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MoneyTreeTM China TMT ReportQ3/Q4 2015 Data source: Zero2IPO Research

Technology Institute

This MoneyTreeTM China Telecommunications, Media and Technology (TMT) Report includes information on private equity and venture capital (PE/VC) investment in the TMT industry for Q3/Q4 2015, as well as Q1/Q2 2015, 2014 and 2013.

Table of contents

1. Overview 4

2. PE/VC investments in the TMT industry 5

TMT industry investments compared with all industries 5

Investments by quarter 7

Investments by sector 8

First-time funding compared with follow-on funding 11

Investments by stage of development 13

Investments by region 16

3. PE/VC exits in the TMT industry 17

Exits by quarter 17

Exits by type 18

Exits by sector 20

4. Sector focus: Technology, Internet, and Telecommunications and Mobile

21

Investments in Technology 21

Investments in Internet 27

Investments in Telecommunications and Mobile 33

5. A close look at investments in Mobile 37

6. Methodology and definitions 40

7. Contacts 42

4 MoneyTreeTM China TMT Report Q3/Q4 2015

In the second half (H2) of 2015, private equity and venture capital (PE/VC) investment in the TMT industry increased steadily despite the downturn of the domestic macro-economy. The variable and uneven market had no material impact on TMT investments. In H2 2015, the TMT industry continued its high-speed development momentum of H1 2015, with the deal value increasing by 8% half over half (HoH) to US$19.01 billion, and the deal volume increasing by 11% HoH to 1,435 deals. Both the deal value and volume in the TMT industry in H2 2015 reached a new record since 2012.

The deal volume in the TMT industry, in Q3 accounted for half of the overall Q3 deals. The highest single-deal value continued to reach a historical high. There were 32 deals each with values over US$100 million in H2 2015. However, Q3 and Q4 were totally different. In Q3 the TMT industry continued its hot development trend of H1 but this declined significantly in Q4. As the capital market entered winter time, investors became prudent.

From the point of view of the sectors, the Internet clearly continued to see the most investment in terms of both deal volume and deal value. The deal value in the Telecommunications and Mobile sector exceeded that of the Technology sector, ranking second with investment of US$3 billion, the most it’s seen since 2012. In terms of deal volume, the Technology sector exceeded Telecommunications and Mobile, ranking second.

1. OverviewIn H2 2015, IPO was suspended and resumed, resulting in a significant decrease in total exit volume compared to H1. Meanwhile, due to good policies and a strong market, M&A grew quickly. The M&A volume in H2 2015 accounted for 47% of total exits, more than twice the level of H1 2015. Therefore, M&A became the most popular method of exit. In Q3, the volume of M&A activity reached a historical high since 2012.

With innovation as the major theme of development, the TMT industry, as a model, is continuously driving other traditional industries to move into a brand new era and develop new blueprints. This report shows you the details of PE/VC investments and exits in the TMT industry and its three major sectors, helping you understand the trends in TMT industry investments. We would greatly welcome discussing this report with you, and encourage you to contact us.

Wilson ChowPwC China & Hong Kong TMT Leader

Jianbin GaoPwC China TMT Leader


In Q3, the deal value of overall PE/VC saw a record high since 2012. Both the deal value and volume of TMT industry investment reached historical records since 2012

In Q3 2015, overall industry investment amounted to US$25.63 billion, an increase of 6% QoQ, reaching a new high since 2012. The deal volume experienced a slight decrease compared to Q2 2015, despite an increase of 11% QoQ in the average single-deal value. The TMT industry continued its high-speed development momentum of H1 2015, with deal value significantly increasing by 48% QoQ to US$13.29 billion, and deal volume increasing by 65% QoQ to 954 deals. Both the deal value and volume in the TMT industry of this quarter reached a new high since 2012.

TMT industry investments compared with all industries

2. PE/VC investments in the TMTindustry

In H2 2015, overall PE/VC investments continued to be hot in the sluggish capital market. In Q3, high growth continued after soaring in Q2. In Q4, it remained high though experiencing a sharp fall. It is still expected to maintain stability in 2016.

Overall, despite the fluctuation of the stock market and the downturn of the traditional economy, the investments in the TMT industry further increased in Q3 2015 with the deal value accounting for half of the overall industry investment. In Q4, this enthusiasm cooled down as investors turned cautious. However, from the point of financial investment, strategic investment and outbound acquisition, the TMT industry will continue to be a hotspot.

PwC Viewpoints

In Q4, the deal value and volume of overall PE/VC investments fell sharply

In Q4 2015, the deal value of overall PE/VC investments decreased by 40% QoQ, deal volume dropped by 48% QoQ while the average single-deal value increased by 15% QoQ. In Q4, the deal value and deal volume in the TMT industry dropped by 57% and 50%, respectively, compared to Q3, experiencing an overall downward trend.

Overall industry investment in H2 2015 maintained the strong momentum from the first half of the year and remained on an upward trend. Total TMT deal value and volume accounted for 46% and 40% of overall industry investments, respectively.


Overall PE/VC investments

In Q3 2015, there were a total of 2,379 PE/VC investments across all industries totalling US$25.63 billion, which represented a decrease of 4% by volume, but an increase of 6% by value compared to Q2 2015.

In Q4 2015, there were a total of 1,242 PE/VC investments across all industries, a decrease of 48% compared to Q3 2015. The deal value of US$15.33 billion decreased by 40% compared to Q3 2015.

PE/VC investments in TMT

In Q3 2015, there were 954 PE/VC investments in the TMT industry, accounting for 40% of total volume across all industries. The deal value of US$13.29 billion represented 52% of the total PE/VC deal value in the same period.

In Q4 2015, the number of TMT investments reached 481, accounting for 39% of total PE/VC volume across all industries. Deal value for the quarter was US$5.72 billion, representing 37% of the total PE/VC deal value in the same period.

Figure 1: Comparison of PE/VC investments and TMT investments ‒ Q1 2013-Q4 2015 (Deal value)

Q1’13 Q2’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15Q3’13

30,000

25,000

20,000

15,000

10,000

5,000

0

$25,632

$15,325

$24,176

$18,584

$5,723

$8,957$8,577

$11,230

$16,084$17,612

$5,868$7,284$7,531

$6,675

$3,240$1,191 $1,962

$3,614$2,490

$5,539$3,865

$5,137

$779

$13,289

US$m

PE/VC funding in all industries PE/VC funding in TMT industry

Figure 2 : Comparison of PE/VC investments and TMT investments – Q1 2013-Q4 2015 (Deal volume)

3,000

2,500

2,000

1,500

1,000

500

0

257 259476 463

336 412618

Q1’13 Q2’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15Q3’13

1,814

2,486 2,379

1,242

481

954

577716

429466251271288239197168

593

PE/VC deal volume in all industries PE/VC deal volume in the TMT industry


Investments by quarter

In Q3 2015, there were 954 deals in the TMT industry, a rise of 65% over Q2 2015. The deal value amounted to US$13.29 billion, an increase of 48% compared to Q2 2015.

In Q4 2015, there were 481 deals, a drop of 50% compared to Q3 2015. The deal value amounted to US$5.72 billion, down 57% compared to Q3 2015.

In Q3, the deal value and volume reached the highest since 2012

In Q3, the deal value and volume in the TMT industry rose sharply by 48% and 65%, respectively, compared to Q2 2015, reaching new records since 2012. In Q3, the average single-deal value decreased by 38% QoQ. However, there were 21 deals over US$100 million, and the largest single deal was US$3 billion.

In Q4, the overall investments saw a downward trend

In Q4, the deal value and volume in the TMT industry slumped by 57% and 50%, respectively, compared to Q3, representing a sluggish trend. In Q4, there were 11 deals over US$100 million, and the largest single deal was US$0.5 billion.

The booming trend of investments in the TMT industry was evidenced in various aspects:

1. Both the deal value and volume has increased significantly year after year. The volume of single-value deals over US$100 million jumped to 71 in 2015 from 9 in 2012, with 39 and 32 for H1 and H2 2015, respectively. The highest single-deal value was eye-catching and continued to reach new highs.

2. Because of the popularization of the smart phone and tablet PC, among all the deals with single values over US$100 million, 54 deals were related to internet or mobile internet. Most large internet deals were investments of E-commerce and internet services such as travel, transportation and etc.

3. The large volume of single deals with a value over US$100 million reflects a distinctive characteristic of China’s TMT industry currently. As the traditional economy has not yet seen the degree of industry consolidation observed in developed countries, China’s TMT industry, and particularly the Internet sector act as the main force driving industry consolidation and connecting traditional industries with the internet. More large deals are expected in 2016.

PwC Viewpoints

Figure 4: Volume of TMT investments with single value over US$100 million by quarter – Q1 2013-Q4 2015

25

20

15

10

5

0

Q1’13 Q2’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15Q3’13Q1’12 Q2’12 Q4’12Q3’12

0 022

5

23

97

11

1920

21

11

79

Figure 3: TMT investments by quarter ‒ Q1 2013-Q4 2015 (Deal volume/Deal value)

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

1,200

1,000

800

600

400

200

0

Q1’13 Q2’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15Q3’13

$1,191 $779 $1,962$3,614 $2,490

$5,539$3,865

$5,137

$8,577 $8,957

$13,289

$5,723

Deal value Deal volume

US$m

168 197251239

288 271

466 429

716

577

954

481


Investments by sector

The TMT industry is divided into the following sectors: Technology, Internet, Telecommunications and Mobile, and Entertainment and Media.

As the hottest investment sector in the TMT industry, the Internet remained outstanding in H2 2015. There were 487 investments with a total investment value of US$5.36 billion in Q3, reaching a record high since 2012. The deal volume and value in Q4 decreased by 51% and 35%, respectively, compared to Q3.

The deal value in H2 2015 saw little fluctuation compared to the first half of the year. However, the deal volume increased greatly, leading to the single-average-deal value to slump by 45% QoQ. In Q3 2015, the deal volume was over 200 deals for the first time, a new record high since 2012. Meanwhile, there were six deals with over US$100 million single-deal value in Technology in H2, and the largest single deal was US$1 billion.

The Telecommunications and Mobile sector posted good performance, second only to the Internet in H2 2015. In Q3, average single-investment value sharply increased by 244%. In Q3 2015, the deal value increased by a whopping 399% compared to Q2, reaching a new historical record since 2012. The deal volume increased by 45%. In Q4, the deal value and volume declined sharply by 89% and 60%, respectively, compared to Q3 2015. The largest single-deal value in H2 2015 was in the Telecommunications and Mobile sector, with a value of US$3 billion.

In Q3, the deal volume in the Entertainment and Media sector increased by 45%, a new record high since 2012. However, the deal value decreased by 54% QoQ. In Q4, the deal volume and value continued to decrease by 42% and 78%, respectively.

In H2 2015, the Internet sector attracted the most investments. Both the proportions of its deal volume and its value ranked first, and it had the largest number of deals with single-deal-value over US$100 million, primarily due to contributions from Internet Service investments. The deal value in Telecommunications and Mobile exceeded that of Technology and ranked second due to the highest investment since 2012, fully demonstrating the charm of Mobile. By contrast, in H2 2015, the Technology and Entertainment and Media sectors had huge deal volume, but small single-deal values.

PwC Viewpoints

Figure 5: Deal value comparison in TMT sectors – Q1 2013-Q4 2015

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

$1,191$1,962

$3,614

$2,490

$5,539

$3,865

$5,137$5,718

$8,577 $8,957

$13,288

$779

Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15

Telecommunications and Mobile

Technology Internet

Entertainment and Media

US$m

Figure 6: Deal volume comparison in TMT sectors – Q1 2013-Q4 2015

600

500

400

300

200

100

0

Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’1516

38

13 22 319 12 15 10 20 31 45 26

5645

71 74 76 74112 113

94 78119

207

125

105152

269

154

61

67 68 48 4036

78 83 70115 138 125

245 228

370316

487

239

Telecommunicationsand Mobile

Technology Internet Entertainment and Media

In Q3 2015, among the 21 deals over US$100 million, the Internet sector, Technology sector, Telecommunications and Mobile sector, and the Entertainment and Media sector accounted for 58%, 14%, 14% and 14%, respectively.

In Q4 2015, among the 11 deals over US$100 million, the Internet sector, Technology sector, and the Telecommunications and Mobile sector represented 64%, 27% and 9%, respectively.


Q3 2015Total deal volume for the TMT industry reached 954 deals, with a total investment value of US$13.29 billion.

Figure 8: Deal value in TMT sectors Q3’15 (US$m)

Figure 7: Deal volume in TMT sectors Q3’15

Internet: 487 deals, 51% of the total

Technology: 269 deals, 28% of the total

Telecommunications and mobile: 152 deals, 15.9% of the total

Entertainment and Media: 45 deals, 5% of the total

Undisclosed: 1 deal, 0.1% of totalDeal value by sectors:

Internet: US$5.36 billion, 40% of the total

Telecommunications and mobile: US$4.28 billion, 32% of the total

Technology: US$2.39 billion, 18% of the total

Entertainment and Media: US$1.25 billion, 9.99% of the total

Undisclosed: US$790,000, 0.01% of the total

48751%

26928%

15215.9%

455%

10.1%

TechnologyTelecommunications and Mobile

Internet

Entertainment and MediaUndisclosed

$5,36140%

$4,28232%

$2,39218%

$1,2539.99%

$0.790.01%

Telecommunications and MobileTechnology

Internet

Entertainment and Media Undisclosed

QoQ comparison between Q2 2015

and Q3 2015

Deal volume

Dealvalue

Technology技 115% 47%

Internet技技 54% 44%


45% 399%

Entertainmentand Media

45% 54%



and Q4 2015

Deal volume

Dealvalue

Technology技 43% 39%

Internet技技 51% 35%


60% 89%

Entertainmentand Media 传技

42% 78%

Deal volume by sector:

Internet: 239 deals, 49.8% of the total


Telecommunications and Mobile: 61 deals, 13% of the total


Undisclosed: 1 deal, 0.2% of total

Deal value by sector:

Internet: US$3.51 billion, 61% of the total

Technology: US$1.46 billion, 26% of the total

Telecommunications and Mobile: US$480 million, 8% of the total

Entertainment and Media: US$272 million, 4.9% of the total

Undisclosed: US$4.96 million, 0.1% of the total

Q4 2015

Total deal volume for the TMT industry reached 481 deals, with a total investment value of US$5.72 billion.

Figure 9: Deal volume in TMT sectors Q4’15

Figure 10: Deal value in TMT sectors Q4’15 (US$m)

239

49.8%

15432%

6113%

265%

10.2%

Telecommunications and MobileTechnology Internet


$3,50561%

$1,46126%

$4808%

$2724.9%

$4.960.1%


Technology Internet



Figure 11: TMT follow-on funding compared with initial investments – Q1 2013-Q4 2015

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15

67%63% 61% 58%

78%73%

61%65%

53% 55%

44% 45%

Initial investments Follow-on investments

First-time funding compared with follow-on funding

Q3 2015

There were 742 enterprises engaged in first-round funding in the TMT industry, making up 78% of the total deal volume in the TMT industry, up 20% compared to Q2 2015, and a new record high since 2012. The total deal value of first-round funding reached US$4.48 billion, representing 34% of the total deal value in the TMT industry in Q3, up 16% compared to Q2 2015, which created a new record high since 2012.

Q4 2015

In this quarter, 353 TMT companies successfully received first-round funding, accounting for 73% of the total deal volume in the TMT industry. The percentage was only five percent lower than the previous quarter in the TMT industry. The total investment figure for first-round funding was US$2.19 billion, representing 38% of the total deal value in the TMT industry, an increase of 4% compared with Q3 2015.


Q3 2015

Enterprises engaged in first-round funding by sector:

Internet: 400 enterprises, funding total US$2 billion

Technology: 185 enterprises, funding total US$611 million

Telecommunications and Mobile: 121 enterprises, funding total US$918 million

Entertainment and Media: 35 enterprises, funding total US$952 million

Undisclosed: 1 enterprise, funding total US$790,000

For first-round funding, 536 enterprises were at the early stage, accounting for 72%; 147 enterprises were at the expansion stage, accounting for 20% and 59 enterprises were at late stage, accounting for 8%.

Q4 2015

Enterprises engaged in first-time funding by sector:

Internet: 191 enterprises, funding total US$1.225 billion

Technology: 96 enterprises, funding total US$621 million

Telecommunications and Mobile: 47 enterprises, funding total US$317 million

Entertainment and Media: 18 enterprises, funding total US$18 million

Undisclosed: 1 enterprise, funding total US$4.96 million

For first round funding, 236 enterprises were at the early stage, accounting for 67%; 76 enterprises were at the expansion stage, accounting for 21% and 41 enterprises were at late stage, accounting for 12%.

In H2 2015, over 70% of investments were first round, illustrating the rapid upgrading and emerging new projects in the TMT industry. Meanwhile, there were nine deals with single values over US$100 million among first-round funding, showing that investors became more and more interested in new projects and were willing to invest more in them. In terms of industry distribution of first round investment, Internet enterprises were far ahead of the other three sectors in both volume and value. Various new internet or mobile internet enterprises emerged one after another due to the implementation of entrepreneurship and innovation incentive policies encouraged by the government. Internet services related to people life, such as transportation, travel, education and automobile, became the main trend of entrepreneurship. Innovation and entrepreneurship not only changed our consumption patterns of life but also attracted many investors’ interest.

PwC Viewpoints

Q3 2015

First-time funding summary (US$)

Number of enterprises

<= 1m 363

1m-5m 266

>5m-10m 46

>10m 60

N/A 7

Q4 2015

First-time funding summary (US$)

Number of enterprises

<= 1m 115

1m-5m 165

>5m-10m 43

>10m 30

185

121

40035

19196

47 18


Investments by stage of development

The deals for early-stage investments saw dramatic increase in Q3 and significant decrease in Q4

Among the four stages of investment, the deal volume for early-stage investments took the lead as usual, accounting for 63% and 57% of the total in Q3 and Q4 2015, respectively. In Q3 2015, early-stage investments reached 603 deals, or US$4.165 billion, the highest level since 2012. In Q3, the highest single deal value reached US$499 million.

In Q3, the deal volume and value for expansion stage hit new records, while in Q4 both dropped significantly

The deal value of expansion-stage investments exceeded that of early-stage investments by almost US$6 billion, accounting for 45% of the total deal value of all four stages, a historical high since 2012. In Q4, the deal value slumped 80% compared to Q3, only accounting for 21%. This is because there was a huge investment of US$3 billion in Q3, which was also the highest H2 single-deal value in the TMT industry. In Q3, the deal volume increased by 74% compared to Q2 and reached a record high since 2012 with 232 deals. In Q4, the deal volume decreased by 49% compared to Q3 and remained around 25% in H2.

Deal volume for late-stage investments in Q3 exceeded one hundred for the first time

The deal value for late-stage investments in Q3 2015 sharply increased by 553% to US$1.29 billion, accounting for 10% of the total. However, the deal value in Q4 decreased by 54% compared to Q3. The late-stage investments in Q3 increased by 76% to 109 deals, the highest level since since 2012.

PIPE (private investment in public equity) deal volume hit record high since 2012 in Q4 2015

Overall, the deal volume of PIPE investments rose further in H2 2015. In Q4, there were 25 deals, an increase of 150% compared to Q3. In addition, over 60% of the PIPE investments were in the Technology sector. However, the deal value of PIPE suffered a significant decline compared to the sharp increase over Q2. The total deal value in H2 was less than that of Q2, primarily due to decreases in the average single-deal value. In H2 2015, the transaction with the second highest deal value was a PIPE transaction of US$1 billion.

Figure 12: TMT investments by stage of development – Q1 2013-Q4 2015 (Deal value)

PIPE

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15

$1,188 $779

$1,955

$3,614$2,490

$5,539

$3,865

$5,137

$8,577$8,957

$13,289

$5,723

Early stageLate stage Expansion stage

US$m

Figure 13: TMT investments by stage of development – Q1 2013-Q4 2015 (Deal volume)

PIPE

700

600

500

400

300

200

100

0Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15

327 21 22 22 21 29

62 65

119

232

13312992

6381

695857

80122

100110

138 147165 160

314

312

544

367

603

272

109

16 1723

8 7 6 53 412 10

2518

Early stage Late stageExpansion stage


Q3 2015

Total deal volume in the TMT industry reached 954 deals, with a total investment value of US$13.29 billion.

Deal volume by stage of development:

Early stage: 603 deals, 63% of the total

Expansion stage: 232 deals, 24% of the total

Late stage: 109 deals, 12% of the total

PIPE: 10 deals, 1% of the total

Figure 15: Deal value in TMT industry by stage of development Q3’15(US$m)

$5,95545%

$4,16531%

$1,87914%

$1,29110%

PIPEEarly stageLate stage

Expansion stage

Deal value by stage of development

Expansion stage: US$5.96 billion, 45% of the total

Early stage: US$4.17 billion, 31% of the total

PIPE: US$1.88 billion, 14% of the total

Late stage: US$1.29 billion, 10% of the total

QoQ comparison between Q2 2015 and Q3 2015

Deal volume

Deal value

Early stage 64% 100%

Expansion stage

74% 147%

Late stage 76% 553%

PIPE 17% 56%

Figure 14: Deal volume in TMT industry by stage of development Q3’15

60363%

23224%

101% 109

12%

PIPE

Early stage

Late stageExpansion stage


Q4 2015

Total deal volume in the TMT industry reached 481 deals, with a total investment value of US$5.72 billion.

Deal volume by stage of development

Early stage: 272 deals, 57% of the total

Expansion stage: 119 deals, 25% of the total

Late stage: 65 deals, 13% of the total

PIPE: 25 deals, 5% of the total

Deal value by stage of development

Early stage: US$2.27 billion, 40% of the total

PIPE: US$1.66 billion, 29% of the total

Expansion stage: US$1.19 billion, 21% of the total

Late stage: US$599 million, 10% of the total

Figure 16: Deal volume in TMT industry by stage of development Q4’15

27257%

11925%

6513%

255%

PIPE

Early stage

Late stageExpansion stage

Figure 17: Deal value in TMT industry by stage of development Q4’15 (US$m)

$2,27340%

$1,65629%$1,194

21%

$59910%

PIPE

Early stageLate stage

Expansion stage

QoQ comparison between Q3 2015 and Q4 2015

Deal volume

Deal volume

Early stage传 55% 45%

Expansion stage传传

49% 80%

Late stage传 40% 54%

PIPE 150% 12%


Investments by region

In Q3 and Q4 2015, 1,435 TMT deals disclosed the region where investments took place. The top five investment regions in China in the TMT industry were Beijing with 493 deals (accounting for 34% of the total deal volume), Shanghai with 261 deals, Shenzhen with 137 deals, Zhejiang Province with 132 deals and Guangdong Province (except Shenzhen) with 119 deals. The total deal volume of the top five regions was 1,142, accounting for 80% of the total.

In terms of investments regions, both the deal volume and value in Beijing were far above other provinces in H1 2015; Beijing was still the core area of the Chinese TMT industry, and it is estimated that it would be difficult to surpass by other regions in the short term.

In H1 2015, the deal volume and value in Shanghai saw a significant increase; Fujian Province also surged abruptly with deal value surpassing Shenzhen. Overall, TMT investments were mostly concentrated in the four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen and the provinces located on the east coast of China.

Total deal value of investments with regions disclosed was US$19.01 billion. In terms of deal value, the top two rankings remained the same. Tianjin surpassed Shenzhen and ranked third. The top five regions by deal value had an aggregated deal value of US$16.47 billion, accounting for 87% of the total. Beijing took the top spot with an impressive sum of US$7.82 billion, and Shanghai ranked second with US$4 billion, followed by Tianjin, Shenzhen and Zhejiang Province ranking third, fourth and fifth, respectively, with an aggregated deal value of US$4.65 billion.

PwC Viewpoints

Figure 18: The top six regions for TMT investments in Q3/Q4’15 (Deal volume/Deal value)

493

261

137

132

119

$7,820

$1,502

$1,480

$3,996

$519

16 $1,668

0 4,000 6,000 10,0008,0002,000

US$m

Deal volume

Beijing

Shanghai

Zhejiang Province

Tianjin

Shenzhen

Guangdong Province (except Shenzhen)


Exits by quarter

3. PE/VC exits in the TMT industry

In H2 2015, TMT exit volume hit a record high since 2012

In Q3 2015, there were 69 exits, and one quarter later, the number decreased to 53. There were 49 exits in H1 2015. In general, the total amount of exits in H2 2015 increased by 149% compared to H1 2015.

The Chinese economy slowed down in 2015. In H2 2015, because A-share IPO was suspended and resumed, M&A and management buy-out surpassed IPO as the main forms of exit. In H2 2015, due to the strong support from the government, the M&A transactions started to boom and reached its second highest point since 2012. It is expected that domestic M&A will continue to increase in the future. The booming of M&A is mainly due to the long wait times for IPO. Backdoor listing or significant assets restructuring has become the exit method for many TMT investments.

Meanwhile, a large proportion of A-share listed companies and domestic investment companies entered into M&A, mainly because of the economic slow-down. More and more enterprises are considering their future development in the industry and intend to further expand businesses, develop production lines and seek new performance growth through M&A with other relevant enterprises. Furthermore, M&A costs were low due to the sluggish capital market, attracting more enterprises to exit through M&A. According to the disclosed data, over 80% of M&A deals were not related to BAT (Baidu, Alibaba, Tencent), which disproves the traditional mode that BAT, as the TMT leaders, involved in many M&A deals in various internet subsectors.

PwC Viewpoints

Figure 19: Exit volume in the TMT industry – Q1 2013-Q4 2015

80

70

60

50

40

30

20

10

0

Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15

6

23 2326

69

53

20

1014

18 16 17


The number of IPOs declined dramatically in Q3 2015 due to the suspension of IPO in July, accounting for the drop to 14% from 77% in Q2. This was the second depression since H1 2013. The resumption of IPO in November 2015 resulted in a slight rebound in the number of IPOs in Q4, when they accounted for 28% of exits.

M&A accounted for 46% and 47% of total exits in Q3 and Q4 2015, respectively, increasing by more than 100% compared to H1 2015. Therefore, M&A became the major method of exit. In Q3, the number of M&A exits reached a new historical high since 2012.

Exits by type

Historically, management buy-out and secondary sale represent a small percentage, normally no more than 20%, of the total exits. In Q3, the proportion of IPO declined greatly due to suspension, and both the management buy-out and secondary sale exits broke the historical record since 2012. The number of secondary sales was far more than that of IPO. There were no management buy-outs in Q4, and the number of secondary sales dropped slightly, and were lower than IPOs.

Figure 20: TMT exit trends by type – Q1 2013-Q4 2015

IPO

80

70

60

50

40

30

20

10

0

Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15

2 11

1 11

11 1 1

2

22 22 2

335 6 69 8

45 5

8

4

77

10

11

11

14 20 32

13

15

25

19

10

8

4

Strategic sale Management buy-out Secondary sale


In Q3 2015, there were 69 exits in total, broken down as follows:

Strategic sale: 32 exits, 46% of the total

Secondary sale: 19 exits, 28% of the total

IPO: 10 exits, 14% of the total

Management buy-out (including buy-back): 8 exits, 12% of the total

In Q4 2015, there were 53 exits in total, broken down as follows:

Strategic sale: 25 exits, 47% of the total

IPO: 15 exits, 28% of the total

Secondary sale: 13 exits, 25% of the total

National Equities Exchange and Quotations (“NEEQ”) became a new exit channel and IPO in the US went downward

Due to the suspension of IPO in July, the number of IPOs in Q3 declined by 50% compared to Q2. However, with the resumption of IPO in November, the number of IPOs in Q4 increased by 50% compared to Q3.

In terms of choices of listing markets, in Q3 2015, 90% of TMT companies were listed in Mainland China and the remaining 10% listed in the US. In Q4 2015, 71% of TMT companies were listed in Mainland China, and 29% were listed in Hong Kong.

The A share market experienced sharp fluctuation. The whole capital market was struck seriously. However, the gloom in the A share market triggered fervent NEEQ. Among the TMT companies listing domestically, 36% chose to list on the NEEQ, 21% chose to list on the main board of the Shanghai Stock Exchange and the SME board of Shenzhen Stock Exchange, respectively, and 11% chose to list on the main board and GEM Board of Shenzhen Stock Exchange, respectively.

Figure 21: Comparison of TMT exits in mainland China, Hong Kong and US capital markets – Q1 2013-Q4 2015

Q2’13

100%

Q1’13

0%

Q3’13 50%50% Q4’13

43%

57%

Q1’14 Q2’14

90%

10%

64%

27%9%

Q4’14 Q1’15 Q2’15 Q3’15 Q4’15Q3’14

64%

27%9%

50% 57%

29%14%25%25%

86% 80%

10%10%14%

90%

10%

71%

29%

Mainland China Hong Kong US

Figure 22: Exit types in the TMT industry Q3’15

3246%

1014%

1928%

812%

IPOStrategic sale

Secondary saleManagement buy-out

Figure 23: Exit types in the TMT industry Q4’15

2547%

1528%

1325%

IPOStrategic sale

Management buy-out


Exits in the Technology sector increased greatly in H2 2015, accounting for over 50%

The exit volume in the Technology sector ranked the highest among the four sectors, accounting for 51% of the total in TMT industry in H2 2015. The exit volume of 35 in Q3 2015 reached a new historical high since 2012 and increased by 106% compared to Q2 2015.

The Internet sector saw more exits in Q3 2015

The exits in the Internet sector in Q3 reached a historical high since 2012 while the investments also increased. The exit volume was four times that of Q2. The exit volume in Q4 decreased by 44% compared to Q3. However, it still exceeded the total of exits in H1.

Exits in the Telecommunications and Mobile sector and the Entertainment and Media sector increased

In Q3, there was a rush of exits in both the Telecommunications and Mobile sector and the Entertainment and Media sectors; the exit volume increased by 400% and 167%, respectively, compared to Q2, creating a new record high since 2012. In Q4, the exit volume in the Telecommunications and Mobile decreased by 10%, while the volume in the Entertainment and Media sector remained stable.

Exits by sectorQ3 2015

Exits by sector in the TMT industry:



Telecommunications and mobile: 10 deals, 14% of the total


Q4 2015

Exits by sector in the TMT industry:



Telecommunications and Mobile: 9 deals, 17% of the total


Figure 24: IPO exits in the TMT industry – Q1 2013-Q4 2015

40

35

30

25

20

15

10

5

0

Q1’15 Q2’15 Q3’15 Q4’15Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

4 4

10 0

00 0

22

22

2 2

13

9

9

6

12 11

1716

10

8 8

35

27

57 7 7

33

34

4 4 4 4

11

Technology InternetTelecommunications and Mobile Entertainment and Media


4. Sector focus: Technology, Internet, and Telecommunications and Mobile

Investments in Technology

The Technology sector includes IT Services, Hardware, Software, Electronics & Optoelectronics Devices and Semiconductor.

In H2 2015, total deal value in the Software subsector increased rapidly, and the Software subsector took the lead in investments

In H2 2015, deal volume in the Software subsector increased substantially, and in Q3 2015, it increased by 316% compared to Q4 2014, reaching a historical high since 2012. The deal value in Q3 2015 increased sharply by 1,160% compared to Q2 2015, accounting for up to 62% of the total deal value in Technology sector. The main reason was that a listed Software company obtained a PIPE investment of US$1 billion, which increased the overall deal value. Deal value in Q4 2015 decreased by 82% compared to Q3 2015 because there were no such huge investments in Q4 2015.

In Q3 2015, deal volume in both the Electronics & Optoelectronics Devices and the IT Services subsectors reached record highs since 2012

In Q3 2015, deal volume in the Electronics & Optoelectronics Devices subsector increased by 75% compared to Q2 2015, reaching a historical high since 2012. The deal value in Q4 2015 increased by 144% compared to Q3 2015, accounting for up to 55% of the total. In Q3 2015, deal value in the IT Services subsector was higher than that in the Electronics & Optoelectronics Devices subsector, but deal volume was equal. However, the IT Services deal value in Q4 2015 decreased by 65% compared to Q3 2015 and accounted for only 11% of the total, which was far lower than that of the Electronics & Optoelectronics Devices subsector.

In H2 2015, investments in the Semiconductor subsector decreased substantially

In Q3 and Q4 2015, deal value in the Semiconductor subsector accounted for as low as 1% and 11% of the total deal value in Technology sector, respectively. The deal value in Q3 2015 decreased by 97% compared to Q2 2015. Investments in H2 2015 were far less than that in H1 2015, which was mainly because in H2 2015, and there were no single high-value investments, while in Q1 2015, there was a high-value investment in the Semiconductor subsector. In a word, there was an obvious decline in investments in the Semiconductor subsector in H2

Figure 25: Deal value in the Technology sector – Q1 2013-Q4 2015

3,000

2,500

2,000

1,500

1,000

500

0

$128$230

$848

$1,583

$2,813

$2,389 $2,392

$1,632$1,461

$218

$1,001

$574

Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15

US$m

Hardware

Semiconductor IT Services

Software

Electronics & Optoelectronics Devices

Figure 26: Deal volume in the Technology sector – Q1 2013-Q4 2015

90

80

70

60

50

40

30

20

10

0

Q1’15 Q2’15 Q3’15 Q4’15Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

1618

72 21

11 1113

2326

35

44

79

70

34

34

18

59

37

7 6

40

19

15

302522

23

16

27

2117

137

5 5

23

22

153

3 32 2 27

15

15

21

13

913

23 5

1

26

Hardware Semiconductor

IT ServicesSoftwareElectronics & Optoelectronics Devices

compared to H1, but the change is tiny when compared to prior years.

In Q3 2015, investments in the Hardware subsector reached a historical high since 2012, but still ranked low

In Q3 2015, deal volume and deal value in the Hardware subsector increased by 127% and 81%, respectively, compared to Q2 2015, reaching new records since 2012. However, the deal value still ranked low in the Technology sector as a whole. In H2 2015, the deal value in the Hardware subsector accounted for less than 5%, and the deal volume only ranked slightly higher than that in the Semiconductor subsector.



and Q3 2015

Deal volume

Deal value


75% 18%

Software 316% 1,160%

IT Services 80% 73%

Semiconductor传 133% 97%

Hardware 127% 81%

Deal volume and value

Q3 2015

There were a total of 269 deals in the Technology sector, with a total investment value of US$2.39 billion.

Software:79 deals, 29% of the total; deal value of US$1.49 billion, 62% of the total

IT Services: 79 deals, 29% of the total; deal value of US$458 million, 19% of the total

Electronics & Optoelectronics Devices:70 deals, 26% of the total; deal value of US$327 million, 14% of the total

Hardware: 34 deals, 13% of the total; deal value of US$88 million, 4% of the total

Semiconductor: 7 deals, 3% of the total; deal value of US$27 million, 1% of the total

Figure 27: Deal volume by Technology subsector Q3’15

7929%7

3%

3413% 79

29%

7026%



Figure 28: Deal value by Technology subsector Q3’15 (US$m)

$1,49262%

$884%

$271%

$45819%

$32714%



The deal volume and deal value of the Technology sector in 2015 increased a lot, compared to previous years. In H2 2015, the investments in the Technology sector were mostly related to software and IT service. Artificial intelligence, cloud computing and IDC were the hotspots of investments.

With the fast development of internet, though the direction of internet investment mainly focused on consumer side, many internet companies who serviced for small and medium enterprises attracted more and more investors, as various small and medium enterprises emerged one after another. The year 2015 was a turning point for the Technology sector and more and more investors will pay attention to it in the future.

PwC Viewpoints



Q4 2015


Software:59 deals, 38% of the total; deal value of US$272 million, 18% of the total

IT Services:37 deals, 24% of the total; deal value of US$159 million, 11% of the total

Electronics & Optoelectronics Devices:34 deals, 22% of the total; deal value of US$798 million, 55% of the total

Hardware:18 deals, 12% of the total; deal value of US$69 million, 5% of the total

Semiconductor:6 deals, 4% of the total; deal value of US$162 million, 11% of the total

Figure 29: Deal volume by Technology subsector Q4’15

Figure 30: Deal value by Technology subsector Q4’15 (US$m)

5938%

64%

3724%

3422%

1812%



$79855%

$695% $162

11% $15911%

$27218%

HardwareSemiconductorIT ServicesSoftware



and Q4 2015

Dealvolume

Deal value

Electronics & Optoelectronics Devices 传传传传传

51% 114%

Software 25% 82%

IT Services传传 53% 65%

Semiconductor 传 14% 506%

Hardware 47% 21%



Early-stage deal volume and value in Q3 reached a new high since 2012

The deal volume and value for the early stage in Q3 2015 reached its highest level on record since 2012 when we started to track investment trends, and the deal volume and deal value rose substantially by 159% and 581%, respectively, compared to Q2 2015. In Q3 2015, an investment with deal value of US$100 million in the IT Services subsector contributed to the overall total value of the early-stage investments.

Deal volume at the expansion and late stages in Q3 multiplied

Overall, the deal volume and value in H2 2015 at the expansion and late stages remained stable. In Q3 2015, the deal volume at both the expansion and late stages reached a historical record since 2012, almost doubled compared to that of Q2 2015. In Q3 2015, both the deal volume and value at the expansion stage were greater than that at the late stage. However, the deal volume and value in Q4 2015 at the late stage surpassed that of the expansion stage. This was mainly due to a deal of US$100 million made in Q3 at the expansion stage in a Software company and a deal of US$376 million made in Q4 at the late stage in an Electronics & Optoelectronics Devices company.

PIPE investments increased continuously, with the deal value ranking No. 1

In H2 2015, PIPE investments maintained the good momentum from H1, with the deal volume continuously reaching new records since 2012 and the deal value ranking No. 1. There were a total of three deals with values exceeding US$100 million across H2 2015, the deal values of which were US$1 billion, 249 million and 125 million, respectively.

Figure 31: Deal value by stage of development in the Technology sector – Q1 2013-Q4 2015

3,500

3,000

2,500

2,000

1,500

1,000

500

0

PIPE

$128 $230 $218

$574

$2,813

$2,389

$1,001

$1,632$1,461

$2,392

$848

$1,583

Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15

Early stageExpansion stageLate stage

US$m

Figure 32: Deal volume by stage of development in the Technology sector – Q1 2013-Q4 2015

120

100

80

60

40

20

0

Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15

PIPE

15

3126

2410 1014

40

106

6 715

54

37

48

98

88

76

48 3

21 21

11

417

88

1 25

18 31

1182

20

10

37

36

68

39

34

46

32

14

3

Early stageExpansion stage Late stage



and Q4 2015

Deal volume

Deal value

Early stage 58% 69%

Expansion stage技

51% 66%

Late stage 29% 89%

PIPE 114% 49%


Q3 2015


Expansion stage: 98 deals, 36% of the total; deal value of US$540 million, 23% of the total

Early stage: 88 deals, 33% of the total; deal value of US$385 million, 16% of the total

Late stage: 76 deals, 28% of the total; deal value of US$297 million, 12% of the total

PIPE7 deals, 3% of the total; deal value of US$1.17 billion, 49% of the total

Q4 2015


Late stage:54 deals, 35% of the total; deal value of US$560 million, 38% of the total

Expansion stage:48 deals, 31% of the total; deal value of US$185 million, 13% of the total

Early stage:37 deals, 24% of the total; deal value of US$119 million, 8% of the total

PIPE15 deals, 10% of the total; deal value of US$596 million, 41% of the total

Figure 33: Deal volume by stage of development in the Technology sector Q3’15

Figure 34: Deal value by stage of development in the Technology sector Q3’15 (US$m)

9836%

73%

8833%76

28%

PIPEEarly stageExpansion stage

Late stage

$29712%

$1,17049%

$54023%$385

16%

PIPEEarly stage

Expansion stageLate stage

Figure 35: Deal volume by stage of development in the Technology sector Q4’15

Figure 36: Deal value by stage of development in the Technology sector Q4’15 (US$m)

5435%

4831%37

24%

1510%

PIPEEarly stageExpansion stageLate stage

$59641%

$1198%

$18513% $560

38%

PIPEEarly stageExpansion stageLate stage


and Q3 2015

Deal volume

Deal value


Expansion stage技

113% 20%

Late stage 95% 242%

PIPE 17% 13%



In H2 2015, the top five regions with the highest deal volume in the Technology sector were, in descending order, Beijing, Shanghai, Shenzhen, Guangdong Province (excluding Shenzhen) and Jiangsu Province. Beijing took the top spot, with 121 deals. Shanghai had 53 deals. Shenzhen had 52 deals. Guangdong Province (excluding Shenzhen) had 44 deals. Jiangsu Province had 27 deals. While in terms of deal value, Tianjin ranked first, with deal value totalling US$1.19 billion. Beijing ranked second, with deal value totalling US$739 million. Shenzhen ranked third, with deal value totalling US$569 million. Fujian Province ranked fourth and exceeded Shanghai for the first time, with deal value totalling US$281 million, which was slightly higher than US$265 million of Shanghai.

Being included in the ranking list for the first time, Tianjin ranked first

Tianjin’s deal value ranked first in H2 2015, mainly due to two deals with value exceeding US$100 million each (one deal had a value of US$1 billion). This disproves the traditional thinking that Beijing must always rank first in terms of deal volume and deal value. In H2 2015, Shenzhen and Fujian Province each had a deal with value exceeding 100 million, putting Shanghai slightly behind in terms of deal value.

Figure 37: The top six regions for Technology investments Q3/Q4’15 (Deal volume/Deal value)

121

53 $265

$739

52 $569

44 $226

27

9

7

$182

$281

$1,191

0 1,000500 1,500Deal volume

Beijing

Shanghai

Shenzhen

Tianjin


Jiangsu ProvinceFujian Province

US$m


The Internet Services subsector became the most active in the Internet sector in H2 2015, and the total deal volume and value reached a historical high level since 2012

In H2 2015, investments in the Internet Services subsector accounted for the majority of Internet sector investments, surpassing the E-commerce subsector which had been the leader. The deal volume and deal value in Q3 rose by 177% and 62%, respectively, compared to Q2, both reaching a new historical high since 2012. In Q4, both the deal volume and deal value decreased slightly, but were still greater than the investments in H1 2015. In H2, there were a total of 19 deals in the Internet sector with single values of over US$100 million each. Among them there were seven deals in the Internet Services subsector with total deal value of US$1.93 billion. In H2, the biggest single-deal value in the Internet sector was US$500 million, which was provided to a well-known online travel company.

The deal volume in the E-commerce subsector in Q3 reached record highs since 2012

In H2, the E-commerce subsector continued its strong trend from H1. The deal volume in Q3 hit a new record since 2012 and increased by 64% compared to Q2, while the deal value rose by 30% QoQ. In H2 2015, there were in total five deals with single values over US$100 million each, all of which were expansion-stage deals in B2C. The biggest single-deal value was US$200 million.

Investments in Internet

The Internet sector includes E-commerce, Online Education, Internet Services, Online Entertainment, Social Media, Internet Marketing and Internet Finance.

Deal value in Internet Marketing in Q3 was almost US$1 billion, a new historical high since 2012

The deal value in the Internet Marketing subsector in Q3 was almost US$1 billion, a sharp increase of 1337% compared to Q2, and a new historical high since 2012. The deal volume in Q3 doubled compared to Q2. In Q4, there was a slight decrease in the investments. In H2, there were in total of four deals in the Internet Marketing subsector with single values over US$100 million each, among which two deals were PIPE investments provided to companies providing information portals. In H2, the biggest single-deal value in the Internet Marketing subsector was US$467 million.

Figure 38: Deal value in the Internet sector – Q1 2013-Q4 2015

6,000

5,000

4,000

3,000

2,000

1,000

0

Q1’15

$913$408

$578 $854

$1,654$1,782

$2,267 $1,996

$4,819

$3,728

$5,361

$3,505

Q2’15 Q3’15 Q4’15Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

E-commerceInternet Services

Internet Marketing Social Media

Online Education

Online EntertainmentInternet Finance

US$m

Figure 39: Deal volume in the Internet sector – Q1 2013-Q4 2015

250

200

150

100

50

0

Q1’15 Q2’15 Q3’15 Q4’15Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

47 55 55 5554

107

61 61

21 21

48

10

39 3939

80 82 87

154

219

90 9479

132

1723 1417

2027 29

6 6 616

12

12

1616

1616

4 48 8 8 85 6 613

211 1216 1611 1123

3129 2924

1 34

11

12

12

18 18 19 19 194 4 9

107 7 737

E-commerce Internet Services

Internet MarketingSocial Media

Online Education Online Entertainment

Internet Finance

Investments in the Internet Finance subsector decreased slightly in H2

In H1 2015, the Internet Finance subsector saw its biggest growth since 2012. By contrast, in H2, due to stricter financial regulation, both the deal volume and deal value decreased QoQ. In addition, there were seven deals with single values over US$100 million each in H1, while in H2 the number of such deals was only two.



and Q3 2015

Deal volume

Dealvalue

E-commerce 64% 30%

Online Education 10% 35%

Internet Services 177% 62%

Online Entertainment

9% 26%

Social Media 25% 28%

Internet Marketing 100% 1,337%

Internet Finance 技技 37% 17%


Q3 2015

There were 487 deals in the Internet sector, with a total investment value of US$5.36 billion.

Internet Services: 219 deals, 45% of the total; deal value of US$1.71 billion, 32% of the total

E-commerce:154 deals, 32% of the total; deal value of US$1.54 billion, 29% of the total

Internet Finance: 55 deals, 12% of the total; deal value of US$856 million, 16% of the total

Online Education:19 deals, 4% of the total; deal value of US$87 million, 2% of the total

Internet Marketing: 16 deals, 3% of the total; deal value of US$979 million, 18% of the total

Online Entertainment: 12 deals, 2% of the total; deal value of US$126 million, 2% of the total

Social Media:12 deals, 2% of the total; deal value of US$62 million, 1% of the total

Figure 40: Deal volume by Internet subsector Q3’15

21945%

194%

122%16

3%

122%

15432%

5512%



Online Education Internet FinanceOnline Entertainment

Figure 41: Deal value by Internet subsector Q3’15 (US$m)

$1,53729%

$1,71432%

$621%

$1262%

$872%

$97918%

$85616%

E-commerceInternet ServicesInternet Marketing

Social Media

Online Education Internet Finance




and Q4 2015

Deal volume

Dealvalue

E-commerce 65% 57%

Online Education 16% 403%

Internet Services 51% 10%


42% 64%

Social Media 75% 89%

Internet Marketing 19% 68%

Internet Finance 技技 29% 40%


Q4 2015


Internet Services:107 deals, 45% of the total; deal value of US$1.54 billion, 44% of the total

E-commerce:54 deals, 23% of the total; deal value of US$655 million, 18% of the total

Internet Finance:39 deals, 16% of the total; deal value of US$514 million, 14% of the total

Online Education:16 deals, 7% of the total; deal value of US$435 million, 12% of the total

Internet Marketing:13 deals, 5% of the total; deal value of US$312 million, 9% of the total

Online Entertainment:7 deals, 3% of the total; deal value of US$45 million, 2% of the total

Social Media:3 deals, 1% of the total; deal value of US$7 million, 1% of the total

Figure 42: Deal volume by Internet subsector Q4’15

Figure 43: Deal value by Internet subsector Q4’15 (US$m)

10745%

167%

73%

135%

31%

5423%

3916%




$65518%

$1,53744%$7

1%

$452%

$3129%

$43512% $514

14%






In H2, early-stage investments increased rapidly, with both the deal volume and deal value creating new historical highs since 2012

Early stage has been the hottest investment stage of the Internet sector since Q4 2012. In Q3 2015, both the deal volume and deal value for the early stage created a new historical high since 2012. In Q4, this figure decreased slightly, but was still at a high level. In H2, there were a total of seven deals with single values over US$100 million each, and the average deal value of these seven deals was US$190 million.

Figure 44: Deal value by stage of development in the Internet sector – Q1 2013-Q4 2015

6,000

5,000

4,000

3,000

2,000

1,000

0

PIPE

Q1’15

$913

$409$578

$854

$1,654 $1,782

$2,267$1,996

$4,819

$3,728

$5,361

$3,505

Q2’15 Q3’15 Q4’15Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

Expansion stageLate stage Early stage

US$m

Figure 45: Deal volume by stage of development in the Internet sector – Q1 2013-Q4 2015

400

350

300

250

200

150

100

50

0Q1’15 Q2’15 Q3’15 Q4’15Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

PIPE

0 0 01 1 1 12 2 25

55

49 7 44 8 12 22

1030 2042 45 37

5841

66 58

98

4643 5168

84 77

176 180

292

241

366

184

62646

Expansion stage Late stageEarly stage

The deal volume in the expansion and late stages in Q3 hit new highs since 2012

The development of expansion-stage and late-stage investments was relatively steady. Though the deal volume in Q3 rose substantially QoQ, creating a new high since 2012, the deal value did not hit new records. In H2, there were in total seven deals with values over US$100 million each in the expansion stage, among which five deals belonged to the E-commerce subsector. There were a total of two huge deals in H2 in the late stage, with values of US$396 million and US$359 million, respectively, both belonging to the Internet Services subsector.

There were multiple huge deals in H2 of the PIPE stage, and the deal value in Q4 reached a new historical high since 2012

There were only five deals in the PIPE stage in H2 2015, but among them there were three huge investments with values of US$500 million, US$467 million and US$204 million, respectively. Therefore, the deal value in Q4 accounted for more than that of the expansion stage and hit a new record since 2012.



Q3 2015


Early stage:366 deals, 75% of the total; deal value of US$2.37 billion, 44% of the total

Expansion stage:98 deals, 20% of the total; deal value of US$1.59 billion, 30% of the total


PIPE:1 deal, 1% of the total; deal value of US$467 million, 9% of the total

Q4 2015



Expansion stage:46 deals,19% of the total; deal value of US$762 million, 22% of the total


PIPE:4 deals, 2% of the total; deal value of US$772 million, 22% of the total

Figure 46: Deal volume by stage of development in the Internet sector Q3’15

Figure 47: Deal value by stage of development in the Internet sector Q3’15 (US$m)）

Figure 48: Deal value by stage of development in the Internet sector Q4’15 (US$m)

Figure 49: Deal value by stage of development in the Internet sector Q4’15 (US$m)

36675%

9820%

11%22

4%

Expansion stageLate stageEarly stage

Undisclosed

$1,58930%

$93917%

$2,36744%

$4679%


Undisclosed

18477%

42%

4619%

52%


PIPE

$241%

$1,94855%

$76222%

$77222%

Expansion stageLate stage

Early stagePIPE


and Q3 2015

Deal volume

Deal value

Early stage 52% 56%

Expansion stage

69% 6%

Late stage 83% 1,081%

PIPE 50% 26%


and Q4 2015

Deal volume

Deal value

Early stage 50% 18%

Expansion stage

53% 52%

Late stage 77% 97%

PIPE 300% 65%



During Q3 and Q4 2015, the top three regions in terms of deal volume in the Internet sector were, in descending order, Beijing, with 261 deals and a total deal value of US$3.25 billion; Shanghai, with 148 deals and a total deal value of US$2.62 billion and Zhejiang, with 85 deals and a total deal value of US$636 million. From the perspective of investment value, Shenzhen and Jiangsu overtook Zhejiang with US$738 million and US$705 million, respectively, and entered the top 3 and top 4 spots, respectively.

Figure 50: The top six regions for Internet sector investments in Q3/Q4’15 (Deal volume/Deal value)

261 $3,246

85 $636

63 $738

50 $172

31 $705

148 $2,622

0 1,000500 2,000 2,5001,500 3,5003,000Deal volume

Beijing

Shanghai

Shenzhen


JiangsuProvince

ZhejiangProvince

US$m


Investments in Telecommunications and MobileThe Telecommunications and Mobile sector includes Telecom Equipment and Terminals, Other Telecommunications Subsectors and Mobile.


Q3 2015

There were 152 deals in Telecommunications and Mobile sector, with a total investment value of US$4.28 billion.

Mobile: 141 deals, 93% of the total; deal value of US$4.25 billion, 99% of the total

Telecom Equipment and Terminals:6 deals, 4% of the total; deal value of US$31 million, 0.7% of the total

Other Telecommunications Subsectors: 5 deals, 3% of the total; deal value of US$4 million, 0.3% of the total

Mobile: the largest single deal value was in Q3, which broke historical records in the whole TMT industry since 2012

In Q3 2015, investment value in Mobile reached historical highs since 2012, hitting US$4.25 billion and accounting for 99% of the total investments in the sector. This was up nearly 400% QoQ. In Q4 2015, investments decreased by 91% QoQ, mainly due to a single investment in a well-known taxi hailing app enterprise amounting to US$3 billion in Q3 2015. This deal value also reached a record high for single-deal value in the entire TMT industry since 2012. In Q3 and Q4, the number of deals of single value over US$100 million in the Telecommunications and Mobile sector were three and one, respectively. And all of these deals belonged to the Mobile subsector.

The deal volume and deal value in Other Telecommunications Subsectors in Q4 rose slightly

The deal volume of this subsector has never surpassed 10 deals and the deal value was also historically low. The deal volume and deal value in Q3 equalled that of Q2, while in Q4, the deal volume and deal value rose by 60% and 1,667% QoQ, respectively. The total deal value in this subsector increased due to two PIPE investments in Q4, which were each over US$10 million.

Telecom Equipment and Terminals: Investments were stable in H2

There were six deals and four deals in Q3 and Q4 in the Telecom Equipment and Terminals subsector with deal value of US$31 million and US$18 million, respectively. These levels were relatively equal with prior years.

Figure 51: Deal volume by subsegment in the Telecommunications and Mobile sector Q3’15

Figure 52: Deal value by subsegment in the Telecommunications and Mobile sector Q3’15 (US$m)

14193%

53%

64%

MobileTelecom Equipment and TerminalsOther Telecommunications Sectors

$4,24795%

$40.3%

$310.7%

MobileTelecom Equipment and TerminalsOther Telecommunications Sectors


Q4 2015

There were 61 deals in Telecommunications and Mobile sector, with a total investment value of US$480 million.

Mobile:49 deals, 80% of the total; deal value of US$393 million, 82% of the total

Other Telecommunications Subsectors:8 deals, 13% of the total; deal value of US$69 million, 14% of the total

Telecom Equipment and Terminals:4 deals, 7% of the total; deal value of US$18 million, 4% of the total

Figure 53: Deal volume by subsectors in the Telecommunications and Mobile sector Q4’15

Figure 54: Deal value by subsectors in the Telecommunications and Mobile sector Q4’15(US$m)

4980%

47%

813%

Mobile

Telecom Equipment and TerminalsOther Telecommunications Sectors

$39382%

$184%

$6914%

Mobile

Telecom Equipment and TerminalsOther Telecommunications Sectors


and Q3 2015

Deal volume

Dealvalue

Mobile 45% 398%

Telecom Equipment and Terminals

100% 1,736%

Other Telecommunications Subsectors 传传

— 3%


and Q4 2015

Deal volume

Dealvalue

Mobile 65% 91%

Telecom Equipment and Terminals

33% 42%

Other Telecommunications Subsectors 传传

60% 1,667%



Q3 2015

There were 152 deals in Telecommunications and Mobile sector, with a total investment value of US$4.282 billion.


Expansion stage:22 deals, 14% of the total; deal value of US$3.2 billion, 74.5% of the total

Late stage:4 deals, 3% of the total; deal value of US$19 million, 0.4% of the total

PIPE:1 deal, 1% of the total; deal value of US$2 million, 0.1% of the total

Q4 2015

There were 61 deals in Telecommunications and Mobile sector, with a total investment value of US$480 million.

Early stage:42 deals, 69% of the total; deal value of US$198 million, 41% of the total

Expansion stage:13 deals, 21% of the total; deal value of US$170 million, 36% of the total

PIPE:4 deals, 7% of the total; deal value of US$101 million, 21% of the total


Figure 55: Deal volume by stage of development in the Telecommunications and Mobile sector Q3’15

Figure 57: Deal volume by stage of development in the Telecommunications and Mobile sector Q4’15

Figure 56: Deal value by stage of development in the Telecommunications and Mobile sector Q3’15 (US$m)

Figure 58: Deal value by stage of development in the Telecommunications and Mobile sector Q4’15 (US$m)

12582%

2214%1

1%4

3%

PIPEEarly stage Expansion stageLate stage

$3,19574.5%

$1,06625%

$190.4%

$20.1%

PIPE Early stage Expansion stageLate stage

PIPE

4269%

23%

1321%

47%

Early stage Expansion stageLate stage


and Q3 2015

Deal volume

Deal value


Expansion stage

29% 717%

Late stage — 410%

PIPE N/A N/A


and Q4 2015

Deal volume

Deal value

Early stage 66% 81%

Expansion stage

41% 95%

Late stage 50% 43%

PIPE 300% 5,833%

$19841%

$17036%

$112%

$10121%

PIPEEarly stage Expansion stage

Late stage



During Q3 and Q4 2015 in the Telecommunications and Mobile sector, Beijing took the top spot with 76 deals and total deal value of US$3.42 billion. Shanghai took second place with 43 deals. There were 22 deals in Shenzhen, 20 deals in Guangdong (excluding Shenzhen) and 20 deals in Zhejiang, respectively. From the perspective of deal value, the top three remained the same in terms of deal volume. Sichuan ranked fourth with a total deal value of US$165 million and Guangdong (excluding Shenzhen) came fifth with a total deal value of US$120 million. The largest single deal was US$600 million provided to a well-known taxi hailing app enterprise in Beijing.

Figure 59: The top six regions for investment in the Telecommunications and Mobile sector Q3/Q4’15 (Deal volume/Deal value)

76 $3,420

20

20

$19622

$120

12 $165

$57

43 $720

0 4,0003,0002,0001,000

Beijing

Shanghai

Shenzhen

ZhejiangProvince

SichuanProvince


Deal volume

US$m


The Mobile subsector mainly includes Mobile Entertainment, Mobile Advertising, Mobile Shopping, Mobile Healthcare, Mobile Technology, Mobile Education, Mobile Services, Mobile Social Media and Mobile Messaging.

5. A close look at investments in Mobile

MobileShopping

Mobile

MobileEntertainment Mobile

Technology

Mobile Services(Including Mobile TravelServices, Mobile Housekeeeping Services)

Mobile Messaging

Education

Mobile Social Media

Mobile Advertising

Mobile Healthcare

(Including Mobile Video, Mobile Music, Mobile Gaming, etc.)



Q3 2015

In Q3 2015, the total number of deals in the Mobile subsector was 141, with a total investment value of US$4.25 billion.

Mobile Services: 53 deals, 38% of the total; deal value of US$3.34 billion, 79% of the total

Mobile Social Media: 32 deals, 23% of the total; deal value of US$142 million, 3% of the total

Mobile Entertainment:23 deals, 16% of the total; deal value of US$554 million, 13% of the total

Mobile Technology: 14 deals, 9% of the total; deal value of US$31 million, 1% of the total

Mobile Shopping: 10 deals, 7% of the total; deal value of US$104 million, 2% of the total

Mobile Healthcare: 6 deals, 4% of the total; deal value of US$53 million, 1.5% of the total

Mobile Messaging: 2 deals, 2% of the total; deal value of US$14 million, 0.3% of the total

Mobile Advertising: 1 deal, 1% of the total; deal value of US$10 million, 0.2% of the total

Mobile Education: No deals in Q3 2015


Q4 2015

In Q4 2015, the total number of deals in the Mobile subsector was 49, with a total investment value of US$393 million.

Mobile Services:18 deals, 37% of the total; deal value of US$93 million, 24% of the total

Mobile Entertainment:10 deals, 21% of the total; deal value of US$107 million, 27% of the total

Mobile Social Media:9 deals, 18% of the total; deal value of US$49 million, 12% of the total

Mobile Technology:6 deals, 12% of the total; deal value of US$36 million, 9% of the total

Mobile Healthcare:2 deals, 4% of the total; deal value of US$3 million, 1% of the total

Mobile Education:2 deals, 4% of the total; deal value of US$2 million, 1% of the total

Mobile Messaging:1 deal, 2% of the total; deal value of US$100 million, 25% of the total

Mobile Advertising:1 deal, 2% of the total; deal value of US$2 million, 1% of the total

Mobile Shopping:No deals in Q4 2015

Figure 60: Deal value by Mobile Internet subsegments – Q1 2013-Q4 2015

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

Q1’15

$68 $78 $215 $175$448 $482

$859 $853

$393

$1,386$1,239

$4,247

Q2’15 Q3’15 Q4’15Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14

US$m

Mobile Entertainment Mobile Advertising Mobile Shopping

Mobile Healthcare Mobile TechnologyMobile Education

Mobile Services Mobile Social MediaMobile Messaging


In H2, Mobile Services, Mobile Entertainment and Mobile Social Media were the three pillars of the Mobile subsector.

Mobile Services: Ranking first, with boom arising from huge investments in taxi-hailing APPs

Taxi-hailing apps have been the major investment area in the Mobile Services subsector since 2014. In Q3 2015, a single deal valued at US$3 billion for a taxi-hailing app company was the biggest single-deal value in the TMT industry since 2012. In addition, in Q3, the deal volume in the Mobile Services was over 50 deals for the first time, reaching a new record high since 2012. In Q4, both the deal volume and deal value decreased substantially due to lack of large investments.

Mobile Entertainment: Deal value ranking second and deal volume ranking third, with a substantial increase in single-deal value

Mobile Entertainment has been ranking third since 2014 within the Mobile subsector, and it remains in that position. In H2 2015, although the deal volume in Mobile Entertainment decreased slightly compared to H1, the deal value increased substantially. Due to a huge investment of US$499 million provided to a well-known gaming company, the deal value in Q3 was over US$500 million, reaching a new historical high since 2012.

Driven by the “Internet +” strategy and led by the currently hottest subsector, Mobile Internet, traditional enterprises are entering a new stage, where various platforms such as services, entertainment and social media are emerging one after another. The operation model represented by O2O is an innovation highlight driven by Mobile Internet. In 2015, enterprises in some areas of the Mobile subsector stepped into a relatively steady development stage. An expansion-stage deal of US$3 billion in H2 was the best example of this. Whether the capital market faces turbulence or downturn in the future, we believe that we will still see strong investments in the Mobile subsector.

PwC Viewpoints

Figure 61: Deal volume by Mobile subsegments – Q1 2013-Q4 2015

60

50

40

30

20

10

0

Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15

9

22 1 1 1 1 1 11 1 11 1 114

1011 12

11

68 8 8 8 8 87 7776 6 6 6 6 6 6 6 65 5 5 5

1512

14 1416

2018 1819 1919

15

24

20 2023 23

29 29 29

44

53

3229

31

2 2 2 236

3 3 3 33 4 4 443

9 9 9 9

2 2 2

10 10 10

Mobile Entertainment Mobile Advertising Mobile Shopping

Mobile Healthcare Mobile TechnologyMobile Education

Mobile Services Mobile Social MediaMobile Messaging

Mobile Social Media: Deal volume ranking second and deal value ranking third, with the deal value in Q3 refreshing historical records since 2012

In H2 2015, the deal volume in Mobile Social Media decreased slightly compared to H1, not surpassing the strong volume seen in Q1. However, the deal value in Q3 was over US$100 million, a rise of 406% compared to Q2, creating a new historical high since 2012.

Mobile Messaging: Seeing the first large deal since 2012

Among the various ranking of Mobile subsector, Mobile Messaging always ranked behind others, and the deal volume was generally below five deals. In H2 2015, there were a total of three deals. But in Q4, a messaging company in Shenzhen obtained an investment of US$100 million, which broke the traditional view.


6. Methodology and definitions

TMT is an acronym for Telecommunications, Media and Technology. The three words represent Telecommunications and mobile, Media and Technology, respectively. In this report, we have carried out analysis of the three most active sectors within TMT. They are Technology, Internet and Telecommunications and Mobile.

This report covers Q3 and Q4 2015. However, in order to show trends and make comparisons in the industry, we have included data from the year 2013 to the first half of 2015. In this report, only deals disclosing specific investment data were included in relevant analysis. Deals that did not disclose the specific investment period, deal value or investment stage were excluded from the relevant analysis in order to maintain the accuracy of the report.

All data in this report was provided by Zero2IPO Research.

DefinitionsTechnology sector

Hardware: Computer hardware, computer peripherals, network equipment, etc.

Software: Basic software, software applications, etc.

IT Services: IT consultation, software outsourcing, hosting services, computer and network security, etc.

Electronics & Optoelectronics Devices: Optoelectronic components, optoelectronics, electronics, power supply, etc.

Semiconductor: IC design, IC testing and packaging, IC equipment manufacturing, etc.

Internet sector

E-commerce: B2C, B2B, C2C, etc.

Internet Marketing: Information portal, search engine, advertising agency and Internet marketing services

Internet Services: Online travel services, online recruitment services, online housekeeping services, etc.

Online Education: E-learning, online classroom, etc.

Online Entertainment: Online gaming, online video and online music

Social Media: BBS/Forum, online networking, etc.

Internet Finance: I-finance, E-payment, etc.

Telecommunications and Mobile sector

Telecom Equipment and Terminals: Telecommunications and mobile equipment, Telecommunications and mobile terminals, Telecommunications and mobile software, etc.

Other Telecommunications Subsectors: Mobile operators, Fixed-line operators, Virtual network operator (VNO) and others.

Mobile: Mobile entertainment, Mobile advertising, Mobile shopping, Mobile healthcare, Mobile technology, Mobile education, Mobile services, Mobile social media, and Mobile messaging

Entertainment and Media sector

Traditional Media: Newspaper, magazines, publishing, etc.

Outdoor Media: Outdoor print ads, outdoor LED TV, mobile TV, building TV, etc.

Video Production and Distribution: Film and television production and distribution, film projection, etc.

Advertising Creation/Agency: Ad creation, media buying, ad agency, etc.

Cultural Transmission: Culture brokerage and agency, etc.

Entertainment & Leisure: Animation and other industries


Stage of development

Early stage: This stage varies from one to five years while the product or concept is under development and not yet in mass and commercial production. During this stage, funds are mainly used for acquiring production equipment and developing products as well as marketing and setting up management systems.

Expansion stage: The investment period at this stage usually lasts about two or three years. The products or services have been recognised by the market. The company generally needs more funds to further develop the product, as well as to expand facilities and production. Inventory planning and marketing efforts are also ramped up.

Late stage: During this stage, the company has grown its operating revenue, and is more likely to be, but not necessarily, profitable. The company may have plans to go public. The main purpose of financing is to seek capital to grow capacity, and to introduce shareholders with industry experience and influence, thereby increasing corporate recognition and attracting shareholders. The company will aim to improve its financial structure and management system in preparation for listing. At this stage, the investment risk is the lowest, but the chance of high returns is also lower.

PIPE (private investment in public equity): PE investments in publicly listed companies via preferential allotments or private placements, and the acquisition of shares by PE firms via the secondary market.

Exits

IPO: IPO is short for Initial public offering. IPO refers to listing on the stock markets in Shanghai, Shenzhen, Hong Kong, and overseas, including the NEEQ.

Strategic sale: This includes the sale of the PE or VC investors’ equity stakes (or the entire investee company itself) to a third-party company.

Management buy-out: The purchase of a company by its management through either debt-credit finance or stock transaction, which results in relevant changes in corporate ownership, control, residual claim and assets, in order to alter the structure of corporate proprietary rights. Through management buy-out, the company’s operators become its owners.

Secondary sale: Any purchase of the PE or VC investors’ equity stakes by another PE or VC investors constitutes secondary sale.


If you’d like to discuss what’s happening in your particular TMT market or how PwC might be able to help your company meets its challenges, please reach out to one of the TMT industry leaders listed here.

7. Contacts

Shenzhen Wilson Chow

PwC China/Hong Kong TMT Leader+86 (755) 8261 8886 [email protected]

Beijing

Qin Zhang+86 (10) 6533 2098 [email protected]

Shanghai

Jianbin GaoPwC China TMT Leader+86 (21) 2323 3362 [email protected]

Roland Xu+86 (21) 2323 2588 [email protected]

Frank Lin+86 (21) 2323 [email protected]

MoneyTreeTM China TMT Report Editorial Team

Frank LinPartner, TMT [email protected]

Stacy ZhangMarketing Manager, Private Equity & [email protected]

Catherine GuSenior Associate, [email protected]

GlobalRaman Chitkara+1 408 817 [email protected]

AustraliaRod Dring+61 2 8266 [email protected]

BrazilEstela Vieira+55 1 3674 [email protected]

CanadaChristopher Dulny+1 416 869 [email protected]

ChinaJianbin Gao+86 (21) 2323 [email protected]

FrancePierre Marty+33 1 5657 [email protected]

GermanyWerner Ballhaus+49 211 981 [email protected]

IndiaSandeep Ladda+91 22 6689 [email protected]

JapanMasahiro Ozaki+81 3 5326 9090 [email protected]

KoreaHoonsoo Yoon+82 2 709 [email protected]

NetherlandsIlja Linnemeijer+31 (0) 88 792 49 [email protected]

RussiaYury Pukha+7 495 223 [email protected]

SingaporeMark Jansen+65 6236 [email protected]

TaiwanAndy Chang+886 (2) 2729 6666 ext [email protected]

UAEPhilip Shepherd+97 1 4304 [email protected]

UKJass Sarai+44 (0) 1895 52 [email protected]

USPierre-Alain Sur+1 646 471 [email protected]

www.pwc.com This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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