Consolidation, a normal part of any industry, generally consists of three stages: fragmentation, acquisitions & expansion. The stages are the same for all industries, yet every industry will experience these stages differently.

2015 was a banner year of consolidation for China’s technology industry, marked by a frenzy of M&A cases among top players across various vertical sectors while leaders began to emerge from the early fragmented stage.

Such M&A cases could be found everywhere in joint attempts to scoop the market and share the resources, from red-hot sectors like ride-hailing (Didi/Kuaidi), local listing services ( and O2O (Meituan/Dianping) to smaller fields such as online education (51talk/91waijiao) and social e-commerce service (Pinduoduo/Pinhaohuo). The market consolidation trend continues in co-working space with the merger between URWork and New Space earlier this year.

However, 2017 is shaping up to be a bit different. We will see a steady transition of Chinese internet companies to the expansion stage as more newly-formed tech giants are choosing independent development as a way to capture further growth rather than M&A, an analysis report from M&A intelligence vendor Mergermarket pointed out.

Large-scale fundraising and unicorn deals have become an increasingly prominent aspect of Chinese M&A. Didi Chuxing’s record-breaking US$ 5.5 billion fundraise is the most spectacular reminder of this shift. The case along represents a staggering 27.6% of the total US$ 12.4 billion fundings that local companies received so far this year.

Along with Didi Chuxing, there’s a growing number of Chinese tech giants in this trend. Since last year, we have been continuously bombarded by billion dollar investments as well as the creation of a new breed of unicorns in different verticals. Alibaba’s local services platform raised US$ 1.1 billion and Toutiao, a news mobile application provider, raised a US$ 1 billion Series D.

However, these mega fundraises have not translated into a growing number of takeovers, the report added. So far this year, tech deals have decreased in value by 13% to US$ 19.9 billion (65 deals), compared to US$ 22.8 billion (73 deals) in the same period of 2016. And since the beginning of 2017, 41 fewer deals have been announced compared to the same period in 2015, when 106 deals worth US$ 21.6 billion were announced, according to data from Mergermarket.

Chinese M&A suffered a slower start to the year than has been seen in the last couple of years, with the lowest year-to-date value since 2013 (US$ 39.6 billion). This year has seen 413 deals worth US$ 82.1 billion, a 24.6% drop in value compared to the same period in 2016 (479 deals, US$ 108.8 billion). The first three months of the year represent the lowest quarterly value since Q1 2014 when US$ 52.6 billion changed hands across 267 deals.

Mergermarket Group
Chinese M&A: Quarterly Breakdown (source: Mergermarket Group )

IPOs now provide an attractive exit option for investors with China Securities Regulatory Commission approving 103 IPOs in Q1 2017 alone, a 66% YoY increase, the report noted.

Chinese photo-beautifier Meitu was listed at the end of last year while several Chinese tech companies are reportedly in the IPO pipeline including Tencent-backed online reading platform China Reading, internet company Qihoo 360 and Ant Financial.

Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, serving as mutual market access, are expected to make Hong Kong another attractive listing venue for Chinese companies.

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Emma Lee

Emma Lee (Li Xin) was TechNode's e-commerce and new retail reporter until June 2022, when she moved to Sixth Tone to cover technology and consumption. Get in touch with her via or Twitter.

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