The overall size has declined and the giants are still active.
Editor’s note: This article comes from the semi-annual report of Huaxing 2019.
Difficulties are well known. What is scarce is the degree and trend of measurement. It is precious to give a solution.
The figures show that the number of M&A transactions in the Chinese market fell by 30% in the first half of the year, and the amount was almost 40%. As the winner of the stock flow and the buyer with abundant cash flow, the giants frequently shot, and every move is still worthy of attention.
From the head enterprises, we can see that the growth potential comes from three major directions: fine integration of sinking market, rushing to the gold mining industry Internet, and diversified flexible capital operation. In contrast, we give new ideas for integrating trend judgment, open market operations, and capital for different mass companies.
First, the market in the first half of the year: the overall scale is down, the giant is still active
1. The amount of transactions has dropped, and market attitudes are generally cautious
In the first half of 2019, there were 239 M&A transactions in China’s TMT M&A market, a 38% decrease from the same period in 2018. The total transaction amount decreased by 60% compared to the same period in 2018.
Compared with 2018, the amount of transactions in the M&A market in the first half of 2019 dropped significantly. Among them, large transactions with a transaction amount of over US$1 billion fell from 4 in the same period last year to 4.
In the first half of 2019, there were 86 M&A transactions in China’s A-share TMT M&A market, a decrease of 53% compared with the same period in 2018. The total transaction amount decreased by 18% compared to the same period in 2018. Compared with 2018, the number of large-value transactions in the M&A market in 2019 has decreased, but there has been a huge transaction in which the home of the company has listed at 35.65 billion yuan.
Although the policy of mergers and acquisitions has gradually relaxed since the end of 2018, the A-share M&A market is still in a downturn due to the low willingness of both buyers and sellers. Due to the listing in early 2019The goodwill of the company’s goodwill is collectively thunderous. The buyer adopts a cautious attitude toward M&A transactions and targets. Companies with better fundamentals are more inclined to pursue endogenous growth rather than mergers and acquisitions as a means of expansion. Due to the emergence of the science and technology board as a new channel for landing capital market, the quality of the standard is reluctant to sell.
2. Giants are frequently shot, and technology is still a hot spot for investment
In 2019, Internet giants still shot frequently. In the top 20 M&A transactions in the TMT industry, there were six Internet giants involved.
Among them, YY’s acquisition of BIGO, Suning’s acquisition of Carrefour, Ctrip’s acquisition of MakeMyTrip, Ant’s acquisition of WORLDFIRST, and love recycling and Jingdong’s pat are all transactions that expand business boundaries through large-scale acquisitions, which help the giants in different formats and different regions. Business integration and recognition of the value of the capital market.
In the first 20 years of the TMT industry in the first half of 2019, strategic giants such as Alibaba and Tencent remained the main funders of head equity.
Tencent is involved in investing in 5 transactions. The target companies include Shell Finding House, Go-Jek, Reddit, Friendship Fresh, and Clear Data.
Alibaba is involved in 8 transactions. The target companies include Ali Local Life, Defiance Technology, Shentong Express, Qianfang Technology, Eggshell Apartment, Handan, Ali Health, and CICC.
BATJ and other Internet giants are focusing on their own business advantages on the basis of continuous follow-up in the hotspots. The technology, entertainment/content, e-commerce/new retail, finance and other sectors are Internet giants in the first half of 2019. The focus of attention.
Among them, the technology field is still a hot spot for investment by Internet giants, especially the sub-sectors such as artificial intelligence, intelligent hardware, and enterprise services.
The financial sector has seen an increase in the heat of the same period last year. Tencent and Ali have made more frequent shots in this field. Ali 2018H1 has completed 5 transactions in the financial sector, and 2019H1 has reached 8.
Entertainment/content is still a hot area for Internet giants, but the industry’s popularity has dropped significantly. Tencent’s 2018H1 has completed 33 transactions in the entertainment/content area, and the number of 2019H1 has dropped to 10. In addition, the e-commerce/new retail sector is also showing a downward trend.
Second, sinking market: fine-grained operation of the head, integration space giantBig
1. The head player completes the initial accumulation and the refined operation phase is coming
Under the overall poor performance of the market, the scale of financing in the sinking market in 2019 was against the trend: in H19, 2019, the transaction value of the overall financing market fell by 38.03%, while the amount of financing in the sinking market of 2019H1 increased by 311%. Among them, the number of sinking market financing reached 44 in H19 in 2019, and the total transaction amount was 1.3 billion US dollars. In 2018, the number of H2 corresponding financing was 19, and the amount was 300 million US dollars.
At present, the head players have initially completed the flow/user accumulation in the sinking market, and the user’s stickiness is the core goal of the next stage. In the future, companies that understand the user appeal and product play of the sinking market will have tremendous integration value.
Internet products for the sinking market will have the following characteristics:
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In terms of content, users in sinking markets have a short time to touch the web, and new content that will resonate with them will be given an opportunity.
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In terms of operation, the simpler the user interface, the more it will increase its willingness to use.
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Interaction, the third- and fourth-line users did not go through the early Internet company’s process of cognizing the user’s brand, and the price was more sensitive. Through some incentive-oriented operation strategies, the traffic could be obtained at a lower user acquisition cost. .
The sinking market has transitioned from the staking phase to the refined operation phase. With the rise of the head players, the sinking market traffic has reached the second half, and it is difficult to see new traffic-passing players.
At the same time, the industry is developing bottlenecks, and the information field is interesting. In June 2019, MAU increased by 36% year-on-year, compared with 294% in the same period of last year. In the e-commerce field, the cost of winning customers increased from 143 yuan/person in 2018Q4 to 2019Q1. 286 yuan / person.
In this context, players gradually enter the refined operational phase of existing traffic.
Head players turn to a diversified product matrix to accelerate their commercialization. The head player is starting from the core product to gradually refine the product matrix or expand fromAt the boundary of the body, the use of differentiated products enhances the use of different segments of users, thereby improving the efficiency of commercialization.
2. Clear business model and create more opportunities for integration
Under the capital and market promotion, the number of players in the submerged market has increased significantly, and they have seized various market segments. However, as the difficulty of obtaining traffic increases, the difficulty of financing on the capital side increases, and the market’s requirements for clear business models, it is expected that opportunities for industry consolidation in the vertical sector will increase in the future.
According to the network infrastructure and development logic, the development stage of the sinking market can be divided into the commodity thinking stage, the flow thinking stage and the user thinking stage.
Commodity thinking stage: All kinds of consumer goods have occupied the sinking market, and the integration space is small for regional reasons.
Traffic thinking stage: is mainly reflected in the gradual penetration of BAT into the sinking market; Baidu establishes the traffic entry advantage through search engines; Ali with the logistics business penetrates into the sinking market; Tencent uses QQ, WeChat Traffic entry.
User thinking stage: With the rise of players such as a lot of fun and funny headlines, the immersive market acquaintance society, price sensitive and other attributes have been discovered, and a series of players emerged around the above attributes. The integration space has increased dramatically.
Third, the industry Internet: the giant continues to increase the code, the secondary market into a layout hotspot
1. Capital attention, giant layout, multiple benefits to help the industry Internet
Before the rapid development of the consumer Internet in the past decade, on the one hand, the Internet infrastructure including instant messaging, payment, and logistics has been continuously improved, and the Internet has reached more than 800 million users. On the other hand, consumer demand is constantly being stimulated, generating massive consumption data, creating a precondition for the emergence of the industrial Internet.
The development of the underlying technology provides support for the rise of the industrial Internet. AI enables companies to better aggregate data, analyze data, and achieve insight. The development of chip technology makes super smart terminals available everywhere, and more and more products become intelligent devices. 5G can improve the transmission speed and transmission level of data, realize the connection of people, equipment, software, products and services, and realize the interconnection of all things. Advances in technology have reduced the number of traditional industries to digital,The threshold for intelligent transformation.
With the development of the industry Internet in many industries, such as retail, manufacturing, and public management, the initial results have been shown.
Comparing Top 20 M&A and Investment Transactions in the first half of 2018 and the first half of 2019:
In the first half of 2018, M&A transactions were mainly concentrated in the consumer Internet sectors such as O2O, e-commerce, social networking, and content. The giant acquired more C-side scenarios and traffic through investment M&A on the traffic platform.
In the first half of 2019, capital gradually transformed into offline retail, technology/enterprise services, logistics and other fields, and more important transactions in the field of industrial Internet emerged, for example:
Tencent led the big data and AI company Mingluo Technology 2 billion yuan D round of financing, and led the industrial supplies e-commerce service platform Zhen Kunxing 160 million US dollars D round of financing, in the industry Internet field continue to bet overweight.
Ali invested in STO, further improved Ali’s logistics ecosystem layout, and realized the deep integration of logistics and business flow through the strategic expansion of Santong and Baishi’s strategic shareholding.
Suning acquired Carrefour to complement the shortcomings of FMCG, and at the same time build Carrefour’s product supply chain and warehousing operations capabilities to build a full-scale consumer environment for retail.
This has also helped another group of high-quality industry Internet leaders to land in the capital market and gain more room for development. For example, the home of 13 billion yuan including Ali will be borrowed.Shell listed in the A-share market.
2. The valuation is upside down, and the quality of the secondary market is sought after by the giants
In the areas of enterprise services, medical care, and retail, there are a large number of high-quality listed companies in the secondary market, with a large number of customer resources, supply chain resources, and offline scenarios. The industrial Internet requires deep industry understanding and resource accumulation, and the Internet giant can quickly enter this field through investment.
In 2019, most of the Internet giants were deployed in the field of enterprise services. In 2018, there were also ant jinfu investment Weining Health (300253.SZ), Tencent Investment Haishu Home (600398.SH) and other medical and retail fields. Investment layout.
At present, there is a valuation inversion in the primary and secondary markets. The valuation of listed IPOs of many IPO companies is significantly lower than that of the previous round of financing, or the market value of newly listed companies is below the issue price for a long time. It is expected that the phenomenon of the first- and second-tier market valuations will continue to exist for some time to come. The high-quality targets in the secondary market will become an important way for the giants to lay out.
In the Hong Kong-US stock market and the A-share market, the shareholding method adopted by strategic shareholders is slightly different: Hong Kong and US stocks usually take the form of additional issuance or convertible bonds, and the operation process and transfer price are relatively flexible. A-shares are subject to the approval of the CSRC because of the fixed increase. The time flow is long and the uncertainty is high. Therefore, the transfer of the agreement is usually adopted.
Four operations: an important way to maximize your value
In the first half of 2019, a total of 1,577 transactions (excluding mergers and acquisitions, IPO listings, and subsequent financing) occurred in the primary market financing, with a total transaction value of $37.1 billion.
As of the unicorn company that was counted by Huaxing at the end of June 2019, the amount of financing for the unicorn accounted for 51% of the total amount of financing in the year, and the accumulation of funds for head assets was still very obvious.
In the current asset market environment, diversified capital operation has gradually become an important way for companies to maximize their own value and achieve strategic goals.
1. Merge:
In a market with tight liquidity, endogenous business expansion through financing will face greater challenges, and mergers can often quickly fill shortcomings in a short period of time and create value through business synergies.
Industry head companies can also integrate their capital market stories to give the combined company a valuation premium advantage.
2. Spin-off:
Because of the group’s resource blessing, the head giant’s high-quality independent segment can often get more attention and financial support in the capital market. For the group, the independent development of the spin-off business segment can also improve business operations. Multiple strategic objectives such as efficiency, access to external strategies or capital support, increased flexibility in capital operations, and maximizing group value.
3. Multiple capital operations for small and medium-sized companies
For small and medium-sized companies (1), after listing, they may face problems such as lower market value, stock price fluctuations, and smaller circulation.
In the 2018 to 2019H1, the number of companies with a market capitalization of less than $1 billion and the number of companies with a market capitalization of $1 billion or more is accounted for 77% of the mainland China companies with IPOs listed in Hong Kong and the United States. twenty three%. Among mainland Chinese companies with IPOs in the same period, the average market share of companies with a market capitalization of less than US$1 billion was 25%, and the average market share of companies with a market capitalization of US$1 billion and above was 37%. The average circulation of small and medium-sized listed companies is lower than the overall average.
Based on the status quo and the above issues, more and more institutional shareholders choose to acquire liquidity through mergers/buyouts.
