November VC and PE investment scale grew, internet investment lacked large-scale transactions

　　Towards the end of the year, the VC/PE market also saw a phenomenon of "rush spending", with the number of disclosed investment cases and the total investment amount increasing. According to data from ChinaVenture, a financial information and consulting service provider, in November 2011, the total number of disclosed VC/PE investment cases in China was 64, with a total investment of US$1.806 billion. Both venture capital and private equity investment showed increased activity compared to the previous month. Despite this, the decrease in the average investment amount per deal still indicates a "cooling down" trend in the overall investment market.
　　Increased VC/PE Investment Activity, Continued Decline in Investment Amount per Deal
　　Data from CVSource, a database product under ChinaVenture, shows that in November 2011, a total of 43 venture capital (VC) cases were disclosed in China, with a total investment of US$448 million. This represents a month-on-month increase of 65.4% and 11.7% respectively, indicating a significant increase in investment activity. Compared to the same period in 2010 (48 cases, US$624 million investment), both the number of investment cases and the investment scale decreased.
　　In November 2011, 21 private equity (PE) investment cases were disclosed, nearly double the number of the previous month, with a total investment of US$1.358 billion, slightly higher than the previous month. Compared to the same period in 2010 (36 cases, US$5.919 billion investment), both investment activity and scale decreased significantly. Among them, on November 4, 2011, the privatization transaction of Zhongxiaoan was completed, with Bain Capital acquiring Zhongxiaoan's publicly traded shares for US$265 million. This was the largest transaction of the month.
　　Compared to October, the VC/PE investment activity in November increased. Generally, the end of the year is a more active period for the investment market, with more frequent disclosure of information. Therefore, it is expected that the number of disclosed investment cases will continue to increase throughout the fourth quarter. However, compared to the same period in 2010, the investment scale in October and November this year decreased. This is mainly due to market saturation and the sluggish secondary market, which has had a negative impact on VC/PE investment activity.
　　The change in the average investment amount per deal also confirms this trend. Compared to the number of investments, the growth in investment scale this month was relatively small, resulting in a decrease in the average investment amount per deal compared to the previous month. Cautious investment strategies, declining project valuations, and a shift towards early-stage investments are among the factors contributing to the decline in the average investment amount per deal.
　　China's Consumer Concept Remains Attractive, Lack of Large-Scale Internet Investments
　　From the industry distribution of VC/PE investments this month, the internet sector remains the most active, with 17 disclosed investment cases, accounting for 26.6% of the total. This is followed by the chemical industry, chain operations, and the IT industry, with 9, 6, and 6 cases respectively. In the chemical industry, there were multiple disclosed cases such as CDH Investments investing in Luhua Group and Primavera Capital investing in Xinlianxin Fertilizer. In the chain operation sector, Yintai Department Store and Liqun Department Store received investments from GIC and Goldman Sachs respectively, demonstrating the continued attractiveness of China's consumer concept to foreign investors.
　　In terms of investment amount, the manufacturing industry had the largest investment this month, with a total disclosed amount of US$333 million, accounting for 18.4% of the total. The main case was Bain Capital's participation in the privatization transaction of Zhongxiaoan. This was followed by the food and beverage and chain operation industries, with total disclosed investments of US$309 million and US$248 million respectively, accounting for 17.1% and 13.7% respectively. In the food and beverage sector, the baijiu (Chinese liquor) industry received widespread attention from PE firms. Hunan Liuyang River Distillery introduced strategic investment led by Hunan High-tech Investment; Lenovo Holdings acquired 87% of Chengde Qianlong Zui Distillery Co., Ltd., with both cases involving investments exceeding US$100 million.
　　In November, the internet industry disclosed 17 investment cases, maintaining high investment activity. However, in terms of investment scale, the average investment amount per deal decreased significantly. With a total amount of US$234 million, the average investment per deal was only US$13.75 million, significantly lower than the previous month and the third quarter. The largest disclosed investment case in the internet industry this month was the joint investment of Sequoia China and Oriental Fortune Capital in Jiuxian.com, amounting to US$50 million. However, there were 10 investments of less than US$10 million in the internet sector, indicating that the boom of tens of millions of dollars in investment is no longer prevalent.
　　Beijing Accounts for Nearly 30% of Investments, PE Firms Explore Diversified Investments
　　In terms of regional distribution, Beijing remains the most active region for VC/PE investments in China, with 19 disclosed investment cases and a total investment of US$504 million, accounting for 29.6% and 29.7% respectively. Shanghai and Guangdong followed with 9 and 7 cases respectively, ranking second and third in terms of investment volume. In the central and western regions, Sichuan, Hubei, Xinjiang, and Heilongjiang each disclosed 2 cases, while Hunan, Qinghai, Henan, Anhui, Chongqing, and Shaanxi each disclosed 1 case. Investments in the central and western regions were mainly concentrated in manufacturing, energy, agriculture, forestry, animal husbandry, and fisheries, and the chemical industry.
　　In terms of investment type, among the 43 disclosed venture capital (VC) cases, 26 were Series A financing, 13 were Series B financing, and 4 were Series C financing. No cases of Series C or later financing were disclosed. Recently, venture capital firms have generally increased their investment in early-stage investments and are exploring relatively less competitive areas such as vertical industries and the central and western regions. For companies that have already received multiple rounds of financing, the difficulty of obtaining further financing has increased due to the narrowing of IPO channels, especially overseas IPO channels.
　　In terms of private equity (PE) investment, among the 21 cases, 11 were Growth investments, 8 were PIPE investments, and 2 were mergers and acquisitions (Buyout) investments. In terms of investment scale, PIPE investments totaled US$536 million, while Growth and Buyout investments totaled US$439 million and US$383 million respectively.
　　Under the current situation where the sluggish secondary market continues, investing in listed companies remains favored by PE firms. Coupled with several recent mergers and acquisitions involving privatization, this shows a diversified trend in PE investment types. Recently, an "alternative" approach has also attracted industry attention: investing in major shareholders of listed companies. On November 22, Luhua Group, the controlling shareholder of Luxi Chemical, completed a capital increase and expansion, introducing CDH Investments as a strategic investor. In October, CDH also jointly invested in Midea Group with Tianjin Rongrui Investment, acquiring 15.30% of its equity. Midea Group controls two listed companies: Midea Electric and Little Swan. In addition, the equity restructuring of the controlling shareholder of Boyun New Materials, the Powder Metallurgy Center, controlled by Central South University, was recently completed, introducing several venture capital firms to invest an additional 120 million yuan.
　　ChinaVenture believes that investing in major shareholders of listed companies, as a new investment approach, can avoid fierce competition in the Pre-IPO field. Shareholders of listed companies generally have strong technological and resource advantages, and their control over listed company resources makes the investment relatively low-risk. In terms of exit, it can be achieved through group listing, agreement transfer, or conversion to listed company holdings.