PE Institutions Are Seen As The Deepest Financial Capital Involved In The Real Economy.

Private Equity Fund (PE) was born in the United States after World War II. It is a product of the combination of real economy and financial system.

With the global economic adjustment in 1970s, the problem of low asset efficiency was exposed, and the demand for M & A was blowout.

On the one hand, PE organizations can leverage large amounts of capital and actively participate in the industrial development strategy, demonstrating its strong comprehensive operation capability and participating in mergers and acquisitions for many large enterprises.

Since then, PE institutions have been seen as the deepest financial capital involved in the real economy.

From 2000 to 2008, the development of China's PE industry is at an early stage.

In this period, growth oriented investment is the most important investment strategy.

At that time, China's economy was in the golden age of rapid growth. The average growth rate of GDP was 10.4%. During the 2005 to 2008 years, the added value of mining, construction, wholesale and retail, financial and real estate industries exceeded 20%. Under the rapid development of macro-economy and industry, the annual profit growth rate of many quality enterprises could exceed 50% or even double.

Against this background, PE organizations invest in good companies only after 3~5 years.

It can grow several times.

Therefore, most of the successful cases of PE investment are directed against the industry's absolute leading investment, such as BELLE international, Yurun Food, Mengniu Dairy, etc. the average growth rate of net profit of these three enterprises in the first 5 years was 158.23%, 74.67% and 56.3% respectively.

This period can be said to be the PE1.0 period. The profit model of PE institutions is very simple. It is not necessary to carry out complex operation if we only need to find high-quality enterprises to participate in shares. Within 3~5 years, we can directly share the dividends of rapid growth of enterprises through investment growth enterprises, and passively achieve the excess return of 1 times the investment amount and 4 times.

This is a "money collecting era" for everyone to earn money.

Before 2008, growth investment has always played an absolutely dominant role in China's PE investment.

According to the data of Qing Dynasty, the growth investment in China's PE investment in 2008 was about 6 billion 624 million US dollars, accounting for about 69% of the total investment, and the investment amount of M & A was about 356 million US dollars, accounting for only 3.7% of the total investment.

At this stage, due to the relative lag of China's financial industry, the financial system and financing environment are not mature, and the competitiveness of local PE is weak. Most active PE institutions have foreign investment backgrounds, such as Caire, Goldman Sachs and Morgan Stanley, which are purely foreign institutions.

In 2008, when the global financial crisis broke out, China's economic adjustment and growth slowed down, which directly led to the end of China's PE1.0 era. However, the Chinese PE industry quickly found new growth momentum, that is, the large-scale listing opportunities brought by the reform of China's capital market.

During the period from 2009 to 2013, the PE institution excavated the institutional dividend of Pre-IPO (pre IPO), bringing the whole industry to a new round of rapid growth.

The start of the split share structure reform in 2005.

This task was basically completed at the end of 2006, and the realization of "full circulation" and the opening of the gem in 2009 changed PE's main way of withdrawing from overseas listing and opened up the channels for PE institutions to withdraw from the domestic market.

Because listed companies can get considerable liquidity premium in the two tier market, the successful PE institutions are very sensitive to the real economy and financial markets. They not only know how to find good companies, but also know how to facilitate the successful listing of enterprises.

Therefore, in the PE2.0 stage, PE has formed a new profit model, that is, the "2 x 2" model: in this period, the economic growth rate has slowed down, and the growth rate of enterprises has slowed down correspondingly, but the quality enterprises can still achieve an annual average growth of 15% to 20%, and the performance in the 3~5 year investment cycle has doubled. Meanwhile, the dividend of the system has made the price earnings ratio of the listed companies in the A share market at least double.

For example, in the second years after the implementation of the gem, the average price earnings ratio of the gem issuing enterprises has reached 69.85 times, allowing the relevant investment institutions to get an average of 11.34 times the book return.

The dual factor model in the PE2.0 era is undoubtedly more complicated than the single factor model in the PE1.0 era.

In the PE1.0 era, PE institutions focused on the fundamentals of economy and business.

In the era of PE2.0, PE institutions need to have the ability to deeply intervene in capital markets, and familiarity with the rules of China's securities market.

At this stage, the competition pattern of China's PE industry has undergone major changes. The local PE institutions that know more about the Chinese market have begun to emerge. At the same time, the loose policy has brought plenty of capital. The newly established local PE organizations have sprung up, and the number and scale of investment have increased rapidly.

This period is also a period when China's high-quality private enterprises are listed on a large scale.

2008, new

There were only 35 investment institutions in PE/VC and 171 in 2011, with explosive growth.

However, this growth momentum began to slow down around 2012.

With the introduction of the new regulations of the SFC in 2012 - 2013, the number of IPO declined significantly, the macroeconomic and capital market trends were less than expected, and the scale and rate of return of PE institutions declined.

Because PE agencies and other investment institutions continue to tap the stock and quality enterprises that China has developed over the past few years, such excellent investment targets are becoming more and more difficult to find.

Under the influence of multiple internal and external factors, the era of PE2.0 is coming to an end, and PE institutions are starting to invest more in mergers and acquisitions.

In 2013, the scale of China's M & a market expanded significantly, and the amount of M & a supported by VC/PE institutions reached 6 times the amount in 2012.

PE agencies are flooding the M & a market to find new growth drivers.