Analysis of PE/VC investor valuation criteria with a view to changed market conditions
A new study by Deutsche Börse and CMS Hasche Sigle analyses the valuation ap-proaches applied to private sector investments in Chinese companies. This is already the second joint study on private equity in China. It is to be presented at the German Equity Forum in Frankfurt on Monday.
“Our study confirms that the valuation standards developed in western markets can-not automatically be applied to companies in China, as factors such as due diligence play a major role in addition to key financial figures,” explained Volker Potthoff of CMS Hasche Sigle. “PE/VC investors have also adapted the sectoral focus to the changed macroeconomic conditions in recent years. They now focus less on export-dependent sectors and much more on those geared to China's domestic market, for example in the consumer goods industry or the healthcare market.”
The study was based on interviews conducted with European investors and Chinese managers of PE/VC funds. It also utilised the results of the Zero2IPO research plat-form in the trend analysis of investment allocations in sectors and currencies. The study also includes investigations by the auditing group BDO, which is experienced in international standards. The findings of the study also indicate that the general conditions for Chinese private sector investments have changed due to a less dynamic growth phase. PE/VC investors have become more cautious, particularly in valuing target companies. Moreover, consolidation in the PE/VC sector is expected in the medium term.
“We hope that our study helps to create more transparency and better understanding of the Chinese PE/VC sector,” commented Alexander von Preysing, Head of Issuer Services at Deutsche Börse. “The study findings also result from our China-Europe Private Equity Roundtable, with which we have established a well-functioning think-tank network of Chinese and European investors and fund managers.”
You can find the study here >>
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