls.

“The environment for tech M&A in China has changed after the banner period in 2015, which saw a frenzy of large mergers among [the country’s start-up] unicorns,” Jin said.

In February of that year, rival ride-hailing app operators Didi Dache and Kuaidi Dache announced their blockbuster merger valued at about US$6 billion.

Also that same year, Alibaba Group-backed agreed to merge with Tencent Holdings’ to form China’s largest online-to-offline local services provider, which enables users to book hotel rooms and make restaurant reservations, as well as offering a range of group-buying deals.

Alibaba owns the South China Morning Post.

Jin said Didi’s huge financing round last month represented the largest Chinese technology financing round to date, surpassing the US$4.5 billion raised by Alibaba affiliate Ant Financial Services Group in April last year.

The Didi fundraising made up 27.6 per cent of the total domestic technology mergers and acquisitions activity in the first four months of this year, according to Mergermarket.

It said the next two biggest technology deals during the period were the US$1.1 billion raised in January by Koubei, the online-to-offline service joint venture of Alibaba and Ant Financial, and the US$1 billion obtained early last month by Beijing Bytedance Technology, operator of the Toutiao news and information mobile app.

The overall market for Chinese mergers and acquisitions in the first quarter showed a slow start, according to Mergermarket. There were 413 deals worth US$82.1 billion, down 24.6 per cent in value compared with 479 deals worth US$108.8 billion in the first three months of last year.

“IPOs now provide an attractive exit option for investors,” said Jin, amid the expected dearth of new technology mega deals on the mainland this year. She said the China Securities Regulatory Commission approved 103 initial public offering applications in the first quarter, a 66 per cent year-on-year increase.

Meitu, the developer of China’s most popular photo-enhancing mobile app, raised net proceeds totalling US$4.6 billion in its Hong Kong listing last December, which made it the second-largest technology company listed in the city after Tencent in 2004.