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Whither the financing for expansion of tech firms?
By Qi Jianzhe |
January 19, 2012, Thursday
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Print Edition
Print Edition
Chinese telecom, media and technology firms have enjoyed fast growth in the past five years, thanks to both domestic and overseas investors. Looking beyond, where can these companies find money? Here are a few considerations in trying to track the answer for 2012.
Mergers and acquisitions likely to increase
There will be more mergers and acquisitions in the telecommunications and Internet sectors this year as limits begin to crimp fund-raising through public offerings and other channels. The number and size of overseas IPOs of Chinese companies are expected to decline due to a sluggish global economy and scandals related to the accounting procedures of some Chinese companies.
With money from venture capital and private equity firms tighter, start-up firms may seek mergers and acquisitions as a means of financing their development.
Some of the giants in the Internet space may well take the opportunity to make acquisitions at a relatively cheap cost as the value of smaller players struggling to make profits declines.
At the same time, some listed companies may seek privatization or management buyouts if they believe their values are not fully reflected in stock prices.
Smaller e-commerce players
There may still be some investment opportunities this year for e-commerce companies that operate in narrow realms such as sales of shoes, jewelry, food or apparel.
Taobao and Tencent both launched comprehensive online shopping platforms last year, banking on their huge customer bases and their established brand names.
As the overall market continues to grow apace, smaller online retailers specializing in relatively narrow sectors will focus on quality goods and reliable customer service to attract a loyal following. They may be able to avoid getting sucked into vicious price wars.
Some of the major players in the market, like 360buy.com and New York-listed Dangdang.com, are still pouring huge investments into expansion, delaying any strong growth in profit.
Market restructuring of payment firms
The People's Bank of China has granted licenses to online payment firms, bringing the total of non-financial institutions in the sector to 101. That pace may slow, prodding opportunities for mergers and acquisitions.
Some big and established names, like Alibaba Group's Alipay and Tencent's payment arm Tenpay, may acquire well-run smaller firms, with or without licenses, to expand their business realm. With China's mobile Internet users set to exceed 600 million this year, third-party payment services on mobile devices will also become a focal point of growth.
Mergers and acquisitions likely to increase
There will be more mergers and acquisitions in the telecommunications and Internet sectors this year as limits begin to crimp fund-raising through public offerings and other channels. The number and size of overseas IPOs of Chinese companies are expected to decline due to a sluggish global economy and scandals related to the accounting procedures of some Chinese companies.
With money from venture capital and private equity firms tighter, start-up firms may seek mergers and acquisitions as a means of financing their development.
Some of the giants in the Internet space may well take the opportunity to make acquisitions at a relatively cheap cost as the value of smaller players struggling to make profits declines.
At the same time, some listed companies may seek privatization or management buyouts if they believe their values are not fully reflected in stock prices.
Smaller e-commerce players
There may still be some investment opportunities this year for e-commerce companies that operate in narrow realms such as sales of shoes, jewelry, food or apparel.
Taobao and Tencent both launched comprehensive online shopping platforms last year, banking on their huge customer bases and their established brand names.
As the overall market continues to grow apace, smaller online retailers specializing in relatively narrow sectors will focus on quality goods and reliable customer service to attract a loyal following. They may be able to avoid getting sucked into vicious price wars.
Some of the major players in the market, like 360buy.com and New York-listed Dangdang.com, are still pouring huge investments into expansion, delaying any strong growth in profit.
Market restructuring of payment firms
The People's Bank of China has granted licenses to online payment firms, bringing the total of non-financial institutions in the sector to 101. That pace may slow, prodding opportunities for mergers and acquisitions.
Some big and established names, like Alibaba Group's Alipay and Tencent's payment arm Tenpay, may acquire well-run smaller firms, with or without licenses, to expand their business realm. With China's mobile Internet users set to exceed 600 million this year, third-party payment services on mobile devices will also become a focal point of growth.
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