Greater China-based private companies recorded a quarter-on-quarter growth in both deal count and value in the three months ended September 30, continuing the momentum seen in Q2, according to DealStreetAsia – Research and Analytics’s latest report.
An aggregate of 354 deals raised a total of $14.3 billion in the third quarter, a 51.0 per cent jump in deal value from the second quarter, according to Greater China Deal Review: Q3 2020.
There were 37 mega deals – transactions worth $100 million and more – in the third quarter. Together, they garnered nearly $9.4 billion, representing 65.6 per cent of the total funds raised in the quarter. Shanghai-based electric vehicle maker WM Motor raised 10 billion yuan ($1.47 billion) in Q3, becoming the fourth company to raise over $1 billion this year.
Chinese tier-one cities of Beijing, Shanghai, and Shenzhen remained the top three locations for startup fundraising and incubation in Greater China, thanks to local government policies and generous subsidies. Deal count in the three cities amounted to 213 in Q3, while the total deal value reached over $9.8 billion.
IPO activity has been just as buoyant as private deal activity, with 224 companies raising $52 billion during the quarter. This is about 2.5 times the capital raised via listings in the previous quarter.
Deal-making activity for the rest of the year is expected to benefit from China’s better-than-expected GDP growth rate of 3.2 per cent in H1. According to a survey of 29 economists by Nikkei, it is likely to expand 5.2 per cent in the July-September quarter.
“This year has been a bit of a roller coaster ride. We started this year on a fairly good note until the COVID-19 (crisis) hit Wuhan and later across China and then, the rest of the world. The stock market demonstrated a fairly dramatic reaction as well. Earlier, a couple of trillions of US dollars were being pumped into the economy, the whole market – the tech market in particular – is hitting the roof, ” said Jixun Foo, Managing Partner, GGV Capital.
“Obviously, there is a lot of euphoria. The digitisation process behind small and medium-sized enterprises and their consumers is real. That’s why the market is kind of paying ahead,” Foo added.
“We believe that we’re in an early stage of prolonged distress, which is a debt-buying period in some most-impacted industries like travel, hospitality, energy, and some moderately-hit ones including servicing and manufacturing. The opportunity will come in the second half of this year and persist in 2021. Those sectors will rebound one day. It’s just a matter of whether you can scoop [up deals] during this period at a low and attractive price,” said Brenda Lau, Head of Asset Management Asia, Indosuez Wealth Management.