CCID Consulting: Investment, Financing and M&A in China's Cultural Industry
In 2011, the integration of China’s cultural industry and financial industry expedited. The financial industry is now paying more attention to the cultural industry than ever before. With the financial institutions driving the innovation of cultural finance, the cultural and financial environment and the industry’s capital operation have been constantly improved, which accelerated the listing and M&A of the cultural enterprises and the development of culture-oriented funds and credit products.
IPO upsurge continued in cultural industry.
In 2011, ten Chinese cultural enterprises, mainly from emerging industries like online game and culture media, got listed -- three in mainland China and seven in Hong Kong and US, through which a total of RMB 12,933 billion was raised. Despite a decline from 2010, it was still the second peak since 2007. In terms of the size of IPO, Phoenix Publishing & Media, raising RMB 4,813 million by issuing 509 million shares, was on top.
Credit funds continue flowing into the cultural industry.
By October 2011, China’s commercial banks held a total balance of RMB 230 billion loans in the cultural industry, with press and publication, radio, film, television and the Internet involved. ICBC has established credit ties with 3,247 cultural enterprises, ranking first among China’s commercial banks with a balance of RMB 61.1 billion loans; ABC has 37 tier-1 branches cooperating with local cultural departments and bureaus, with a balance of RMB 47.2 billion loans; BOC has also gained a balance of RMB 25 billion loans through product innovations; while CCB’s average annual growth rate of cultural credit exceeded 30% over the past three years.
Equity funds continue supporting the cultural industry.
Investment in the cultural industry has become a focus of the capital market. In 2011, 14 cultural industry-oriented equity funds were launched, with a plan to raise RMB 45 billion, far exceeding 9 funds and RMB 20 billion in 2010. These equity funds were located in 7 provinces, municipalities and autonomous regions, among which Jiangsu Province with four funds launched boasted the largest number of funds, while Beijing Municipality raised the largest amount of fund of RMB 22 billion, where the China Cultural Industry Investment Fund alone raised RMB 20 billion. Emerging cultural industries such as film & TV, new media and the Internet were most favored by the investment agencies.
M&A of cultural enterprises makes new progress.
In 2010, there were only three M&A cases in China's cultural industry, but in 2011 the figure came to 32, among which 23 cases have disclosed a total value of RMB 8.58 billion. Among the 32 cases, new media accounted for 47%, animation and film 25%, and traditional media only 28%. Meanwhile, 26 M&A cases were between domestic enterprises, mainly in eastern China’s Beijing, Shanghai, Fujian, and Guangdong, with only 2 in the central and western regions. The largest domestic case was Baidu acquiring Qunar.com for RMB 1.976 billion. Among the 6 overseas M&A cases the largest one was the acquisition of Hong Kong Media Asia by Fengdeli and Sina for RMB 401 million.
At present, China has a serious 70% shortage of output capacity of cultural products, while the room for the industry and the market’s further growth is immense. In 2012, the investment, financing and M&A in China’s cultural industry is expected to see the following trends:
Direct financing will continue to hold a prominent position, and banks will enhance credit loan innovations. More enterprises will take VC and PE as their main financing channels. Enterprises will strive to get listed, and the government will further increase investment in the cultural industry.
Investment and financing will keep expanding in size, while risks will grow. CCID Consulting predicts that in 2012, 20 cultural enterprises will launch IPOs to raise over RMB 20 billion. However, the cultural industry also features a long investment cycle and considerable uncertainties including ROI risks, while a mature risk management system has not been formed, and risk management awareness is still weak among the cultural enterprises.
About CCID Consulting Co., Ltd.
CCID Consulting Co., Ltd., the first Chinese consulting firm listed in the Growth Enterprise Market (GEM) of the Stock Exchange of Hong Kong (HKSE: 08235) and the first consulting firm which gets ISO 9001 international and national quality management system standard certification, is directly affiliated to China Center for Information Industry Development (hereinafter known as CCID Group). Headquartered in Beijing, CCID Consulting has so far set up branch offices in Shanghai, Guangzhou, Shenzhen, Xi’an, Wuhan and Nanjing with over 300 professional consultants. The company’s business scope has covered over 200 large and medium-sized cities in China. CCID Consulting provides customers with public policy establishment, industry competitiveness upgrade, development strategy and planning, marketing strategy and research, HR management, IT programming and management services, investment and financing, and M&A. The company's customers range from government departments at all levels and diversified industrial parks, to industrial users in strategic emerging industries in new generation information technology, energy saving and environmental protection, biological science and technology, high-end equipment manufacturing, new materials, and new energy. CCID Consulting commits itself to become the No. 1 advisor for urban economy, the No.1 consultancy for enterprise management, and the No. 1 brand for informatization consulting in China.
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