Private equity, venture capital TMT investment steady

The value of private equity and venture capital investment in the telecommunication, media and technology sector in the first half of 2018 held steady, despite fewer deals compared to the preceding period, according to a report from PricewaterhouseCoopers.

The TMT sector continued to play a key role in the market, with related investment accounting for 50 percent of total private equity and venture capital investment over the period, the report said.

"In the first half of this year, China stepped up efforts to encourage innovation and entrepreneurship with a series of supportive industry policies. PE and VC investors boosted investment in the optoelectronics, integrated circuits and IC design, digital content and game sectors. High-quality projects with strong growth potential and good prospects for exit were still the most favored by investors," said Gao Jianbin, PwC China's TMT leader.

The report said 2,096 private equity and venture capital investment deals were clinched in the TMT sector in the first half of 2018, down 17 percent from the second half of 2017. There were 1,400 deals that disclosed financial terms in the period, totaling $36.26 billion in investment.

There were 56 large deals of over $100 million in value each. While the number of large deals was almost unchanged from the second half of 2017, the total investment value edged up slightly.

However, Gao said the private equity and venture capital investment environment began to show signs of reaching a turning point this year, as financial market regulators strengthened supervision.

All subsectors in the TMT industry saw a decline in the number of private equity and venture capital-related deals in the first half of 2018, according to the report.

The internet and mobile internet subsector, and the tech subsector both remained active, with 966 and 872 deals respectively in the first half. The telecom subsector saw just 20 deals and was the only subsector without a $100 million deal over the period.

Charline Ni, PwC China's technology leader, said with China Integrated Circuit Industry Investment Fund Co Ltd securing second-phase fundraising, investors were increasingly interested in integrated circuits, robots, smart manufacturing, cloud computing, fifth-generation mobile communications, augmented and virtual reality, and artificial intelligence.

Ni said private equity and venture capital investors became more cautious in the period, as they responded to new regulatory policies with a focus on small-value deals and strategies to diversify. As a result, investors are now exploring new growth opportunities in the TMT industry, she said.