64
Your industry. Our focus. Deals advisory dedicated industry team and the latest industry trend
Your industry.
Our focus.Deals advisory dedicated industry team and the latest industry trend
Clients have told us that industry knowledge, expertise and experience is crucial in deciding which advisor to choose.
We’ve responded by making a significant investment into growing our deals industry capabilities by leveraging the 1,500+ transactions across multiple sectors that we worked on last year alone to build specialist teams focused on those industries that matter to you. Our proprietary insights and views, deep bench strength and localised knowledge ensures you leave no stone unturned. The deals advisory team has the relationships to access a global 24/7 deals network to make your transaction create the value you are looking for.
This industry guide offers an introduction to our dedicated teams.
Your industry, our focus, let’s make it happen.
industry
based knowledge
honest
com
plicated
relationship
solutionco
mfo
rtable
Sector
Cred
entials
potential
lawyers
understanding
PwC
making industry
choices
qu
ality
Assurance
accountants
con
sideratio
n
reputation
advisoryprojects
contactcomplexity
price
du
e dilig
ence
deals
imp
ortant
advisors
prefer
better valu
e
issues
experience big data
verifying
players
Foreword
Our industry focusEducation 2
Healthcare service 6
Insurance 10
Logistics 14
Power & utilities 18
Telecommunication 22
Real estate 26
Consumer markets 30
Pharmaceutical and life science 34
Mining & minerals 38
Telecommunications, media and technology (TMT) 42
Automotive 46
Oil & gas 50
Healthcare equipment 54
Chemicals 58
PwC2
Education
Your industry. Our focus. 3
Industry strength
Strong deal sourcing capability
Offer many education investment opportunities and maintain solid relationships with investors active in the sector. Recent education leads include:
• Online K12 education company with high brand awareness and market share (existing minority shares transfer; estimated deal size USD30~90 million);
• Private higher education group which operates three independent undergraduate colleges (Minority financing RMB200 million);
• Child basketball education service provider seeking minority financing of RMB50 million.
Rich education industry experience
• Extensive education experience (over100 deals in the past 3 years) across different regions.
• Full coverage across all the education sub-sectors.
• Market reputation built via leadership and public insights.
Deep dive into preschool and K12 sector
• Involved in over 60 preschool and K12 deals in the past 3 years, leading advisor among all the players in China.
• Extensive experience in popular sectors such as “AI+Education” and Quality-oriented education.
Solid education company IPO credentials
• Provide statutory audit and IPO support services to many education groups, e.g. 51talk, GEDU, LAIX, Disney English, etc.
• In-depth IPO insights regarding the key concerns and issues and regulation focus.
Good relationship with active education investors
• Good and long-term relationship with active education investors and strategic investors.
PwC4
Industry trend
The past decades have witnessed a continuous rising of the education industry with double digit growth in various sub-sectors. National policies and regulations offer great support on its development.
Regulation change
The new regulations announced in 2018 have dramatically changed the market landscape, creating significant pressure/opportunity for investment exit of kindergartens (especially for PE investors) and accelerating the consolidation in the highly fragmented K12 training sector.
Quality-oriented education
a) In 2018, Quality-oriented education deals numbers exceed those in other area, becoming the most attractive sub-sector;
b) policy incentives and market demand driven, particularly in tier1-2 cities.
Education technology
a) increasing penetration in different value chain in China education sector;
b) large amount of investment with new technology, i.e. AI, big data, VR/AR, etc.
Vocational education
New regulation just released in Feb-19 would likely to create rising opportunities for both academic and non-academic education.
Deals numbers in 2018: Quality education > K12
Deals value in 2018 is 3 times to 2016
67
93
101
69
115
129
2016
2017
2018
3,300
7,377
9,338
2016
2017
2018
New technology
( in million RMB)
Your industry. Our focus. 5
Franklin Zhai
Partner
Deals
+86 (21) 2323 2957
Candy Ma
Partner
Deals
+86 (21) 2323 8263
Diana Zou
Director
Deals
+86 (21) 2323 2101
PwC6
Healthcare service
Your industry. Our focus. 7
Industry strength
The largest dedicated team
PwC has more than 5,000 professionals globally serving the Healthcare Industry, including experienced executives, strategists, CPA’s, attorneys, actuaries, PhD’s, regulators, physicians, nurses, pharmacists and technologists.
One-stop service
Our approach is to bring clients a multidisciplinary set of capabilities tailored to their unique business needs: from greenfield projects, to M&A, IPO and post-deal advisory, etc. These capabilities permit us to leverage deep industry resources and experience across our practice.
Leading practitioner in China medical reform
We have actively engaged in China’s medical reform. During the last decade, we helped medical institutions, investment groups and other stakeholders to achieve remarkable results in regards to the reform of public hospitals, social capital investment in medical institutions etc. As the medical reform enters the deep water, we will leverage our experience to help clients stand out from the constant structural adjustment and fierce competition.
High profile clients and established trust
We have maintained long-standing relationship with major industry leaders and funds. The trust we’ve established helps strengthen our insights of industry dynamics and offer numerous opportunities for our Deals Sourcing Plan.
We invest in knowledge
Through our internally funded and operated Industry Program, our people conduct practical, fact-based, primary research and produce meaningful original work. Our thought leadership (summits, reports etc..) provides actionable insight, offering a point of view about what these trends mean for the industry and what organisations need to do to prepare for tomorrow.
Transition period for hospital M&A transactions
Hospital M&A transactions reached a peak in 2016. However, this was followed by the implementation of the “Two-Invoice System”, “zero mark-up of medicines” and “Limited Medical Insurance Fee”, and recent government policies to limit the privatisation of public hospitals, leading to a drop in M&A transactions which remained stable thereafter, and causing post-deal integration and operation optimisation to become more challenging.
Steady growth of private specialised hospitals M&A scale
Specialised hospitals M&A transactions kept increasing in 2016-2018 given their smaller size, easier duplicability, integration and specialisation.
Downward trend of returns of hospitals and institutions after IPO
Due to the effect of IPO speculations and the decline in the return rate, the yields of hospitals and medical institutions were at their highest levels at the beginning of the IPO and then have gradually decreased over time. Therefore, investors are advised to consider not only the investment return based on the price at listing, but also the actual returns on investments at exit point.
PwC8
Industry trend
Hospital M&A transactions amount
2013 2014 2015 2016 2017 2018
A peak in M&A transactions in 2016. Dropped and remained stable thereafter.
2013 - 2018 Domestic Hospital M&A Transactions
16 16 18
60 48
62
-
20
40
60
80
- 2,000 4,000 6,000 8,000
10,000
2013 2014 2015 2016 2017 2018
Num
ber o
f dea
ls
RM
B in
milli
on
Specialized hospitalsNo. of Specialized hospitals
Your industry. Our focus. 9
Leon Qian
Partner
Deals
+86 (10) 6533 2940
Kushal Chadha
Partner
Deals
+852 2289 1815
PwC10
Insurance
Your industry. Our focus. 11
Industry strength
Leading capabilities and market shares
PwC M&A insurance team has over 20 years of dedicated insurance M&A experience. We have integrated M&A, financial, actuarial, regulatory, market and operation skills in the insurance M&A team.
PwC supports all iconic insurance deals with long standing credentials in regulatory, operation, market, distribution, digital strategy and transformation experience.
Leading credentials on supporting regulatory processes
Dedicated team to handle regulatory related process in China, Hong Kong and the key Asia Pacific and other offshore countries.
Long standing credentials of landmark cases and successes. We led the regulatory approval process of all successful insurance deals in Hong Kong. We led the first ever successful application of insurance full license for foreign controller in Mainland China and our team has maintained a 100% success rate on regulatory license application for Mainland China outbound deals overseas.
Leading knowledge and insights of Mainland China, Hong Kong and other key APAC markets
PwC provides services to more than half of the insurers in Mainland China, Hong Kong and other key Asia Pacific countries and we advised most of the Insurance M&A transactions and in addition to our breadth of market and operational knowledge we have accumulated significant experience and knowledge on how to drive successes in insurance deals.
We measure our successes by the proprietary values that we bring to our clients
We focus on bringing proprietary values to support our clients; and on this basis we measure our success and advisory fees.
PwC12
Industry trend
China inbound deals
In 2018, the CBIRC announced new measures to opening up the China insurance market to foreign insurers, including the allowance of foreign controlling stakes in China insurance companies and relaxation of the related qualifying requirements. Coupled with the strong market demands for annuities and pension insurance, the appetite of inbound investments has increased significantly in 2019 and we expect that appetite will continue to increase.
China domestic deals
The CBIRC has tightened up their regulatory controls since 2017 to transform the overall China insurance from saving to long-term protection focused. Together with the collaboration trend of life insurance, health & medical and senior care, life insurance industry in China is expected to see continuing improvement on its new business value. As such, the strategy to derive additional value from existing insurance customer relationship will motivate M&A to extract cross industry synergies.
China outbound deals
There are many drivers for China outbounds in the insurance segment ranging from servicing the retail demands for offshore investments and medical protection, to supporting one belt one road and currency globalisation. Most insurance outbound deals are in Hong Kong and other key Asiapac countries and the target business scope has expanded from life insurance to specialty and reinsurance.
open up the insurance market
strong market demands
extract cross industry synergies
Your industry. Our focus. 13
Thomas Crasti
Partner
Deals
+852 2289 6337 [email protected]
Matthew Phillips
Partner
Deals
+852 2289 2303
Chris ST Chan
Partner
Deals
+852 2289 2824
Loretta Ng
Partner
Deals
+852 2289 2503
Xin Chen
Partner
Deals
+86 (10) 6533 2976
Jett Wang
Partner
Deals
+86 (10) 6533 7476
Jonathan Chen
Partner
Deals
+86 (21) 2323 3425
PwC14
Logistics
Your industry. Our focus. 15
Industry strength
Leading deal sourcing capability
Offering abundant investment opportunities and maintaining close relationships with active players. Recent logistics leads include:
1. A leading fresh food supply chain platform with high brand recognition and market occupancy. Seeking financing round D of USD40~60 million.
2. An intelligent logistics service provider with mature management and strong relationships with logistics giants (Minority financing of RMB60 million).
3. A global decentralized personal delivery and temporary warehouse service that will utilize the blockchain technology, seeking minority financing.
Extensive logistics industry experience
More than 20 years of deals experience in the logistics industry covering various market subsectors.
Rich and various project experiences (over 100 deals in the past 3 years) across different regions.
Widely- recognised professional capability
• Leading advisor among all key players in China, including SF Express, JD Logistics, GLP, Cainiao, Suning and Kerry.
• Involved in dozens of significant transactions in all logistics subsectors such as express & freight, warehousing & storage, and smart logistics.
• Leveraging powerful Data Analytics technology and strong data processing capabilities to excavate value of the target with massive business data and helping investors to create value in M&A.
Robust relationship with active logistics players
• Strong and long-term relationship with active financial investors, and strategic investors.
• Firm cooperation and communication with key industry associations which strengthens PwC industry knowledge and insights.
In-depth market observation
• Hosting PwC logistics seminar regularly, focusing on the recent market trends and key topics in M&A.
• Regular thought leadership sharing on recent logistics heat topics.
PwC16
Industry trend
Thanks to the e-commerce promotion, consumption upgrading and technology development, China’s logistics industry has ushered in a rapid development period. Express & freight, warehousing & storage and smart logistics have attracted great capital attention. With a view in reducing cost and improving efficiency, M&A transaction scale in logistics sector is expected to continue to expand in the future.
The world’s largest logistics marketThe gross logistics cost amounted to RMB13.3 trillion in 2018 (YoY: 9.8%), making China became the world’s largest logistics market.
Express & freight - Mutually penetrating to be an integrated logistics player a. Benefiting from the rapid development of e-commerce,
express sector witnessed several mega deals and freight sector intervenes in e-commerce express business;
b. With continuing high market concentration on express sector, major express enterprises are gradually entering into freight sector and integrated logistics sector.
Smart logistics – Long-term Heat Area a. Increasing penetration of smart logistics into different value
chains of logistics industry in China helps to reduce cost and improve efficiency;
b. Various investors are paying more attention to high-tech targets with Big Data, AIoT etc. The M&A value in 2018 doubled to 23.4 billion compared with 2017 and this sector’s M&A continued to be hot in H1/19 which about 20 deals were announced (compared with 11 in H1/18 and 17 in H2/18).
M&A transactions reporting a double increase in 2018 RMB23.4bn
Largest logistics market: RMB13.3 tn
China
Total Social Logistics Costs
5.6 5.8 6.0 6.6 6.9
3.7 3.7 3.7 3.9 4.6 1.3 1.4 1.4 1.6 1.8
-
5
10
15
2014 2015 2016 2017 2018
RM
B in
trilli
on
TransportationStorageManagement
M&A Scale in Logistics Subsector
0
10
20
30
40
50
60
70
H1/16 H2/16 H1/17 H2/17 H1/18 H2/18 H1/19
RMB
in B
n
Warehousing & storage Integrated logistics Express & FreightInte lligent informatisation New retail log istics Others
Your industry. Our focus. 17
Roger Zhang
Partner
Deals
+86 (20) 3819 2274
Waldemar Jap
Partner
Deals
+852 2289 1892
Weekley Li
Partner
Deals
+86 (21) 2323 3638
PwC18
Power & utilities
Your industry. Our focus. 19
Industry strength
Strong deal sourcing capability
Offer P&U investment opportunities and maintain solid relationships with investors active in the sector. Recent leads include:
• A biomass power generating company, utilizing agricultural waste and forestry material to generate electricity and marsh gas, seeking minority financing of RMB100-200 million.
• Integrated electricity power distribution station management and service provider with over 20 service centers in Zhejiang Province. Seeking minority financing of RMB100 million.
Industry expertise & extensive experience in power & utilities
• Over 4000 power & utilities experts around the world, many with direct industry experiences, including engineers, financial advisors, economists and lawyers.
• Involved in nearly 200 transactions and served over 100 clients in the past 3 years.
Specific industry solutions
• Leading advisor providing holistic solutions for all subsectors with in-depth industry knowledge and experience.
Well-established eco-system
• Responsive to governments and regulatory bodies in providing top-level advice on market structures reform.
• Funding patron of the World Energy Council and long-standing partner and sponsor of the World Energy Congress.
• Close to market and have strategic, long-term relationships with SOEs, including top 5 power developers, MNC, private energy companies and industry funds.
In-depth market observation & thought leadership
• Publish China renewable and cleantech investment report for 5 years continuously.
• Jointly released 2019 White Paper on PV power station asset transaction in China with leading industry player.
PwC20
Industry trend
Energy revolution
Renewable energy has been the most active sector in the industry. At the same time, there is the quest to make conventional energy cleaner and more efficient. With an improving gross margin and the continuing government encouragement, the trend is reasonably believed to continue.
Deregulation & innovation
The delivery of cleaner and renewable energy entails considerable investment, project and technological challenges. Industry players are keen to acquire advanced technologies overseas and transfer the know-how / experiences back to domestic market.
Advanced mobility related to new energy
the rise of electrical vehicles boost adjacent green energy markets, such as lithium battery, charging pile manufacturing, hydrogen fuel cell, new energy charging stations, used-batter recycling, etc.
Energy saving & environmental protection management
with local market players actively acquiring foreign technologies and transiting towards a more centralised-service-oriented direction, cross-border activities are expected to be vital.
2016-2018 China Power & Utilities Deals Market
164
21
256
230
133
196
73
86
72
0
100
200
300
400
500
600
2016 2017 2018
Energy Saving &EnvironmentalProtection
Renewable EnergyConventional Energy
555524 547
Annual TotalDeal Volume
Source:cvsource, Mergermarket
Your industry. Our focus. 21
Franklin Zhai
Partner
Deals
+86 (21) 2323 2957
Sammy Lai
Partner
Deals
+86 (10) 6533 2991
Bing Lu
Partner
Deals
+86 (21) 2323 2118
PwC22
Telecommunication
Your industry. Our focus. 23
Industry strength
Strong deal sourcing capability
Offer many Telecommunication investment opportunities and maintain solid relationships with investors active in the sector. Recent leads include:
• High technology company in the optical communication sector. Provides optical thin film filter and optical components/modules. Reported a revenue of RMB110 million in FY18. Seeking minority financing , can also negotiate for a buyout.
• A fast growing independent IDCs in China; currently owns 3 DCs with 3,000+ racks deployed or in contract, and over 7,000 racks in total planned by 2020. Available for buyout.
Depth of industry experience
We have accumulated a wealth of relevant industry experience in the process of providing listing audit, accounting and transaction services for leading companies in the telecommunication industry, such as Hong Kong Telecommunications (HKT) Limited, China Mobile, and Verizon.
Broad coverage of entire industry value chain
PwC’s services cover global technology companies across the entire technology value chain, from component manufacturer, equipment manufacturer, software developer, operator to media content provider.
One team
PwC has a professional service team for telecommunication industry covering auditing, tax consulting, IT consulting, corporate finance and many other aspects.
Leaders of mega deals from 2015 to 2019
Buy side transactions service for some key strategic investors, and many high-profile private equity firms’ deals in telecommunication industry.
PwC24
Industry trend
5G innovation and market opportunity
The 5th generation of mobile communication technology “5G” has arrived. Future mobile networks will have higher storage capacity and reliability, lower latency, better energy efficiency, and the possibility of providing “Internet of Everything”.
5G Capex by Chinese operators is estimated to be approximately RMB1.23 trillion, a 68% increase over the 4G investment scale*.
M&A deals distribution
Excluding the USD8.92 billion transaction in China Unicom’s mixed-reform in October 2017, domestic transactions declined slightly in 2018 while outbound transactions showed an upward trend. Inbound transactions seemed stable.
Strong domestic growth in Internet Data Center (IDC)
China’s IDC construction continues to grow, and revenues are expected to reach RMB150 billion by 2020.
Source: China Securities - 2018 investment strategy report of
telecommunication industry: China‘s telecommunication industry and
technology rises, and opportunities within the 5G industry chain emerges》,
》HSBC - China’s telecommunication equipment industry report: looking for 5G
investment opportunities with high growth and profitability》, 》Zhongtai
Securities - 2018 investment strategy report of telecommunication industry:
5G Industry rises, Internet of Things Era starts.》, Pedata.cn and PwC analysis
5G capex
RMB 1.23 tn
M&A dealsdomestic transaction decline,
outbound transactions showed an upward trend, inbound seemed stable
IDC
RMB 150 bn by 2020
Your industry. Our focus. 25
Cindy Chen
Partner
Deals
+86 (10) 6533 7627
Gloria Ma
Partner
Deals
+86 (21) 2323 2300
Carol Wu
Partner
Deals
+86 (10) 6533 2956
Benjamin Xie
Partner
Deals
+86 (10) 6533 7887
PwC26
Real estate
Your industry. Our focus. 27
Industry strength
Strong deal sourcing capability
Offer many real estate investment opportunities and maintain solid relationships with investors active in the sector. Recent leads include:
• A commercial complex in the CBD of a domestic east costal city; construction area of 90,000+ sqm. Available for buyout.
• A 5-star hotel project in the Yangtze River Delta region; basic construction has been completed. Available for buyout.
One-stop service
We are able to draw on the full range of PwC services, including due diligence, valuation, tax, deal strategy, feasibility study and other consulting services. Our integrated proposition brings together the full suite of expertise you require, that maximizes efficiency and minimizes costs.
Experience across a broad real estate asset class
We have successfully assisted many clients in entering the numerous opportunities presented through investing in real estate across a range of geographies, styles and sectors, from residential, tourist property to logistic warehouse; and from commercial complex, senior housing to distressed assets.
Local market expertise
We work with different types of clients including: State Owned Enterprises (SOE’s), multinational corporations, sovereign wealth funds, developers, REITs, private equity firms, hedge funds, family offices and institutional investors.
Global relationship
We have a global network with deep relationships with the key local market participants. We leverage our insight and relationships to support identifying Green Field investment opportunities overseas.
Independence
We can bring a truly independent and impartial view to your strategy and are not creating a strategy to sell to you our own book of real estate assets.
PwC28
Industry trend
The overall market fundamentals in Asia remain robust, while real estate markets are facing rising headwinds
• Market fundamentals in 2018 remained robust. Transactions for the year were at record levels and pricing was strong, sustained by ever-growing volumes of institutional capital piling up in Asia’s biggest economies.
• However, Asia’s real estate markets are facing rising headwinds. An impending trade war, tighter access to credit, and buyer fatigue at sky-high prices for both commercial and residential properties are causing investors to question whether the long bull cycle may be reaching its peak.
The scale of China’s M&A market in the real estate sector peaked in 2017, and generally stabilised in 1H19
• The domestic and outbound real estate investment amount of Chinese enterprises has increased year by year, and reached its peak in 2017. It fell back to more normal levels after several exceptionally large deals in 2017.
• In 2017, the two largest outbound M&A were the acquisition of Logicor, a European logistics real estate company, by a Chinese Consortium for about USD13.8 billion, and the
acquisition of GLP, a Singapore logistics real estate company by a Chinese Consortium for about USD11.6 billion.
Transactions in 2018 reached record level in Asia, while real estate markets are facing rising headwinds
China’s M&A market fell back to more normal levels and generally stablised in 1H19
Real Estate M&A Deals Volumn Unit: Project
472 475 367
218 202
8 11
9
5 4
39%
1%
-22%
(40%)
(20%)
0%
20%
40%
60%
-
200
400
600
2016 2017 2018 1H20181H2019
Above USD 1 billion
Below USD 1 billion
YOY
Real Estate M&A Deals Volumn Amount Unit: USD in billion
47 43 30 21 18
18 38
13 7 6
25%24%
-46%
-60%
-40%
-20%
0%
20%
40%
-
50
100
2016 2017 2018 1H2018 1H2019
Above USD 1 billion
Below USD 1 billion
YOY
Your industry. Our focus. 29
Ginger Jiang
Partner
Deals
+86 (21) 2323 3722
Wayne Chen
Partner
Deals
+86 (21) 2323 2606
Jeremy Ngai
Partner
Tax
+852 2289 5616
PwC30
Consumer markets
Your industry. Our focus. 31
Industry strength
Deal sourcing capability
Extensive relationship and domestic and cross-boarder deal network. Recent leads include:
• Well-known omni-channel platform (Eur500 million revenue) in Europe;
• Well-known Korean cosmetic group domestic facilities;
• Agricultural technology service and agrochemical products supplier, seeking minority financing 10%.
Strong reference and relationship clients
• Key corporate reference clients.
• Key PE clients in consumer markets.
• Relationship at C-suite level.
Industry domain expertise and insight
• Combining industry know-how/experience, market trends and consumer insight into deal work.
• Significant work in retail / New retail as well as FMCG/food sectors with expertise in due diligence, post-deal work, strategy.
Thought leadership
• Research and publication into topics like new retail, cross-boarder M&A. Frequent speakers at industry seminar and roadshow.
• Consumer insight and behaviour survey and proprietary city income database.
Dedicated team
• Dedicated partner and director team focusing on Consumer markets with substantial experience in the sector, knowledge of the industry.
Global network and China specific expertise
• Work closely with global consumer markets deal advisory teams in cross-boarder deals/projects.
PwC32
Industry trend
Growth of middle class: >400M middle class+ households by 2022 and share urban population is about to reach 60% by 2020
Young consumers and low-tier cities matter: 66% and 50% of consumption growth from them respectively with distinct behaviour.
Trading up and health & wellness: healthy food/supplement and lifestyle result in a demand increase for health food, packaged food, dairy products and sport goods.
Digitalisation: China the largest e-commerce market globally with >30% e-commerce penetration in many categories.
Experience driven and individualism: moving from “owning” to “experience” that drive demand for services (travel, education, spa etc); demand for products/brands that reflect individual style and personality
On the background of strong consumption growth and increasing omni-channel behaviour, as well as support from government (tax reforms, encouragement of strategic cross-boarder deals), total value of M&A in China’s R&C sector observed a 48% increase in 2018 (reaching USD59 billion) vs. 2017. The volume of transactions increased by 32% to 1,031.
Opportunities
Consumer markets companies are looking for ways leading to successful client centric and digital innovation. They have to invest more than before to stay competent in route to market, product/service catering model, supply chain, distribution and logistics management, etc.
Cross-boarder deal will continue to be focus: outbound to acquire strategic assets, brands and products; inbound to foster local and MNC player partnership.
Omni-channel deal another focus: digital channel and brick & mortar retailer cooperation, as well as supply chain integration/extension.
China R&C sector M&A transaction value and volume (1Q18 vs 1Q19)
51
76
57 53
34
40
64 62
39 24
40
8
- 10 20 30 40 50 60 70 80
- 1,000 2,000 3,000 4,000 5,000 6,000
Onlineretail
Traditionalretail
Food &beverage
Hotel, dining
and leisure
Textiles and
garments
Others
1Q19 total value1Q18 total value
1Q19 No. of transactions1Q18 No. of transactions
Source: Thomson Reuters, �ChinaVenture and PwC analysis
Your industry. Our focus. 33
Waldemar Jap
Partner
Deals
+852 2289 1892
Ken Zhang
Partner
Deals
+86 (21) 2323 3120
Roger Liu
Partner
Deals
+86 (21) 2323 3951
PwC34
Pharmaceutical
and life sciences
Your industry. Our focus. 35
Industry strength
Strong deal sourcing capability
Offer many pharmaceutical, and life sciences (PLS)investment opportunities and maintain solid relationships with investors active in the sector. Recent leads include:
• R&D company of small-molecule targeted drugs in the field of tumors and immune diseases (Transfer of old minority shares and negotiable for new shares);
• Generic testing company, licensed to serve the medical market (minority financing RMB100 million).
Great number of big pharma audit clients
• 33% of the top100 and 6 of the top10 global pharmaceutical companies being our clients;
• cooperated with over 2,100 pharmaceutical practitioners.
Rich M&A experience
• Full coverage of all sub-sector including pharma manufacturing, biotech, distribution/CSO, CMO/CRO, medical device etc;
• More than 100 PLS deals a year in the past three years.
Solid consulting capability
• A dedicated management consulting team focusing on PLS
• Leveraged consulting experience and internally sharing knowledge in delivering deals projects.
Thought leadership
• HRI, PwC’s dedicated health research Institute, conducts original, fact-based research and publishes analyses and viewpoints on topics of vital interest to a healthcare industry;
• Regular M&A trend report to capture market activities;
• Various forum to discuss hot topics.
PLS is a dynamic but challenging industry in China characterised by fast growing health spend, demand for better care, health care reforms, price & market access, digitalisation & E-commerce, and compliance.
Regulation change
A series of policies/regulations launched to reshuffle the industry and lead to deeper sector consolidation, i.e. speed up approval process of innovative drug, launch of MAH, the Two-invoice system, zero mark-up of medicines, QCE testing, 4+7 bulk purchase, joining ICH etc.
Structural adjustment
Structural adjustments in clinical medication and medicine distribution bring investment opportunities in innovative drug, bio technology, chronic drug, OTC, CMO, CSO, drugstore and etc.
Biopharma financing
HKEX and STAR market provide new ways of financing/capital raising for non-profitable biopharma companies and create shorter exit period for PE/VC investments.
MediTech
Technology driven in IVD, innovative consumables, home care and wearable equipment and rising opportunities.
PwC36
Industry trend
2016-2018 PLS deal value and volume
20.6 17.1 19.8
7.7
4.9
10.9
-
100
200
300
400
500
-
5
10
15
20
25
30
35
2016 2017 2018
Num
ber o
f dea
ls
USD
in b
illion
Deal value - deviceDeal value - pharma
Deal volume - pharmaDeal volume - device
Your industry. Our focus. 37
Xun Tang
Partner
Deals
+86 (21) 2323 3396
Janelle Fei
Partner
Deals
+86 (21) 2323 5229
PwC38
Mining & minerals
Your industry. Our focus. 39
Industry strength
Strong deal sourcing capability
Offer many inbound and outbound investment opportunities through our network firms globally and other advisors in the sector.
Global leading position in the sector
We have comprehensive resources to help mining companies understand and manage challenges in an ever-changing industry. PwC is the world’s leading professional adviser to the mining industry, serving more of the world’s top global mining companies than any other professional firm. We have in excess of 1,500 mining professionals across the globe and are present in all significant mining territories and capital markets. Leading mining companies recognise the value that we bring to their businesses.
Local insights and all-round services
We are well-known in the marketplace for our skills in assisting with and executing all types of transactions. We help our clients in the buy- and sell-side of mergers and acquisitions, including developing deals strategies, financial and tax due diligence, accessing capital markets, valuing, negotiating and structuring deals, and integrating or separating businesses and assets.
Expertise across entire value chain of mining & mineral sector
Working with exploration, production and service companies across the entire value chain of the sector.
Our services put companies and other mining sector stakeholders at the leading edge. Our insight into rapidly changing mining environments helps companies improve their performance and competitiveness.
PwC40
Industry trend
Strong Performance in 2018
2018 was a big year for M&A in the metals space, with total deal value of USD53.4 billion, compared to USD28.1 billion in 2017, a 90% increase from prior year. Average deal size in 2018 was USD160.5 million, a 113% growth over 2017.
Asia and Oceania regions strong presence and sub-sector focus
68% of deal value involved an acquirer within the Asia and Oceania region, contributing 56% of the deal volume in the year. Steel remained the dominant sub-sector with 51% of the deal value.
Future challenges and opportunities
Geopolitical instability and trade tensions may have played a role in depressing deal volume, and again the sector faces some uncertainties as the situations evolve. The geopolitical climate and continued uncertainty, on the other hand, could lead to companies slowing M&A activity in 2019 and taking time to review their portfolios amidst the uncertainty. This may lead to an increase in divestitures, which could provide value for both strategic and financial buyers.
M&A dealsdomestic transaction decline,
outbound transactions showed an upward trend, inbound seemed stable
2017
Deal value
USD28.1 bn2018
Deal value
USD53.4 bn
90% increase. Average deal size USD 160.5 m in 2018, 113% grow over 2017
Your industry. Our focus. 41
Franklin Zhai
Partner
Deals
+86 (21) 2323 2957
Nancy Nie
Partner
Deals
+86 (10) 6533 7978
PwC42
Telecommunications,
media and technology (TMT)
Your industry. Our focus. 43
Industry strength
Strong deal sourcing capability
Offer many TMT investment opportunities and maintain solid relationships with investors active in the sector. Recent leads include:
• China’s leading online retailer of nourishment and health products. Reported a revenue of RMB1.4 billion in FY18. Seeking minority financing of USD50~100 million.
• Share charging service provider, focusing on electric bike market. Has over 2 million registered users. Seeking minority financing of RMB50 million.
Leading capabilities in TMT industry
We have rich TMT industry experience (over 800 deals in the past 3 years), covering all the sub-sectors;
We understand the industry trend and client’s needs, and use this understanding to tailor our analysis to each company.
Integrated service to create value
We provide integrated services of financial, tax, and IT due diligence, to ensure comprehensive and consistent deliverables;
We have dedicated team with IT expertise to assess the specific risks in TMT industry.
In-depth insight in TMT company IPOs
We provide IPO audit services to many companies, i.e. Meituan Dianping, Xiaomi, China Tower, Tencent Music, NIO, Inc.
Our in-depth insight regarding the key concerns and issues, the regulation focus, and IPO experience can be shared with our clients.
Long-standing relationship with active TMT investors
We maintain good and long-standing relationship with active TMT investors. We focus on bringing proprietary values to support our clients.
PwC44
Industry trend
The past few years witnessed an exponential growth in TMT sector. In 2018, PE/VC deal value in TMT industry were over USD60 billion, while the total proceeds of Chinese TMT IPOs tripled from 2017 to reach USD35 billion.
Sub-sector growth drivers
China’s Internet and mobile internet remains an attractive subsector, driven by the rising consumer spending and constant business innovation over the past few years.
Global technology revolution, i.e. artificial intelligence, cloud computing, IoT, VR, and 5G mobile telecommunication, is reshaping not only technology and telecom sectors but also all other industries, creating new investment hotspots;
Entertainment and media grow steadily, as fragmented entertainment, digital content, and ACGN sectors attract much attention from investors.
Supportive policies
The State Council has launched the mass entrepreneurship and innovation policies and launched a series of preferential tax policies on technology companies. In 2019, China released regulations on the Science and Technology Innovation Board, which encourages listing of companies in high-tech and strategically emerging sectors. These policy measures further surge the growth of TMT industry.
Deal Value in TMT sub-sectors
13,936
20,051 17,109
7,913
15,732
23,072
13,480
20,478
15,724
20,530 16,554
11,454
-
5,000
10,000
15,000
20,000
25,000
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18
Entertainment and mediaTelecommunication
Internet and mobile internetTechnology
USD in million
Your industry. Our focus. 45
Alvin Bao
Partner
Deals
+86 (21) 2323 3923
Brenda Yip
Partner
Deals
+86 (755) 8621 8888
Carol Wu
Partner
Deals
+86 (10) 6533 2956
PwC46
Automotive
Your industry. Our focus. 47
Industry strength
Strong deal sourcing capability
Offer many automotive investment opportunities and maintain solid relationships with investors active in the sector. Recent leads include:
• Automotive suspension system provider mainly targeting at international automobile after-sales market. Reported a revenue of RMB1 billion in FY18. Available for buyout.
• Innovative new energy vehicles manufacturers of both passenger vehicles and commercial vehicles. Expects to have a profit of RMB70-100 million in FY19. Seeking minority financing of RMB200~300 million.
Autofacts
PwC Autofacts® is a leading provider of automotive information and forecasts with over 25 years of experience. The forecast data and analyses are used both by PwC’s client service teams and by PwC Autofacts® distinct client base to assess implications, make recommendations and support decisions in the automotive sector.
Team capacity
PwC China’s Automotive Team is an integral part of our global automotive network which consists of 4,800 partners and client service professional focused on providing services across the entire automotive value chain.
Client relationship
• Representative Multi-National companies;
• Chinese auto manufacturers and service providers.
Market insights
As the market matures, used car, auto finance, aftermarket against the traditional value chain have welcomed numerous opportunities. Meanwhile, all market forces have been busy developing its strategy layout in areas of new energy vehicles, car sharing, connected car and autonomous driving.
PwC48
Industry trend
Despite of weakening market performance in automotive industry, the outlook of China market is still positive
• Global auto sales continued to surpass 90 million units in 2018.
• Surprisingly, China market posted negative growth (-2.8%) for the first time in the past 3 decades, impacted by soured macro condition and weakening consumer confidence.
• Moreover, the European and US markets have been stagnant since last year which enhanced a weakening global topline.
• India and Russian are two markets that grew at 8.8% and 12.8% respectively.
• Driven by strong demand on passenger cars, new energy vehicle will take up 17% of China market, embracing 25% CAGR between 2019 and 2025.
reaching
33.6million units
5.5%CAGRfrom 2018 to 2024
Looking forward, we keep a positive outlook for China market. We predict a 5.5%CAGR from 2018 to 2024, reaching 33.6million units.
44.1%
China will continue to be the major growth engine to the global automotive market with estimated volume contribution of 44.1%.
Your industry. Our focus. 49
Elaine Wu
Partner
Deals
+86 (21) 2323 3065
Sure Yang
Director
Deals
+86 (10) 6533 5457
George Lu
Partner
Deals
+86 (10) 6533 2920
Xun Tang
Partner
Deals
+86 (21) 2323 3396
PwC50
Oil & gas
Your industry. Our focus. 51
Industry strength
Strong deal sourcing capability
Offer oil and gas investment opportunities and maintain solid relationships with investors active in the sector.
Global industry network
PwC has oil and gas professionals/market experts across global network including Americas, Europe, Middle East, Africa and Asia Pacific. We serve more than 2,500 oil and gas clients, from every segment of their businesses.
Complete value chain services
We provide services across the complete oil & gas deals and value chain: upstream, midstream, downstream and services companies.
Integration capability
We integrate our deep industry knowledge/experience to support numerous deals across the oil & gas industry: Financial advisory; Due diligence; Valuation & business model; Deals strategy and operation; Tax; and Business restructuring.
Value creation
We unlock clients’ value beyond the deals by a comprehensive planning, digital & emerging technology, operating performance, prioritisation & optimization of capital spending, data analytics restructuring, international expansion, etc.
PwC52
Industry trend
China’s outbound focus
China is the world’s second-largest consumer of oil (after the US) and also the third-largest natural gas consumer. ~70% of crude oil consumption and 40% of gas consumption are dependent on imports. Chinese outbound buyers is expected to be growing force in the M&A market in oil and gas industry.
Diversification of investors
While the Chinese NOCs (National Oil Companies) are still dominant, new players (POE, Institutional investors, other SOE) are emerging, especially in midstream and downstream assets.
China gas consumption
Considering China’s surging demand in gas (8% CAGR of natural gas consumption in the coming years), more LNG and related value chain M&A activities will take place.
China inbound focus
The potential further open-up of China’s domestic markets and implementation of environmental and safety regulation provides multinational corporations with more access to opportunities, particularly in the fields of unconventional oil & gas, petrochemicals and retail stations.
~70%of crude oil consumption
40%of gas consumption
Your industry. Our focus. 53
Franklin Zhai
Partner
Deals
+86 (21) 2323 2957
Steve Cheng
Partner
Deals
+852 2289 2568
PwC54
Healthcare
equipment
Your industry. Our focus. 55
Industry strength
Strong deal sourcing capability
We have a wide regional and global network of clients and investors that focus on the medical technology sector. This enables our specialist deals sourcing team in identifying attractive deal opportunities for your consideration. Recent leads include:
• Early breast cancer detection technology with successful clinical studies; On path towards FDA and CFDA approval. Seeking minority financing of USD15 million.
• High-tech company offering bionic prosthesis designed for hand amputees; Has independent intellectual property rights. Seeking minority financing of RMB30 million.
Brand Recognition
“PwC is among the top 3 global health industry consulting and advisory firms”
Kennedy International
“PwC has extensive experience working with life science companies across...pharmaceutical, biotech, and medical devices… PwC continues to receive high marks for under promising and over delivering, bringing industry-specific knowledge (instead of templates) to engagements, and uniquely understanding industry needs from a business perspective.”
IDC, 2016
Good global credentials
Many global credentials for large deals in the last few years.
Healthcare professionals in our network
More than 5,000 professionals globally serving the Healthcare Industry – including experienced executives, strategists, CPAs, attorneys, actuaries, PhDs, regulators, physicians, nurses, pharmacists and technologists.
PwC56
Industry trend
Rapid healthcare expenditure growth in China: In 2020, total healthcare expenditure in China will reach RMB6.5 trillion, accounting for 7.0% of total GDP.
Aging population: China’s senior population (i.e. 65 and older) will grow to 18.2% of the total population by 2030.
Government investment and support: Chinese government has been concentrating its resources on developing basic medical institutions in rural regions, and encouraging Investment in clinical examination laboratories.
Healthcare reform: Ease restriction on foreign investment.
Urbanisation: Increased share of urban population and lifestyle shift bring in greater awareness of diagnostic medical services and consumers’ enhanced ability and willingness to spend on diagnosis and treatment.
New regulation providing greater certain for investors
EU, India and China put in place new regulations on clinical standards in 2017 (to take effect by 2020).
Overseas acquisition of MedTech capabilities to bring back into China
E.g. acquisitions of Sirtex (Australia, oncology treatments) for USD1.4 billion and Echosens (France, liver diagnostics) for RMB203 million.
(In particular US) PEs doing take-private deals
E.g. LifeScan (J&J carve-out), Analogic (Altaris Capital), LifeHealthCare (PEP).
China Total Healthcare Expenditure and Share of GDP, 2005-2020E
reaching
33.6million units
1.2 1.5 1.8 2.0 2.4 2.8 3.2 3.5 3.9 4.6 5.3 6.5
4.3 4.6 5.1 4.9 5.0 5.3 5.4 5.6 5.8 6.2 6.4 7.0
0
2
4
6
8
10
0
2
4
6
8
10
Total health expenditure % to GDP
20092007 2008 2020E2010 2011 2012 2013 2014 20172015 2016
% CNY Trillion+16%CAGR
+7%
Sources: SPEEDA, PwC Analysis
Your industry. Our focus. 57
Leon Qian
Partner
Deals
+86 (10) 6533 2940
Kushal Chadha
Partner
Deals
+852 2289 1815
PwC58
Chemicals
Your industry. Our focus. 59
Industry strength
Global industry network
PwC’s chemicals industry practice consists of more than 3,600 professionals who serve the chemicals industry and is a part of an industrial products group comprising more than 31,500 professionals, among whom more than 18,600 provide assurance services, 7,700 provide tax services, and 5,200 provide advisory services.
China knowledge, speed and quality
We are well-known in the marketplace for our skills in executing all types of transactions. Our people are familiar with China business practices and experienced in dealing with local companies, Chinese management and employees. Our team can think under the deal mindset and act under deal speed to support our clients in realising their deal strategy.
Integrated service to create value
We provide integrated services which may involve work streams from due diligence, deal strategy advisory, valuation and other consulting services, aiming to creating value to clients.
High profile clients and established trust
We provide professional audit services to more Fortune Global 500 chemicals companies than any other firms. We have maintained long-standing relationship with leading players in the Basic and Specialty Chemicals, and Petrochemicals sectors. The trust we’ve established has helped strengthen our insights into industry dynamics.
In-depth understanding of chemicals industry Issues
We have developed an understanding of the Chemicals industry from numerous projects and research. We have in-depth insights in M&A, portfolio management, regulation considerations (e.g. REACH), risk management and security, corporate governance, cost reduction / performance improvement, etc.
PwC60
Industry trend
Dynamic changes of downstream industries lead to diverse performance by application
Several large traditional downstream industries (e.g. auto and textile) have been under pressure. Chemical companies focusing on fast-growing applications (e.g. new energy, telecom, electronics and environment protection) have more favourable demand momentum.
Tightening environmental & safety requirements stimulate market integration
The government is paying more attention to environmental and safety issues of the chem icals industry. With the stricter enforcement of regulations by authorities, small manufacturers with low standards in waste treatment are bound to be eliminated, and leading players may take this opportunity to expand.
Vertical integration is also the key growth initiative for chemicals companies
Chemicals companies are seeking growth opportunities along the value chain, either investing in the upstream raw materials production to control supply and cost or exploring downstream specialty chemicals businesses.
Customer resources of local companies are one of the key deal motivations for inbound fine chemicals investments
Local fine chemicals companies have good customer relationship and well-established distribution network, which is attractive to many chemicals MNCs.
Low valuation multiple may attract value buyers
The industry PE and PB multiples have recently hit historical lows (based on market multiples). Some financial and strategic buyers may be in search of investment opportunities for under-valued assets.
PwC60
Your industry. Our focus. 61
Ken ZhangPartner
Deals
+86 (21) 2323 3120
Candy MaPartner
Deals
+86 (21) 2323 8263
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
© 2020 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
