As China tech M&A heats up, boutique advisers steal big banks’ thunder

 

HONG KONG, April 29 (Reuters) – Boutique Chinese financial advisers are stealing a march on global investment banks as deals pick up speed in the country’s red-hot Internet industry, turning deep ties to entrepreneurs, venture capital and private equity firms into mounting fees.

Small shops like China Renaissance, Hina Group and Kilometre Capital Management arranged crucial early-stage financing years ago for then-startup firms that have developed into billion-dollar businesses. Those tech firms haven’t forgotten the leg-up: boutique advisers banked 57 percent of tech merger and acquisition fees so far in 2015, Thomson Reuters data shows, nearly double last year’s share.

As China transforms itself into a more services-oriented economy and the government looks to bolster consumer demand, Internet and tech startup companies have taken centre-stage, raising billions of dollars from investors. China’s tech sector has seen $25.6 billion of M&A deals so far this year, on pace to beat the record activity of $49.8 billion in all of 2014.

That is offering a growth opportunity for the boutique firms that have grown up alongside new tech companies. Thriving on deep connections, brokering deals between Internet entrepreneurs they know personally, the little-known firms are frustrating bankers representing global investment houses, and sector watchers expect their share of business to keep growing.

“We want to beef up our M&A practice because we see that as a big opportunity,” said Fan Bao, founder and CEO of boutique firm China Renaissance. “The long-term fundamentals for China’s new-economy companies are looking good.”