exit strategies - cvcf may 2005
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Exit Strategies For Chinese Technology
Companies
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NEW YORK
SILICON VALLEY
BOSTON
LONDON
BROADVIEW INTERNATIONAL
A DIVISION OF JEFFERIES & COMPANY, INC
May 2005
About Jefferies Broadview
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Jefferies Broadview 全面性投资银行业务
企业合并收购 2004 年至今承办的全球
高科技企业合并与收购业务总额综合排名第二,交易额 5 亿美元以下排名第一 1
从 1997 至今,完成了 200 个并购项目,总成交额超于 500 亿美元
股票
纳斯达克市场股票交易量第一(超过每日公布交易量 12% );处理 纽约股票交易所 每日交易量 11%
近 10 年来,通过股票公开发售为客户融资超于 200 亿美元
债券
最大的中级市场高收益债券发售商
可兑换债券五大交易商之一
股票市场
Equity
证券
研究
Research
企业
合并
收购
M&A 债券
Debt
证券研究
100 多位分析师,研究 400 多家公司 , 超过 70% 的公司为中型企业(市场价值为 25 亿美元以下)
1 数据来源: SDC
中国高科技企业
4
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实力雄厚的纳斯达克股票交易公司
纳斯达克股票市场最大的交易商
资料来源: Autex, 2003年 7月 1 日至 2004年 6月 30 日。市场份额按公告板市场、纳斯达克全国市场、纳斯达克小市值市场总交易量加权计算,得出总交易量百分比。
规模大、业绩稳定的销售团队,共有 180 位机构投资人股票投资销售代表股票投资销售队伍–共有 150 位高级推销员
证券研究服务销售团队 – 共有 30 位高级推销员
Jefferies 的联营公司 Helfant Group, Inc.处理纽约股票交易所每日公布交易量的 11% 1.9%
1.9%
2.0%
2.3%
2.6%
3.3%
3.5%
3.6%
3.6%
12.5%
0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%
Lehman
BAS
UBS
CSFB
Bear Stearns
Merrill Lynch
Morgan Stanley
Goldman Sachs
Citigroup
Jefferies
占总交易量的百分比
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全球性业务
居领先地位的机构投资经纪商和投资银行公司,具有本行业最强大的资本市场交易平台之一
为 Jefferies Group, Inc. (纽约股票交易所代号:JEF )的主要运营子公司。该公司为一家控股公司,市值大约为 20 亿美元,在世界各地有 20 多家办事处,共有员工 2,000 名
银行业务合作伙伴: Burdett Buckeridge Young Limited
Jefferies 为 50%+ 员工拥有 Jefferies 股票在投资银行界表现第一
奥斯汀
旧金山
洛杉矶 达拉斯
休士顿 新奥尔良
芝加哥 纳西维尔
亚特兰大 里士满
波士顿 斯坦福
纽约 新泽西 华盛顿
伦敦 巴黎 苏黎世
东京
悉尼 *墨尔本 *
矽谷
* 为联营公司
与 Jefferies共同经营全套投资银行业务 , 并就合并与收购、重组和股本私募提供重要咨询
在纽约、矽谷、波士顿和伦敦设有办事处 高科技投资银行的主要业务部门共有 75 名高级银
行业务人员和 18 名以上常务董事 风险投资基金: Broadview Capital
Partners、 Kennet Venture Partners 、AxcessNet (特拉维)、 Allen & Buckeridge (悉尼)
BroadviewJefferies
以色列 *
沃尔瑟姆
香港
$80,600,000October 2004
Initial Public OfferingCo-Manager
China Finance Online Co. Limited
$66,000,000August 2004
has been acquired by
$66,000,000August 2004
has been acquired by
$165,100,000
has divested its Handset Division to
June 2004
近期中国项目
Initial Public OfferingCo-Manager
$106,000,000
December 2004
Ninetowns Digital World Trade
Technology IPO And M&A Trends
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U.S. equity markets have been steadily rising since November 2003
− NASDAQ LTM performance of 10.8%
Fund flows in November 2004 were $12.0 billion
NASDAQ market capitalization currently at 99.7% of 52-week high
Technology Capital Markets Overview
As of December 3, 2004. Source: Jefferies Broadview capital markets
Historic Equity Mutual Funds and S&P PerformanceLTM Market Performance
Market Recovery Trends
80
85
90
95
100
105
110
115
12/05/03 01/13/04 02/19/04 03/25/04 04/30/04 06/07/04 07/14/04 08/18/04 09/23/04 10/28/04 12/03/04
(Price as a % of Base Value)
NASDAQ
10.8%
S&P 50012.2%DJIA7.4%
($60)
($40)
($20)
$0
$20
$40
$60
Sep
-91
Sep
-92
Sep
-93
Sep
-94
Sep
-95
Sep
-96
Sep
-97
Sep
-98
Sep
-99
Sep
-00
Sep
-01
Sep
-02
Sep
-03
Sep
-04
0
400
800
1,200
1,600
Funds
S&P 500
$ in Billions
88
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Post-Bubble Equity Recovery Time: 4 - 6 Years
80’S PC
0
10
20
30
40
50
60
70
80
Jan-82 Oct-82 Jul-83 Apr-84 Jan-85 Oct-85
Apple Computer
4 Year Span
60’S TRONICS BOOM
0
50
100
150
200
250
300
Apr-60 Jan-61 Oct-61 Jul-62 Apr-63 Jan-64 Oct-64 Jul-65 Apr-66
6 Year Span
Texas Instruments
70’S NIFTY FIFTY
0
20
40
60
80
100
120
140
Nov-74 Sep-75 Jul-76 May-77 Mar-78 Jan-79 Nov-79
Hewlett Packard
4 Year Span
90’S INTERNET
eBay
Sep-99 Jun-00 Mar-01 Dec-01 Sep-02 Jun-03 Mar-040
15
30
45
60
75
90
4 Year Span
00’S CHINESE INTERNET
1
10
19
28
36
45
54
63
Apr-00 Oct-00 Apr-01 Nov-01 May-02 Nov-02 May-03 Nov-03 Jun-04
SINA
4 Year Span
99
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QUARTERLY IPO ISSUANCES IPO PRICING VS. FILING RANGE
QUARTERLY FOLLOW-ON ISSUANCES FOLLOW-ON PRICING VS. FILING RANGE
US IPO vs. Follow-On Technology Market Stats
As of 12/3/2004. Source: Jefferies Broadview capital market. Technology defined per SDC Platinum high technology industry classification
Below Filing Range Within Filing Range Above Filing Range
0%
20%
40%
60%
80%
100%
Q1 ‘03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 Q2 ‘04 Q3 ‘04
Below Filing Range Above Filing Range
Q4 ‘04
0%
20%
40%
60%
80%
100%
Q1 ‘03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 Q2 ‘04 Q3 ‘04 Q4 ‘04
- -
2
7
10
17
21
3
9
12
-
5
10
15
20
25
Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q4 '03 Q1 '04 Q2 '04 Q3 '04 Q4 '04
Num
ber
of D
eals
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
Am
ount Raised (m
illions)
7
16
29 30
43
21
14
11
44
-
5
10
15
20
25
30
35
40
45
50
Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q4 '03 Q1 '04 Q2 '04 Q3 '04 Q4 '04
Nu
mbe
r o
f Dea
ls
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
Am
ount R
aise
d ($m
illions)
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The IPO Market Is Strengthening
Current IPO Environment
Recent strengthening of the IPO and equity capital markets
The IPO market is stronger than it has been for over three years, particularly in technology (but the “bar” is high)
Comparable public companies are now benefiting from improved economic conditions and trading at healthier multiples, but IPO backlog has increased
US
Western Europe
Historic Tech IPOActivity
Tech IPO Activity – Number of Transactions
25 17123
370
1996
137
244
1997
171
204
1998
323
415
1999
398
289
2000
78
23
2001
20
2002
19
2003 20041
20
2003 - Q3 2004 Technology IPOs2
IPO Backlog
# IPOs
Q1 Q2 Q3 Q4 Q1 Q2 Q3
2003 2004
27
1017 13 15
24
0
20
40
60
80
100
1 Source: Broadview IPO Database. As of 12/3/04.2 Source: Capital IQ.3 Source: SDC Platinum. For the period 1/1/02-12/3/04.
Asian Companies Represent Nearly 20%
Of US Tech IPOs Since 12/9/03
IPO Issuances by Subsector3
59
Software & Internet Services
36%
IT & Network ServicesSemiconductors
12%Network
Infrastructure
8%
Computing Equipment
5%
Other
25%
14%
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The Dramatic Rationalization Of The Public Markets Has Contributed To The Market’s Health
1 Source: NASDAQ2 Source: CapitalIQ3 Source: Thomson Financial First Call
Number Of NASDAQ Listed Public Companies1
Mar 2000 – Sep 2004
(35%)(1,838)
5,000
DEC 2000
3,800
DEC 2001
3,500
DEC 2002
CHANGE’00-’04
3,300
DEC 2003
Trading Values
<Cash
<$100m
<$250m
# Companies 2
41
1,136
1,882
1%
34%
56%
% of Total
5,181
MAR 2000
3,343
SEP 2004
56% of NASDAQ Listed Public Companies Have No Research
Coverage3
1212
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The Current IT M&A EnvironmentHas Returned To 1996 Levels
M&A Activity 1992 – 9M 2004 Number Of TransactionsNorth America - IT, Media, Communications
Source: Broadview's Global Mergers & Acquisitions database
741.7
33.1 36.8 48.175.9
126.9139.6
369.0
544.3
195.7
95.771.3
116.3
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 9M 2004$0
$100
$200
$300
$400
$500
$600
$700
$800Number of Deals
Total Consideration ($B)
583
831920
1,593
2,079
2,8442,994
3,763 3,801
2,343 2,327
1,821
1,621
2,161
Median Deal Size($MM)
$8.5 $10.0 $11.0 $13.5 $12.2 $12.0 $15.0 $21.9 $28.1 $18.3 $13.5 $17.0 $16.4
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59 of These Companies Were
Venture Capital-Backed
20 of These Companies Were
Venture Capital-Backed
15 of These Companies Were
Venture Capital-Backed
50 of These Companies Were
Venture Capital-Backed
The Venture Capital Industry Has Also Enjoyed A Recovery In Higher Value Private Company Exits
Source: Broadview's Global Mergers & Acquisitions database. North American private seller transactions.
Middle Market Transactions Will
Drive Venture Capital Returns In The
Current Environment
2000 2002 9M 2004
>$20MM 636 172 138 97
>$50MM 397 84 80 78
>$150MM 193 30 23 28
2003
Approximately 75% Of North American
M&A Deals Over US$50MM In Value
Were VC Backed For 9M 2004
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STAGE VALUE/ PROOF
Most Buyers Are Seeking Acquisitions At A Later Stage Of Company Development
Technical Feasibility
Product Functionality
Customer Acceptance
Business Model Works
Economic Model Works
Scalability Proven
5
6
Product is possible to do
Product does what it is supposed to do
Customers care
Customers are willing to pay a rational economic price
Company can be profitable
Increasingly profitable growthis possible
Size O
f Ad
dressab
le Market D
rives Valu
ation
BusinessAcquisition
3
4
ProductAcquisition
1
2
TechnologyAcquisition
Exit Considerations For Chinese Technology Companies
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10
20
30
40
50
2000 2001 2002 2003 2004
Number of M&A Exits
Chinese Companies Typically Go Public On The HK Main Board Or Seek Dual Listings
The Mix Of IPO And M&A Exits For Chinese Companies In 2004 Have Returned To 2000 Levels
IPO M&A
2000 39 43
2001 11 37
2002 11 44
2003 19 32
2004 36 34
Total 116 190
Exit Strategy
IPO Exit
M&A Exit
0
10
20
30
40
2000 2001 2002 2003 2004
Dual Listing
Other
Singapore
Nasdaq
HK GEM
Hong Kong
Dual Listing includes all companies listed on more than 1 exchangeOther includes Shenzhen, Tokyo, Shanghai and New YorkSource: SDC. Excludes transactions where IPO gross proceeds and M&A deal values were < $25MM
17
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IPO M&A
2000 19 20
2001 2 10
2002 2 4
2003 1 7
2004 16 5
Total 40 46
Exit Strategy
In 2004, Nearly 50% Of Chinese Technology Companies Listed Solely On The NASDAQ
0
5
10
15
20
2000 2001 2002 2003 2004
Other
Dual Listing
Singapore
Nasdaq
HK GEM
Hong Kong
5
10
15
20
2000 2001 2002 2003 2004
Number of M&A Exits
Dual Listing includes all companies listed on more than 1 exchangeOther includes Shenzhen, Tokyo, Shanghai and New YorkSource: SDC. Excludes transactions where IPO gross proceeds and M&A deal values were < $25MM
IPO Exit
M&A Exit
18
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Chinese Technology M&A / Minority Investment Activity
Select 2003 – 2004 Transactions Involving Chinese Technology Companies
As of November 24, 2004. Source: SDC.
($Millions)
Date Announced Target Name Acquiror Name
Transaction Value M&A Type
8/19/04 Joyo.com Ltd Amazon.com Inc $75.0 Acquisition
7/26/04 eLong.com IAC/InterActiveCorp 60.0 Minority Investment
7/5/04 Davidhill Capital Inc Sina Corp 36.0 Acquisition
6/21/04 Ctrip.com Rakuten, Inc. 109.6 Minority Investment
2/27/04 Crillion Corp Sina Corp 125.0 Acquisition
2/13/04 Shenzhen Powercom Co Ltd Investor Group 26.0 Minority Investment
11/21/03 3721 Network Software Co Ltd Yahoo! 120.0 Acquisition
11/11/03 Advance Tech(Asia)Ltd InvestNet Inc 33.4 Acquisition
9/8/03 Zhuhai Multilayer PCB Co Ltd Shanghai Founder Yanzhong 28.8 Acquisition
6/11/03 EachNet.com eBay Inc 150.0 Acquisition
3/17/03 Palmweb Inc CDC Mobile Media Corp 55.0 Acquisition
3/12/03 Shanda Network Co Ltd Softbank Asia Infrastructure 40.0 Minority Investment
1919
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1919
CONFIDENTIAL DRAFT A Profile Of Chinese Tech IPOs Shows High Quality, Profitable Companies With Strong Revenue Growth
1 As of 12/1/04. Source: Broadview’s IPO Database / Hoover’s IPO Central / Capital IQ
($Millions)
Issue Date NameOffering Amount
TTM Revenue
TTM Revenue Growth
Quarters of Profitability
TTM EBITDA Margin
% Change
From IPO1
TMC / TTM
Revenue TTM P/E
12/2/04 Ninetowns $105.6 $21.1 43% 15 66% 0% 14.14 x 23.70 x
11/10/04 China Netcom 1,141.1 7,663.4 10% 14 52% 10% 1.74 x 9.70 x
10/27/04 eLong 62.1 13.3 94% 0 4% 58% 20.48 x NM
10/15/04 China Finance Online 80.6 3.5 122% 8 66% (8%) 37.08 x 77.84 x
10/7/04 Hutchison Telecom 808.7 1,597.8 32% 2 27% 4% 3.32 x 67.84 x
9/28/04 51job 73.5 45.9 77% 10 25% 181% 21.14 x 143.43 x
7/8/04 Kongzhong 100.0 14.3 3798% 5 41% 18% 12.67 x 30.00 x
5/13/04 Shanda 152.4 72.6 84% 8 43% 262% 26.27 x 59.82 x
3/12/04 SMIC 1,712.9 365.8 627% 1 48% (30%) 7.89 x NM
3/5/04 TOM Online 175.0 77.1 157% 4 30% 4% 5.60 x 13.90 x
3/4/04 Linktone 86.0 15.5 285% 4 31% (31%) 3.94 x 22.60 x
12/9/03 Ctrip.com 75.6 16.6 62% 6 37% 203% 39.78 x 76.25 x
High 1,712.9 7,663.4 3798% 14 66% 262% 39.78 x 143.43 xMedian 102.8 45.9 94% 5 37% 10% 12.67 x 59.82 xLow 62.1 3.5 10% 0 4% (31%) 1.74 x 9.70 x
20
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0
20
40
60
80
100
120
140
Dec-00 Dec-01 Dec-02 Dec-03 Current0
5
10
15
20
25
30
U.S. Listed Chinese Technology Companies Are Growing Rapidly
The Number Of NASDAQ And NYSE-Listed Companies In China And Their Aggregate Market Capitalization1 Have Doubled Since December 2003
2003-2004 IPOs
Company Listing Date
Ninetowns Dec-04
China Netcom Nov-04
eLong Oct-04
China Finance Online Oct-04
Hutchison Telecom Oct-04
51job Sep-04
Kongzhong Jul-04
Shanda May-04
SMIC Mar-04
TOM Online Mar-04
Linktone Mar-04
Ctrip.com Dec-03
1 As of 12/4/04* 5 companies are listed on the NYSE. The remaining are listed on the NASDAQ.
11 1112 13
24*
0
20
40
60
80
100
120
140
Dec-00 Dec-01 Dec-02 Dec-03 Current0
5
10
15
20
25
30Aggregate Market Cap: Telecom
Aggregate Market Cap: Non-Telecom
Number of NASDAQ and NYSE-listed Companies in China
Nu
mb
er o
f C
om
pa
nie
s
(Ma
rke
t C
ap
in
$B
)
2121
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Typically, Chinese Technology IPOs Have U.S. Comparables…But With Unique Chinese Attributes
VALUATION DRIVERS U.S. Comparable Exists Strong Revenue Growth Higher Customer Retention Recurring Revenue Streams Higher Operating Margins
Total Projected 2005 Enterprise Value / Revenue
Total Projected 2005 P/E
Internet Media Online Travel Semi Foundry Recruiting Online GamingFinancial
Intelligence
Wireless Value-Added
Services
Internet Media Online Travel Semi Foundry Recruiting Online GamingFinancial
Intelligence
Wireless Value-Added
Services
14.86 x
7.05 x
2.24 x
29.09 x
4.48 x2.87 x 3.36 x
6.79 x
3.63 x
10.21 x
4.92 x
11.03 x
8.52 x
2.49 x
76.00 x
26.30 x24.58 x
43.60 x
15.73 x
27.95 x
33.44 x
64.59 x
24.23 x
32.62 x
24.87 x 23.33 x
46.68 x
17.79 x
Yahoo Sina IAC Ctrip.com TSMC SMIC Monster 51Job EA Shanda Factset China Finance
JAMDAT Linktone
Yahoo Sina IAC Ctrip.com TSMC SMIC Monster 51Job EA Shanda Factset China Finance
JAMDAT Linktone
13.0 x
2.0 x 2.8 x 2.2 x
1.8 x
1.8 x
1.9 x
1.4 x
Final Thoughts
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The Changing Landscape For Emerging Growth Technology Companies
Companies Must Develop Flexible Exit Strategies To Prepare For Volatile Market Windows and
Environment
2004E IT spending up 3.9%…but a $2.1 trillion market1
IPO market thawed but uncertain…the “bar” remains high M&A continues to rebound…sector specific Regulatory / structural changes driving rationalization of US
public companies
1 Source: Gartner Dataquest Global Market Sizing – January 2004
Global Landscape
China-Specific Landscape
Largest wireless market with soon-to-be largest Internet market One of few global markets with attractive investment returns IPO/M&A window for Chinese companies will experience
cyclicality but in the long-term will be a viable exit for Chinese companies
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Chinese Company Exit Considerations
Organic Growth, Private Equity or IPO on Alternative Markets Always Exists
Primary means of liquidity for technology companies in U.S. International M&A challenging given regulatory environment Likely to be staged as a strategic investment then M&A Typically positioned as the “China strategy” of U.S. buyer
U.S./Chinese M&A Considerations
U.S. IPO Considerations
Market leader in sector with direct U.S. comparables Limited appetite for “me-too” companies unless market has
matured such that it can support duopoly or many competitors VC backing is critical for marketing China-based deals Chinese companies are held to a higher standard due to risk
2525
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2525
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MAINFRAME
The BUNCH
1960
MINI
Data General
1970
CLIENT/SERVER
1990
INTERNET
2000
“DISTRIBUTED INTERNET”
2005+1980
MICRO
So What’s Next?
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CONFIDENTIAL DRAFT
Next generation infrastructure software High ROI, customer-centric applications Technology-based services
– Profitable / scaleable e-commerce– Enhanced services that use cheap bandwidth
– VOIP– Next generation video
Power Management Security
Better, Faster, Cheaper,
Smaller, Less Power and Heat, High ROI, Uses Existing Infrastructure
The Hot Themes For 2005?
Global Landscape
China-Specific Landscape
Semiconductor devices Network communications and equipment Distance learning Social networks eCommerce
Contact Information
CONFIDENTIAL DRAFT
DAVID A. LIUManaging DirectorInvestment BankingTechnology Capital Markets
Jefferies & Company, Inc.Broadview, a division of Jefferies 950 Tower Lane, 18th FloorFoster City, CA 94404T: (650) 573-4803F: (650) 573-4801Email: [email protected]