In October, Amane Advisors’ China partner Alex Zhang presented at the Chinese Membrane Industry Development Summit, which was held in Zibo City, Shandong Province. This marks the third year that Amane has supported the summit and cohosted the one of the major forums at this prestigious event.

 
Amane Advisors cohosted the fifth forum, which addressed the topic of “Membrane industry & Financing”. Alex shared several market insights on Chinese M&A opportunities observed in our M&A transaction experience over time, including:

• Major M&A deals in China’s water industry in the last five years had EV/Net profit multiples of acquired targets typically around 10.8, while estimated EV/EBITDA multiples were at 10.1. Comparatively, the average EV/EBITDA multiple in overseas water markets averaged at 10.4 in 2020. This means that valuations of Chinese environmental company in M&A deals are generally smaller than the equivalent in overseas M&A deals; therefore, less capital investment is required to acquire a Chinese environmental target. Moreover, the average price-to-earnings ratio of Chinese publicly-listed companies in water industry is 18.6.
• Furthermore, there has been growing needs for fundraising from Chinese domestic players who are thriving in membrane markets. Taking RO as an example, more than 10 local companies have developed RO manufacturing capabilities in the past five years, aiming to win market share in the Chinese RO market. As new market entrants, these local companies would be happy to receive investment from international investors to achieve a win-win outcome.

 
During his speech, Alex also addressed the value and importance of third-party consultancy in a transaction to effectively coordinate communication, assess potential risks, and pave the way for deal closing.

As an example, Amane Advisors successfully helped a UK fund invest in China. In the deal, the investor acquired a project SPV company that brought the investor an annual return of at least 10%. Our client has strongly appreciated Amane’s value leading to the success of this deal.

The forum aims to further develop and support the growth of the Chinese membrane industry. It gathers together national ministry and local government officials, top research institutes, industry experts and innovative entrepreneurs, national and local banks as well as private equity firms, global business partners, and leading membrane corporations such as JiuWu High-Tech, DuPont, Vontron, Origin Water and the like.

The location of the summit is meaningful, as it took place in Shandong Zibo, where a national “Membrane Valley” is being built. Local governments have provided strong economic incentives to attract membrane suppliers to build plants in the membrane valley, including tax discounts and full subsidies for plant construction. The convocation of all parties at the forum created impactful interactions, valuable connections, and inspiring visions towards a prosperous and booming “China Membrane Valley” in 2030.