2013-2019 China Healthcare Services M&A Review ......2 Table of Contents Overview of the development of China healthcare service industry 3 1. Overview of M&A activities (2013-2019)

2013-2019

China Healthcare Services M&A Review

Concentration, cooperation, integration: healthcare service industry continues to thrive

February 2020

2

Table of Contents

Overview of the development of China healthcare service industry 3

1. Overview of M&A activities (2013-2019) 5

1.1 Megadeals 9

1.2 Deals by geography 10

1.3 Deals by investor type 11

1.4 Analysis of deal implied market multiples 13

2. Domestic Hospital M&A Activities 14

2.1 Domestic Hospitals M&A - by Target System 15

2.2 Domestic Hospitals M&A - by Target Type 16

2.3 Analysis of Domestic Specialized Hospitals 17

2.4 Domestic Hospitals M&A - by Target Rating 18

3. M&A of non-hospital healthcare providers 19

4. IPO Analysis 22

Considerations and Expectations 25

2

Foreword

Description of data used in this report

• Data used in the report are based on information provided by the PEdata Database, Thomson Reuters and PwC Analysis,

unless otherwise noted;

• PEdata Database and Thomson Reuters only record transactions announced publicly, and some transactions that have

been announced may not be completed;

• Some transactions’ information or amount are not disclosed, which affects the comprehensiveness and trends of our

analysis to a certain extent. Especially in some hospital investments, only limited information is disclosed due to the

sensitivity of the transaction information.

• The number of transactions mentioned in the report refers to the number of transactions announced, regardless of whether

the transaction amount is disclosed;

• The transaction amount mentioned in the report only includes the transactions for which the amount has been disclosed

(referred to as “the disclosed amount” in the report);

• The average deal amount mentioned in this report only consider the deals which have disclosed deal amount

• “Domestic deal” means the deals happened within the area of mainland China; and

• “Overseas deal” refers to deals happened in the Hong Kong Special Administrative Region, the Macao Special

Administrative Region, the Taiwan region and other overseas countries and regions.

Industry description

• Hospital: A medical institution that provides medical and healthy services to the public. The hospitals in this report refer to

general hospitals and specialized hospitals (including dentistry, plastic surgery, maternity and child and ophthalmic clinics),

which are also the key analysis objects of this report;

• Other medical institutions refer to medical and health care institutions other than hospitals, mainly medical examination

centers, medical care, rehabilitation institutions, etc.;

• Online healthcare services refer to Internet-based health care services, including health education, medical information

inquiry, electronic health records, disease risk assessment, online disease consultation, electronic prescription,

teleconsultation, and remote treatment and rehabilitation.

4

3

Healthcare service industry: ever growing industry driven by robust demand

Throughout the world, healthcare has always been the most

urgent and critical needs of people, and the demand of

healthcare service industry has always been rigid. In 2019,

while the global economy suffered from downward risks,

healthcare service industry became one of the preferred

options for M&A activities for its steady cash flow. Meanwhile,

with people’s developing needs of healthy lifestyle, consumer

health has also seen rapid growth in recent years. In early

2020, the COVID-19 outbreak brought new challenges and

opportunities. The healthcare service industry has become a

$10 trillion market and will continue to grow.

Not a simple business: localized business with high entry barriers

4

Hospitals are facing the dilemma of profit as medical reform enters deep water

Healthcare service industry is usually considered free from

economic fluctuations, and it has a consistent cash flow.

However, the industry is a professional and localized industry,

characterized by high technical barriers, operation complexity,

a scarcity of clinical and operational talents. Investments in

healthcare service industry are not always a highly profitable

business. Investors and investees both come and go. In 2020,

as M&A activities in healthcare service industry continue to

adjust, experienced performers will continue to thrive and be

the game changer.

In the context of China’s medical insurance system, most

hospitals has revenue cap due to medical insurance total

payment control policy. The upcoming reform of DRGs

payment has further added to the uncertainty. Meanwhile,

multiple policies encourage hospitals to adjust revenue

structure and improve operational efficiency, including zero-

markup policy of medicines and consumables, two-invoices

policy (and the upcoming one-invoice policy), ‘4+7’

procurement policy. With that being said, investment in

hospitals should not only discover revenue growth

opportunities, but also improve operational efficiency by

leveraging human resource, clinical skills and market. The

business should be run slowly and steadily.

An overview of the development of China healthcare service industry

3

4

An overview of the development of China healthcare service industry

4

To be or not to be? Private hospitals are encouraged to thrive

in the way led by regulations

New business models, new technology and new investors are

shaping the industry

Compared with other industries that have been transformed

by business innovation and technology development,

healthcare service industry has not yet been fully penetrated.

In recent years, the industry has experienced active

integrations with new business models (independent medical

laboratories, independent medical imaging centers etc.), new

technology (AI, digital health etc.), new strategic partners

(high-tech companies etc.). During the outbreak of COVID-19,

digital health has acted quickly and effectively. The outbreak

will further drive the penetration of technology innovation in

healthcare service industry.

Ten years have passed since the start of China’s new medical

reform. In 2019, as it entered deep waters, as private

hospitals encountered emerging opportunities and

challenges. In June, 2019, ‘Initiatives to Promote the Healthy

Development of Private Medical and Health Institutions’ was

jointly released by 10 central government agencies. The

initiatives indicate that the government will ramp up support

for private medical and health institutions, and push forward

efforts to upgrade services and simplify government

approvals. However, on 29 Dec 2019, ‘Basic Medical and

Healthcare Promotion Law’ was passed, which prohibits the

capital market from cooperating with public hospitals to set up

for-profit medical institutions. Again, the concept of healthcare

as "public welfare" is deeply rooted in mind from the

perspective of national legislation. Furthermore, local

governments have different levels of perception and support

for private hospitals. Therefore, investors should pay attention

to policy guidance and seek investment opportunities in this

highly regulatory industry.

4

5

1. Overview of M&A activities (2013-2019)

China healthcare services industry

6

Overview of China healthcare services M&A transactions 2013-2019

Overview of China

healthcare

services M&A

deals

Average deal

size

Deal size averaged some

Rmb250 million. 2019

ranked top in terms of

average deal size at

Rmb430 million, driven

mainly by strategic

megadeals

Popular

sectors

Hospitals (peaked in 2016);

medical examination, senior

care/rehab centers, and

online healthcare services

gaining popularity in 2019

Deal value

Total disclosed deal value

exceeded Rmb190 billion;

deals closed in 2018

contributed Rmb24.1 billion,

while 2019 reported a

record Rmb60.4 billion

Major

investors

Dominated by strategic

investors, contributing a

combined deal value of

Rmb136.1 billion, or 71%

of the total deal value.

Number of

deals

Cumulative number of

completed deals

reached 924, of which

199 were closed in 2018,

and 160 in 2019

Outbound

deals

51 outbound deals, the

deal value dropped sharply

since the 2016 boom.

Australia, the US, and

Hong Kong led outbound

deal destinations.

Geographic

focus

Beijing, Jiangsu, Zhejiang,

Shanghai, Guangdong, and

Sichuan hosted 80% of the

domestic deals

Megadeals

18 mega deals (>Rmb2

billion in deal size) in the

review period, with a

combined value of more

than Rmb85.8 billion;

2019 saw 5 of them

Source：PEdata,, Thomson Reuters, PwC analysis

22 60 48

161 150 144

214

0

46 19

135

24 40

5

8 100

56

48 32

162

4

40

3

103

55 18

223

46

64

97

191

167

199

160

-

50

100

150

200

250

-

100

200

300

400

500

600

700

2013 2014 2015 2016 2017 2018 2019

RM

B in

100 m

illi

on

Domestic hospitals Overseas hospitals Online Healthcare services

Other medical institutions Total deal count

7


Source: PEdata, Thomson and PwC Analysis

The deal value in this analysis does not include that of the 145 undisclosed transactions.

Average deal

size Rmb in

100 million

0.7 3.1 2.0 3.0 2.1 1.3 4.3

China healthcare services M&A, Deal value and Deal count (2013-2019)

From 2013 to 2019, overall M&A and investment activities in

China's healthcare services market have been robust, with an

aggregate deal value reaching over Rmb190 billion. Notable

trends include:

Deal values fluctuate widely over the historical period

The total deal value had been growing annually since 2013

and boomed in 2016, driven mainly by a wave of megadeals

in the hospital sector. As the industry going through an

adjustment period, deal value declined after 2016 and hit

bottom in 2018. Boosted again by the rise of megadeals on

new fronts such as medical examination and online

healthcare services, 2019 saw a record aggregate deal value

of over Rmb60 billion, with an average deal size of more than

Rmb400 million.

Investment focus shifts from hospitals to other sectors

As the most focused investment targets traditionally, hospitals

have been less attractive to investors since 2016, with the

sector stepping into a period of adjustment. In particular, the

sizes of outbound hospital deals shrank more rapidly. In 2019,

the overall M&A activities on hospitals remained flat,

excluding a megadeal - the New Frontier Corporation's

("NFC") acquisition of United Family Healthcare (“UFH”). In

comparison, other medical institutions and online healthcare

services gained momentum, leading to a surge in deal value.

Integration in and between industries intensifies

As the capital market cooling down over recent years,

integration has gradually become the focus of M&A activities

in China's healthcare services market. 2019 witnessed some

symbolic megadeals revealing this trend: The resale of a high-

profile hospital (the UFH) took place in the hospital sector.

The private medical examination sector underwent a profound

consolidation driven by the new entrant from the technology

industry (Alibaba Group). Substantial funding flowing into

online healthcare services highlighted investor's commitment

to integrating online and offline medical services.

8


Deal value by sectors 2013-2019 (Rmb in 100 million)

Deal count by sectors 2013-2019



From 2013 to 2019, M&A activities of major sectors within

China's healthcare services market demonstrated the

following trends:

1. Domestic hospitals: Propelled by capital investment and

policies, the domestic hospital M&A transactions grew

actively from 2013 to 2019 with fluctuations. Represented

by fundraisings of private specialized hospitals and

acquisitions of public hospitals, the traditional hospital M&A

activities peaked in 2016 and immediately followed by a

period of adjustment. In 2019, driven by the USD1.3 billion

resale of UFH, the deal value of domestic hospitals M&A

totaled Rmb21.4 billion, setting a record. In spite of a lower

deal count in 2019, determined large strategic investors

such as New Journey Hospital Group, Universal Medical

Group, and Tonghua Golden-horse Group continued

moving forward along the path of public hospitals'

integration and reform. On the other hand, financial

investors such as PE firms have been acting prudently

during the adjustment period, focusing on leading

specialized hospitals with a more certain prospect.

2. Overseas hospitals: With several megadeals completed

during the "Going Global" boom, the total deal value of

outbound hospital transactions hit a record high of

RMB13.5 billion in 2016. It then cooled down quickly amid

the tightening policies and economic downturn. In 2019,

with greater international political and economic

uncertainties, M&A activities targeting overseas hospitals

have slowed.

3. Online healthcare services: Driven by favorable

framework policies, 2015 saw a massive wave of M&A

transactions in the online healthcare services sector.

However, it has been declining since, as the sector

continued to face difficulties establishing a sustainable

business model, and the policies lacked details on

implementation. In 2019, providing clear instructions to the

industry, the newly issued regulations brought a second

wave of deals to this sector. Examples include the large-

scale fundraisings completed by JD Health, Ali Health, and

Penguin Almond, respectively. The total deal value of the

sector reached an all-time high in 2019. Also, investors

demonstrated their increasing appetite for leading players

backed by internet giants.

4. other medical institutions: M&A activities targeting other

medical institutions like medical examination chains and

senior care centers have been building up momentum. In

particular, as a crucial channel of gaining customer traffic

offline, medical examination chains became one of the

most active sub-sectors in China's healthcare services

M&A market. In 2018, deals in this sub-sector were

dominated by sector-wide consolidation comprising a

series of small to mid-sized acquisitions. Then in 2019,

Alibaba Group, an internet giant and new entrant to this

sector, pushed forward the sector-wide integration by

leading a series of megadeals, including the iKang

Healthcare privatization, acquisition of a sizeable share in

Meinian Healthcare, and Meinian Healthcare's following

share placement. (Meinian Healthcare and iKang

Healthcare are the top two private medical examination

chains in China). These extraordinary transactions made

the other medical institutions the largest sector by deal

value in 2019, surpassing the domestic hospital sector for

the first time.

22 0 0 4

60 46

8

40 48

19

100

3

161 135

56

103

150

24 48 55

144

40 32 18

214

5

162

223

-

50

100

150

200

250

Domestic hospitals Overseas hospitals Online Healthcare services Other medical institutions

2013 2014 2015 2016 2017 2018 2019

26

1 5 14

34

9 8 13

48

7

30

12

108

3

52

28

99

8

22

38

107

5 3

84 88

4

40

28

-

20

40

60

80

100

120

Domestic hospitals Overseas hospitals Online Healthcare services Other medical institutions

2013 2014 2015 2016 2017 2018 2019

9

“As the integration process of the medical examination sector accelerated and the financing of the

online healthcare services recovered, these two sectors contributed the majority of megadeals in

2019. In stark contrast, the hospital sector dominated the 2018 megadeals. Highlighted behind this

trend are the bold attempts by internet giants to build one-stop healthcare platforms through cross-

industry integration.

Megadeals targeting hospitals have remained active in 2019. The resale of UFH marked the largest

standalone hospital deal by value in recent years. Deals with a value over Rmb1 billion were observed

across all major hospitals sub-sectors, including public hospitals, private hospitals, general hospitals,

and specialized chain hospitals, revealing the strong and timeless appeal of premium hospital targets

for investors.

1.1 Megadeals

Top 10 M&A transactions by value - 2019

Target Sector Deal value Funding stage% of total deal

value in the period

iKang Healthcare Group other medical institutions (medical examination) USD1.5 billion Privatization 17%

United Family Healthcare Hospital USD1.3 billion Share transfer 15%

Meinian Group other medical institutions (medical examination) Rmb7.26 billion Share transfer 12%

JD Health Online healthcare services USD1 billion Round A 11%

Meinian Group other medical institutions (medical examination) Rmb2.05 billion Strategic 3%

Ali Health Online healthcare services HKD2.27 billion Strategic 3%

AIER Eye Group Hospital Rmb1.85 billion Share transfer 3%

Penguin Almond Online healthcare services USD250 million Round D 3%

Jixi hospital and

Shuangyashan hospitalHospital Rmb1.53 billion Share transfer 3%

Jinxin Fertility Hospital USD150 million IPO Cornerstone 2%

Top 10 M&A transactions by value - 2018

Target Sector Deal value Funding stage% of total deal

value in the period

WeDoctor Online healthcare services USD500 million Strategic 13%

Fortis Healthcare Ltd Hospital USD350 million Strategic 10%

AIER Eye Group Hospital Rmb1.72 billion Strategic 7%

Concord Medical Hospital Rmb1.5 billion Strategic 6%

Sanjiu Hospital Hospital Rmb1.12 billion Share transfer 5%

Hong Kong Asia Medical

GroupHospital USD150 million Round A 4%

Shanyi Group Hospital Rmb800 million Share transfer 3%

Foshan Chancheng Central

HospitalHospital Rmb750 million Share transfer 3%

Oriental Ally Holdings Hospital HKD770 million Share transfer 3%

Xinshijie Eyes Hospital Rmb600 million Share transfer 2%



10

“From 2013 to 2019, China's

healthcare services M&A

activities took place primarily in

Beijing, Jiangsu, Zhejiang,


Sichuan. These regions benefit

from rich medical resources,

leading positions in medical

reform, and enormous market

demands. Other areas,

especially Heilongjiang,

Hunan, Anhui, Shandong, and

Hubei, are also showing

potential in deal opportunities.

Driven by the recovery of

online healthcare services,

deal value and count in Beijing,


Zhejiang rose rapidly. At the

same time, Sichuan remained

a popular destination for M&A

targeting the more traditional

hospital sector.

Outbound M&A peaked in

2016 with the completion of

two mega acquisitions in

Australia, followed by a sudden

decline. Deal flows in Hong

Kong were more stable, with

mainly small to mid-sized

transactions.

1.2 Deals by geography

Deal count% of total deal

count

Deal value (Rmb

in 100 million)

% of total

value

Domestic 873 94% 1,565 81%

Beijing 171 19% 564 29%

Zhejiang 76 8% 224 12%

Shanghai 89 10% 201 10%

Guangdong 112 12% 146 8%

Sichuan 50 5% 74 4%

Jiangsu 61 7% 74 4%

Heilongjian

g17 2% 54 3%

Hunan 22 2% 45 2%

Anhui 31 3% 35 2%

Shandong 51 6% 29 2%

Hubei 20 2% 25 1%

Liaoning 23 2% 20 1%

Shanxi 16 2% 12 1%

Chongqing 22 2% 11 1%

Other 112 12% 50 3%

Outbound 51 6% 362 19%

Australia 4 0% 134 7%

The US 5 1% 88 5%

Hong Kong 31 3% 54 3%

Other 11 0% 86 1%

Total 924 100% 1,928 100%

Deal count and deal value by geography 2013 - 2019

Shanghai

Beijing

Ningx

ia

Shannxi

SichuanChongqing

Yunnan

Guizhou

Hunan JiangxiZhejiang

Guangdong

Jiangs

u

AnhuiHubei

Shand

ong

Hebei

Tianjin

Liaoning

Guangxi

Inner

Mongolia

Xinjiang

XizangQinghai

Gansu

Shanxi

Henan

Fujian

Hainan

Taiwan

Jilin

Heilongjiang



Deal Volume or Deal Value

>100 >RMB 10 billion

50~100 RMB 3~10 billion

20~50 RMB 1~3 billion

1~20 <RMB 1 billion

N/A

11

“

1.3 Deals by investor type

Deal value and deal count by investor type 2013 - 2019



10

111 121

354

191 167

409

16

44 50

100 86

74

195

37%

58%

44%

58%

54%69%

47%

39%

72% 71%

78%

69%69% 68%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

50

100

150

200

250

300

350

400

450

2013 2014 2015 2016 2017 2018 2019

RM

B in

100 m

illi

on

Strategic Investors - Deal value Financial Investors - Deal value

% of deal count made by strategic Investors % of deal value made by strategic Investors

Strategic investors have dominated healthcare services M&A, having made up roughly 70%

of the total deal value in the review period. Because of the industry’s profound impact on

people's well-being, the tight regulations and complex ecosystem, investors have to be

equipped with professional and operational expertise. Investors also have to learn to

achieve a balance between short-term returns and the longer cycle of healthcare

operations. Relying on highly competent teams to integrate and reshape the acquired

businesses, strategic investors aim to pursue their goal of creating value for both the

society and their assets.

Financial investors remain highly interested in this sector. The healthcare service’s relative

immunity to economic cycles and stable cash flows make investing in this sector an

attractive move in building portfolios. Uncertain of short to mid-term yields, financial

investors tend to be more rational and practical when making investment decisions, with a

preference for leading specialized hospitals and healthcare service platforms with clear

business models and more predictable capital expenditures.

12

1.3 Strategic investors by industry



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016 2017 2018 2019

Healthcare Internet & IT Insurance Real Estate & Construction Manufacturing Energy & Resources Others

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016 2017 2018 2019

Healthcare industry

Among all strategic investors, investors from the healthcare

industry (including broader sub-sectors such as healthcare

services, pharmaceutical and medical devices) led most of the

strategic M&A deals before 2019, eclipsing investors from

other industries in term of both deal value and count. To

consolidate resources within the sector through M&A,

hospitals and healthcare management groups played a vital

role over the period. The most high-profile investors include

large integrated healthcare groups (such as CR Medical

Group, Universal Medical Group), ambitious emerging

powers backed by global capital (like the NFC), and leading

specialized hospital groups (like AIER Eye Group). Through

the ups and downs of the market, these investors continue to

be the backbone of China's healthcare services M&A deals.

On the other front, encouraged by the policies on medical

reform and divestiture of SOE-owned hospitals, companies in

biotech, pharmaceutical, and medical devices have carried

out a wave of hospital acquisitions since 2015, in pursuit of

expansion through the value chain or business

transformation. Unfortunately, few of the hospitals acquired in

this wave achieved smooth post-deal integration, and many

investors have started seeking exits since 2018.

Internet and IT industry

By developing in-house platforms or investing in other

healthcare companies, internet giants have been actively

expanding into the healthcare sector. Aiming to build

integrated online and offline healthcare services, their

investment focus has long been only online healthcare

services. In 2019, to control the offline end, Alibaba Group

(along with its affiliates) launched a series of megadeals

targeting medical examination services chains, including the

iKang Healthcare privatization, acquisition of a sizeable share

in Meinian Healthcare, and Meinian Healthcare's share

placement. With a total deal value of over Rmb21 billion,

these megadeals made internet and IT companies the largest

investor group (by deal value) in the healthcare services M&A

market, for the first time surpassing investors from the

healthcare industry.

Insurance industry

Connected by payment of medical expenses, the insurance

and healthcare services industry share a foundation of deep

integration. In addition, insurance funds typically can meet the

longer investment cycle and substantial capital expenditure

required by the healthcare sector. Therefore, healthcare

naturally is an essential investment target for insurance funds,

with a historical focus on specialized hospitals and online

healthcare services. However, due to the limited presence of

commercial medical insurance in China's healthcare system,

the M&A activities of healthcare targets by insurance funds

are still low, with considerable potential in the future.

Other industries

In addition to investors from the above industries, investors in

real estate, manufacturing, and energy & resources have also

been actively engaging in healthcare services M&A. These

investors hope that investments in healthcare can hedge their

risks from economic cycles and create additional business

growth through cross-industry integration. Due to the

complexity of the healthcare industry, cross-sector investors

from traditional industries often face challenges in operation,

and the outcome of the integration post-deal remains to be

seen in an extended period.

Strategic investors by industry– Deal value Strategic investors by industry– Deal count

“13

1.4 Analysis of deal implied market multiples

Source: PEdata, Thomson Reuters and PwC analysis

Note: online healthcare service is not included in this analysis due to the scarcity of samples

Distribution of deal implied market multiples in healthcare service industry during 2013-2019

Distribution range of deal implied P/S ratio

0% 20% 40% 60% 80% 100%

Other medicalinstitution

Hospital

0~2x 2x~4x 4x~6x 6x~8x 8x and above

Distribution range of deal implied P/E ratio

0% 50% 100%

Other medicalinstitution

Hospital

<0 0x~20x 20x~50x 50x~100x 100x and above

Buying a good target may or may not turn out to be a good deal. For investors, the

ultimate question is whether you can achieve your target return rate, which calls for full

coordination in the funding-investing-managing-withdrawing process. The valuation of

healthcare service providers depends on multiple considerations, such as the nature of

the entity, asset ownership, revenue cap from medical insurance total payment policy.

For each particular deal, there are no absolute guidelines for valuation, and the key

question would be how your target return rate can be achieved.

We analyzed the implied market multiples of the 130 deals during 2013-2019, for which

the deal amount and financials were publicly disclosed. We noticed the situations

varied with fund raising conditions, fund maturity, etc. We saw market dynamics, but it

is impossible to lay down any rules; we will continue to closely monitor the market.

14

2. Domestic Hospital M&A Activities

Healthcare Service M&A Activitiesand Trend Overview in China

15

2010-2014

Preparation Phase

2015-2016

Peak Phase

2017-2019

Adjustment Phase

The investment amount in this analysis does not include that of the 92 undisclosed transactions.


2013-2019 Domestic Hospitals M&A - by Target System

Average Deal Size

( RMB in millions)

2013 2014 2015 2016 2017 2018 2019

Public Hospitals - - 281 322 332 438 587

Private Hospitals 108 241 104 150 173 146 242

2.1 Domestic Hospitals M&A - by Target System

- - 844

7,411

2,654 2,191 3,523 2,150

6,013 3,941

8,715

12,306 12,233

17,880

3 4 4

35

20

6 8

23

30

44

73 78

99

80

-

20

40

60

80

100

120

-

5,000

10,000

15,000

20,000

25,000

2013 2014 2015 2016 2017 2018 2019

De

al V

olu

me

Dea

l V

alu

e (

RM

B i

n m

illi

on

s)

Public Hospital Private Hospital Public Hospital in Volume Private Hospital in Volume

Social capital investment in domestic hospitals has been

undergoing an adjustment phase in the past three years. In

2017-2018 the deal value and volume both declined

compared with the peak phase; the deal size of disclosed

transactions reached a peak in 2019 with total value RMB21.4

billion, while the deal volume dropped sharply over the prior

year. Capital has been concentrated more on high-quality

targets.

Impacted by related regulation requirement, the state-owned

hospital medical reform has come to an end in 2019. The

newly completed reform cases include: Genertec Universal

Medical invested in Shanxi Yangquan Coal General Hospital

and Anshan Steel General Hospital, New Journey Hospital

Group invested in Shanxi Jincheng Coal Medical Health Co.

Ltd, China Resources Medical Holdings invested in Jinan

Heavy Duty Truck Hospital, etc.

The overall investment market on private hospitals cooled

down in 2019 mainly due to two reasons: 1) Hospital is heavy

assets industry, the initial construction investment and

operation cost are high and return period is relatively long; 2)

At present there is no mature exit path for investors. There are

80 deals related to private hospitals investment in this year,

decreased by 19% compared with 2018. Driven by the mega

size deal that New Frontier Corporation invested USD1.3

billion (RMB8.95 billion) in United Family Healthcare in July,

the deal value peaked in 2019; However, if excluding the

above mentioned United Family Healthcare case, the average

deal size this year would be RMB122 million, which is less

than that in the historical period.

952

3,698 3,975

7,280

5,163 4,974

13,848

1,008

2,149

721

6,089 6,364

8,186

6,715

190 166 89

2,758 3,434

1,264 839

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2013 2014 2015 2016 2017 2018 2019

Dea

l V

alu

e (

RM

B i

n m

illi

on

s)

General Specialized Healthcare management enterprise

16



2013-2019 Domestic Hospitals M&A – by Target Type

Average Deal Size

( RMB in millions)

2013 2014 2015 2016 2017 2018 2019

General Hospitals190 336 166 280 215 166 729

Specialized Hospitals84 179 48 119 152 149 118

Healthcare Management Enterprises63 83 45 689 264 316 210

2.2 Domestic Hospitals M&A - by Target Type

6 16 4Deal Volume 16 16 2 27 18 3 41 60 7 37 48 13 39 62 4 20 64 4

The overall domestic hospital investment market declined in

2019. Although the deal value increased significantly, it was

concentrated mainly in several large general hospital deals in

the second half of 2019.

Specialized hospitals was favored by the market in 2016-2018

due to its highly profitable and reproducible features.

However, amid the fierce competition in popular departments

such as ob&gyn, dentistry, etc., the investment in specialized

hospitals decreased in 2019. Although the deal volume

remained stable with last year, the average deal size

decreased 21%. Market is more cautious.

General hospitals related deal value reached RMB13.8 billion

in this year, while the number of deal was only half of that

of 2018; the market concentrated on high-quality targets.

Two transactions (New Frontier Corporation’s investment in

United Family Healthcare, and Tonghua Golden-horse’s

investment in Jixi Coal Hospital & Shuangyashan Coal

Hospital) accounted for 76% of general hospital deals in 2019.

719 -113

1,510

358 - -

377

152

-- 90

707

2,111 856

1,540

760 85 -

219

1,863

947

1,410

463

1,192

201

2,452

520

885

2,105

482

1,117 267

340

3,624

381

177

209

89

300

1,935

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Deal V

alu

e (

RM

B in

mil

lio

ns

)

2013 2014 2015 2016 2017 2018 2019

17



2013-2019 Deal Value of Domestic Specialized Hospitals

2.3 Analysis of Domestic Specialized Hospitals

From 2013 to 2019, investment in specialized hospitals

has seen the trend of shifting from targets with low-risk

and fast return to targets with high technology and high

talent barriers. Investments in ob&gyn, dentistry, etc. have

been declining, while the special departments with high

technology barriers such as ophthalmology, oncology and

neurology, are being favored by the market.

1. Ob&gyn health: Since 2016, the deal size has continued

to fall amid the increasingly intense competition caused

by shrinking customer source and lower technology

barriers;

2. Ophthalmology: With the high technology barrier, this

sector currently has a large market space. The

ophthalmic chain has been formed with the investment

from listed companies, such as Aier Eye Hospital Group.

This sub-sector performed quite outstanding in 2019;

3. Oncology: With the increase in the early diagnosis rate

of tumor screening and patient awareness, it is difficult for

public hospitals to meet the increasing demand for

diagnosis and treatment. In addition, public hospitals face

other pressures such as medical insurance’s percentage

control of drug expenditure and the control of drug

markup rates, which brings about opportunities of private

hospitals taking on tumor treatment business. Private

hospitals are expected to enter this niche market by

means of their high-quality medical personnel and

equipment, and favorable treatment environment &

service. New Journey Hospital Group’s investment in the

newly built Lanzhou Heavy Ion Hospital* in 2019 is

regarded an important event in this segment.

* The investment amount in above chart does not include this transaction, due to the undisclosed transaction amount.



“

2013-2019 Domestic Hospitals M&A Deal Value- by Target Rating

2.4 Domestic Hospitals M&A - by Target Rating

2013-2019 Domestic Hospitals M&A Deal Volume- by Target Rating

988 1,425

4,363 2,078

3,523 4,366 949

2,383

4,187

3,318

5,841 5,509

1,057

4,607 875

7,576

9,563

5,060

11,526

-

5,000

10,000

15,000

20,000

2013 2014 2015 2016 2017 2018 2019

De

al V

alu

e (

RM

B i

n m

illi

on

s)

Level III Level II Level I Non-rated

6 5

7

15

7 14 14

4

8

16

26 22 21

21

1 -

2 -- - 1

15

21 23

67 69 70

52

-

10

20

30

40

50

60

70

80

2013 2014 2015 2016 2017 2018 2019

Deal

Vo

lum

e

No. of Level III No. of Level II No. of Level I No. of Non-rated

Unrated hospitals are mainly specialized hospitals, medical management groups, private

general hospitals and smaller public general hospitals. Influenced by the previously

mentioned mega deals, the deal value of unrated and Level III hospitals increased

significantly compared with historical periods, causing domestic hospitals investment

amounts to rise. However, in terms of deal volume, the number of deal in 2019

decreased 16% over prior year, as a combined result of hospital investments’ return to

rationality and the reduction of high-quality targets.

18

19

3. M&A of non-hospital healthcare providers

China healthcare services industry

Online healthcare services

“M&A deals in online healthcare services recovered strongly in 2019, concluding a period of decline since

2016. Investors are increasingly seeking investment opportunities in leading online platforms backed by

internet giants. Exciting opportunities also bring challenges. The industry would have to continue exploring a

sustainable business model to effectively allocate healthcare resources to better meet patients' needs by

leveraging information technology within the framework of medical and financial regulations.

While working on developing online healthcare platforms, internet giants also set off on the quest for a

broader reach in healthcare services. The historic integration of the medical examination chains sector led by

Alibaba demonstrated its dedication to linking online and offline customer traffic and data, a move that would

have a profound impact on the healthcare ecosystems in the future.


China's online healthcare services sector originated from online

doctor appointment platforms. The services later expanded to online

consultation, online pharmacy, and online hospitals as the regulation

and business model evolve. Affected by changing policies and

market conditions, this sector experienced a boom in 2015, followed

by a downturn in the following years, before regaining investors’

attention in 2019.

During the outbreak of novel coronavirus at the beginning of 2020,

major internet healthcare platforms have moved swiftly to work on

several fronts of the fight against the epidemic. These efforts

included preliminary online screening, information updates, and

coordination of medical supplies, making an increasingly powerful

impact in both the healthcare community and society.

Key challenges faced by online healthcare services

• It is difficult for doctors to perform full diagnostic and reliable

treatment through pure online communications with patients,

limiting the scope of services to only preliminary consultation and

patients' revisits. This limitation largely reduces the value of

online platforms in the ecosystem.

• The degree of hospitals/doctors' participation is still low,

especially for the top ones.

• The early-stage business model leads to low profitability, and

most of the large platforms rely heavily on online pharmacies for

profit. The industry has to explore a new path to prove the

sustainability of this business.

• Although the newly issued regulation opened up access to public

medical insurance for online healthcare services, tight quota

control places a ceiling on the total revenue generated by a

healthcare platform, limiting the platforms' ability to balance its

online and offline operations. It also poses challenges to

standalone online platforms without an offline unit.

Opportunities and outlook

• With a series of detailed regulatory guidance published in 2018,

the industry can determine the boundary of operations and adjust

strategies accordingly, leading to an opportunity of rapid growth.

• The significant contribution made during the 2020 epidemic

further proved the value of online healthcare services and

highlighted its strong supplementary role in the hierarchical

medical system.

• The core of “Internet + Healthcare" will always be healthcare.

Patients will benefit substantially from he set-up of a one-stop

service platform through technology-enabled online services.

Notable ongoing efforts include building regional online health

information databases, promoting electronic medical records, and

further integrating medical resources like doctors, medicine,

supplies, and big data.

2014.8The National Health and Family Planning Commission ("NHFPC") issued

the "Opinions on Promoting Telemedicine Services for Medical

Institutions," the first policy document allowing online B2C services.

2015.3The State Council issued the "Outline of the National Medical and Health

Service System Planning (2015-2020)" to promote the development of

mobile internet and Telemedicine services.

The State Council displayed its support for "Internet + Healthcare through

its "Outline of Healthy China Plan 2030”, and for the first time, at a

national strategic level.

2016.10

The State Council's "Opinions on Promoting the Development of the"

Internet + Healthcare " and “Implementing rules dedicated to improve the

"Internet + Healthcare" service system, improve the supporting system,

strengthen industry regulation and security, and encourage medical

institutions to use information technology to expand the content of

medical services, build an online and offline integrated medical service

model that covers end-to-end diagnosis processes and provide guidelines

for access to public medical insurance by online healthcare services.

2018~

2019

The mainstream online healthcare services were first involved in

online doctor appointments, online consultation, and healthcare

education.

From 2015 to 2016, driven by the optimism of industry participants

and investors, the online healthcare services sector has grown

explosively, with active M&A transactions. However, although many

online platforms accumulated substantial traffic, making a profit

was proved to be difficult with an immature business model.

In 2017, under the pressure of profitability and unclear policy

details, the industry experienced a downturn. Thousands of start-

ups were forced to close, eliminating some economic bubbles in

the industry.

In 2019, as newly issued regulations provided further instructions to

the industry, M&A activities picked up, and the focus of key players

shifted from simply gaining traffic to an attempt to integrating

medical resources. Investors tended to pursue leading online

healthcare platforms backed by internet giants. JD Health, Ali

Health, and Penguin Almond all closed large fundraisings during

the year, with a combined deal value of Rmb10 billion.

The National Health Commission issued “Opinions on Strengthening IT

Support for the Prevention and Control of COVID-19”, and “Opinions on

Internet+ diagnosis and Treatment Services for the Prevention and

Control of COVID-19”, which encourages medical institutions to leverage

online healthcare to release the pressure of offline medical institutions.

2020.2 In 2020, the outbreak of COVID-19 has imposed major impact to

the strategic positioning of online healthcare service, which will

accelerates its future development.

Selected key regulations and events in the development of online healthcare services

Source: Public information

20

33%

22% 4%

19%

11%

11%

91%

4%4%

Medical examination Senior careMaternal and child care Health managementOthers Rehab

72%

3%

17%

8% 1%

79%

4%

5%

11%1%

Medical examination Senior careHealth management OthersRehab

21

other medical institutions

20182019

Sub-sectors in other medical institutions M&A (outer circle: deal value inner circle: deal count)


With the opening up of the healthcare services market, the

rising standard of living, and an increasingly aged

population, people in China value their health and well-being

more than ever. On July 15, 2019, the State Council

published the "Notice on Implementation and Evaluation of

the Healthy China Initiative," calling on everyone to assume

the primary responsibility for their health. The entire

healthcare services industry has gradually transformed from

"medical services" to broader "health services." Consumers'

growing willingness to pay a premium for better services and

healthcare products drives the rapid development of medical

examination, senior care/rehabilitation ("rehab") services,

and health management. Accordingly, these sectors have

seen rising number of M&A activities in recent years.

Medical examination services

As a gateway to massive offline customer traffic and data,

medical examination features a straightforward business

model and ability to generate stable cash flows, making it

one the most active fields in M&A. Long been dominated by

public hospitals that are out of reach by investors, the

medical examination sector saw an increasing number of

deals targeting private facilities in recent years in an effort to

consolidate market shares.

Among those deals, we’ve observed both internal and cross-

industry integrations. For instance, Meinian Group carried

out a series of transactions to aggressively consolidate

facilities within the sector,

including the acquisition of Ciming Group (another leading

medical examination chain) and an extensive campaign to

acquire many standalone shops across China. Alibaba

launched a series of transactions in 2019 to achieve

considerable control over the top three private medical

examination chains (Meinian Group, iKang Group, and

Ciming Group). With the completion of these deals, Alibaba

will be able to reinforce its Ali Health business, currently

relying solely on its online pharmacy unit, by diversifying

revenue stream and access to incremental offline traffic

and data. In the future, Alibaba can also leverage the

extensive local medical examination network to host more

services across the healthcare ecosystem.

Senior care and rehab services

Despite the vast market demand, the senior care and

rehab sector is still in an early stage of development.

Significant challenges include under-developed

infrastructure, lack of clear regulations, immature industrial

value chain, and shortage of professional workers. The

M&A in this sector is less active than the medical

examination sector. In addition, many organizations, mainly

real estate companies, chose to enter this sector by

establishing new business entities instead of through M&A.

Given the great potential, more M&A activities are

expected to be carried out in this sector as the market

positioning and business model further develop.

2017 Jan 2019 Dec 2019

Timeline of the integration of private medical examination chains by Alibaba


Meinian Group acquired a 100% equity interest of Ciming Group for a consideration of Rmb3.6 billion

Alibaba and its affiliates led the ~USD1.5 billion privatization of iKangGroup, a former NASDAQ listed company, and became the largest shareholder of the iKangGroup

Alibaba and its affiliates acquired shares of MeinianGroup at a consideration of ~Rmb7.3 billion, becoming the second-largest shareholder of MeinianGroup

After closing the said transactions, Ali has completed an unprecedented integration of the private medical examination chains in China, with over 700 storesacross China

4. IPO Analysis

Healthcare Service M&A Activities and Trend Overview in China

22

“2013-2019 Analysis of Listing of Hospitals and Other Medical Institutions

2019 IPO List of Hospitals and Other Medical Institutions

No. Company Sub-sector Stock Exchange IPO Date

1 So-Young International Inc. Medical Beauty NASDAQ 2019.05.02

2 Kato (Hong Kong) Holdings Senior Care HK Main Board 2019.06.13

3 Jinxin Fertility Group Reproduction HK Main Board 2019.06.25

4 IVD Medical Physical examination HK Main Board 2019.07.12

5 Euro Eyes Ophthalmology HK Main Board 2019.10.15

6 Aesthetic Medical International Medical Beauty NASDAQ 2019.10.25

4.1 IPO Analysis

2013-2019, 61 hospitals and

other medical institutions were

successfully listed, of which 20

companies went public in Hong

Kong. Since 2016, Hong Kong

Exchange (HKEX) has become a

popular choice for listing due to

the large number of successful

cases and the relatively high

financing amount.

Compared with other popular

sectors, there have been fewer

successful listing in recent years

due to the public welfare feature

of medical institutions and higher

listing threshold. Investors may

need to seek other exit paths.

Selected IPO cases in recent years:

In May 2019，So-Young International Inc. (“SY”) was

listed on the NASDAQ, raising a total of USD179 million

(RMB1.2 billion). SY has been regarded as the first

stock in providing online aesthetic information.

In June 2019, Jinxin Fertility Group (1951.HK) went

public on the main board of the HKEX. It was

announced that the company offered HKD8.54 per

share, raising a total fund of HKD3.05 billion (RMB2.73

billion), which accounted for half of the total funds

raised in 2019.

In 2018, PingAn Health Medical Technology Co., Ltd.

(1833.hk) was listed on the main board of the HKEX.

PingAn Good Doctor publicly offered 160 million shares

priced at HKD54.80 per share, raising a total of

HKD8.564 billion (Rmb7.1 billion), which was the

largest deal value in recent years.

3 205 208 - - - --

939

-- - -

1,420

1,165 -

4,727

1,579 1,255

7,671 4,439

1

3

14

12

8

- --

1

- - - -

2

1

-

4

4 4

3

4

-

2

4

6

8

10

12

14

16

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2013 2014 2015 2016 2017 2018 2019

IPO

vo

lum

e

Cap

ital R

ais

ed

(R

MB

in

mil

lio

ns

)

Capital Raised - China Mainland Capital Raised - United States

Capital Raised - Hong Kong IPO Volume - China Mainland

IPO Volume - United States IPO Volume - Hong Kong


23

“

2015-2019 Average P/E Ratio, Investment return and Return of Net Asset Trends of Newly Listed Hospitals and Other

Medical Institutions on the HK Exchange

2015-2019 After Listing Average P/E Ratio, Investment Return and Net Asset Return Trends of Newly Listed Hospitals

and Other Medical Institutions on the HK Exchange

4.2 Financial Performance of listed Companies on the HKEX

34.82 23.41

42.66

64.75

38.02

71.98

57.73

32.80

14.3%

6.1%

9.5%

6.2%

6.1%3.9%

0.2%2.9%

21.4%

3.4%

9.0%

3.5%

6.5%

3.0%

1.8%

7.9%

0%

5%

10%

15%

20%

25%

-

10

20

30

40

50

60

70

80

2015/12/31 2016/6/30 2016/12/31 2017/6/30 2017/12/31 2018/6/30 2018/12/31 2019/6/30

Pen

cen

tag

e

P/E

Rati

o

P/E Ratio Return on Investment Return on Net Assets

52.09

76.54

64.02

30.08 27.17

27.17

7.8%

6.6%

5.1%5.7% 5.5%

0.5%

5.0%4.4%

6.1%

6.9%6.3%

5.7%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

-

10

20

30

40

50

60

70

80

90

6 months 12 months 18 months 24 months 30 months 36 months

Perc

en

tag

e

P/E

Rati

o

P/E Ratio Return on Investment Return on Net Assets

• Data above refer to the semi-annual data from 2015 to

2019, including the average P/E ratio of listed companies

(excluding the one with negative P/E ratio), average return

on investment and average return on net assets. As most

companies have not yet filed 2019 annual report,

December 2019 data was not listed.

• 2015-2019, a total of 19 medical companies were listed on

the HKEX: Universal Medical, Harmonicare Medical,

United Medical, Kangning Hospital, MediNet Group,

Human Health, Union Medical Healthcare, Kanghua

Medical, Hospital Corporation of China, New Century

Healthcare, Pine Care Group, Hang Chi Holdings,

Fameglow Holdings, PingAn Good Doctor, C-MER Eye

Care, Kato (Hong Kong), Jinxin Fertility, Euro Eyes and

IVD Medical.

Hong Kong has been the preferred location for medical institutions to go public in recent years.

A total of 19 companies were listed on the HKEX. Driven by the two newly listed companies in

the first half of 2019, return on investment and return on net assets increased slightly; however,

stable and rising return has not yet brought high valuations, and the recent P/E ratio has

continued to decline.

Medical reforms, such as the “two-invoice” policy, zero-markup of medicines and consumables,

medical insurance total payment control and DRGs payment reform, caused uncertainties in

medical institution investment payback period. As the targets were relatively overvalued in the

early listing stage, and previous investments need to be digested, the average P/E ratio, return

on investment and return on net assets showed a downtrend after their listing.


24

Considerations and Expectations

25

“

26

The Effects of COVID-19 Outbreak on Healthcare Service M&A activities

In Dec, 2019, the COVID-19, considered as a black swan event, went viral and brought

major impact to healthcare service providers. Most of the private hospitals suffered from

weak cash flow. For healthcare providers, they need to figure out the underlying

opportunities in uncertainty, and undertake social responsibility. In the long term, the

outbreak of COVID-19 will accelerate the improvement of public health system and

hierarchical medical system, and push forward the construction of large hospital projects.

Also, it will raise higher requirements on online healthcare services, which brings up more

investment opportunities.

General Hospitals

During the outbreak, top public hospitals acted as the major

force, which, however, are normally inactive in M&A activities.

Private hospitals act nimbly, but some of them can barely help

due to capability constraints, scarcity of talents, and medical

specialty development. Meanwhile, some negative judgement

on private hospitals came up at this point. In the long run,

there will be a vast number of M&A opportunities in private

hospitals. Investors and operators should practice strength,

demonstrate patience, and promote technologies, such as AI

and telemedicine, to build trust and win more opportunities.

Specialized Hospitals and other medical institutions

Fewer patients went to specialized hospitals (medical beauty,

stomatology, ophthalmology etc.) and medical examination

centers. In the long run, business will soon return to normal,

with a slight rebound initially when the outbreak comes to an

end. With the increasing demand for healthy lifestyle, M&A

activities in health management will remain active.

Online Healthcare Services

Online healthcare services played an active role during the

outbreak, including online medical consultation (free clinic

consultation, medical image analysis, mental health

consultation etc.), public information release (COVID-19

distribution map, disease prevention tips etc.), online

pharmacy etc., which drew attention from the market, and

have proven the vital importance of online healthcare service,

as one of the important channels in hierarchical medical

system. Overall, the long-term development of online

healthcare service fundamentally depends on the

improvement in service capacity and patients engagement,

which requires the development of regional health information

interchange and electronic medical record databases.

Investors

Before the outbreak ceases, targets may suffer from unstable

business and weak cashflow, which may slow down due

diligence and negotiation work, and bring negative impact to

M&A activities. However, we also see some underlying

investment opportunities as some targets might have

experienced a significant slowdown in cash collection, and

investors can help in some way.

2020 is the milestone of China’s building of a moderately

prosperous society in an all-round way. As chaos brings

uncertainty to economic growth, we expect some stimulative

policies to come, together with the effective disease control,

we believe that the second half of 2020 might be a good

timing for investment activities.

27

Considerations on Healthcare Services Investment

Medical profession has always been supposed to focus on

the improvement of value-based care, the development of

medical science, and the training of medical talents. On top of

that, business innovation and technology development make

it even better. To practice strength and demonstrate patience,

and it will makes a difference between making easy money

and making a big fortune.

Again, private hospital investment is still in the primary stage

The industry continues to be a vast market given the aging

population and the increasing demand for consumer health,

bringing rigid demand for healthcare services. However,

private hospitals and other medical services investment in

China still has a long way to go. As (1) investment in private

hospitals usually requires huge amounts of capital and

industry network, yet it does not have a well-proven way of

capital withdraw. (2) other medical institutions, together with

online healthcare services, are in the preliminary stages of

development, as related policies are not yet set, and some

business models are not yet proven sustainable.

Market capital penetration: so far so good, but the best is yet to come

Hospitals have been, and will always be the major force of the

healthcare service industry. Among them, not-for-profit

hospitals, especially public hospitals act as the main role,

while for-profit hospitals act as complementary roles.

However, undoubtedly speaking, since the new medical

reform encouraged market capital to engage in hospital

investment, we have seen many outstanding cases in medical

profession. We believe, favorable policies for private hospital

investment are still on the way, and the best is yet to come.

Stronger regulatory efficiency and medical insurance coordination than other

countries, bringing in directional investment opportunities

China’s healthcare system boasts a strong execution when it

comes to regulatory efficiency and medical insurance

coordination, compared to that of developed countries,

evidenced by the implementation of the zero-markup of

medicines and consumables, ‘4+7’ procurement policy, DRGs

payment, etc. With the new medical reform being part of the

14th Five-Year Plan, we expect more related policies to be

introduced, and more investment opportunities to emerge.

To practice strength and demonstrate patience:

the real way to success

30

2020 Expectations

1. M&A activities in healthcare service industry will be in

a continuous period of adjustment, and capital goes to

high-quality assets.

With the ups and downs since 2016, investors have

developed a deeper understanding of the industry,

and have been demonstrating greater wisdom and

patience in selecting underlying assets. In 2020, as the

divest opportunity of state-owned hospitals comes to an

end, and investment in private hospitals continues to

adjust, the assets with well-developed business model and

strong profitability will be favored, such as specialized

hospitals with high technical barriers and a hospital group

with high market potential.

2. More strategical partnership will be seen.

In the context of hierarchical medical system, medical

insurance total payment and medical association, large

hospital groups will continue to dominate the market

through M&A activities and the expansion of patient

numbers. Meanwhile, non-medical companies (such as

real estate, insurance and internet technology companies)

will build strategic partnership with related assets.

3. More greenfield projects will be seen.

Greenfield projects usually require larger amounts of cash,

longer periods of return, and more complicated approval

process, however, they are also advantageous in

implementing new operational concepts and freeing

remaining issues. With the favorable policies on private

hospitals and the Greater Bay Area, we expect more

capital to focus on greenfield projects, and multiple

investors will likely leverage their own advantages, such as

land, capital, technology, and medical talents, to integrate

business and seek investment return.

4. Reorganized and re-transactive hospital M&A activities

will continue to grow

The last 3-4 years was a time for sorting out, and now re-

transactive activities are expected to occur. However, it is

not certain if asset dumping or decreasing asset premium

would be seen in the future.

5. The sustainability of the popularity in M&A activities in

online healthcare services and other medical

institutions has not yet been established

Driven by mega deals, the M&A activities in online

healthcare services and other medical institutions have set

a new record in 2019. However, considering the continued

adjustments in the industry, the sustainability of this

uptrend is uncertain; we would have to wait and see.

28

The data in this report and press release may differ from

those in previous press releases. There are three main

reasons: when the deal is finalized or completed, the PEdata

Database and Thomson Reuters regularly update their

historical data; PwC excluded deals that were not, in

essence, a transfer of control but closer to an internal

restructuring; PwC's previous data came from a different

source.

29

Transactions include: Transactions exclude：

• Change of control resulting from acquisition of listed and unlisted

companies

• Real estate in a property/individual property

• Investments in listed and unlisted companies (an at least 5%

ownership)

• Rumored deal

• Company merger • The option to acquire additional equity issued without the

acquisition of a 100% equity

• Leveraged buyouts, management buyouts, management sales • Purchase of the right to use trademark

• Privatization of enterprises • Land acquisition

• Offer • Fund market share raising

• spin-off • The purchase of shares in a mutual fund

• Splitting of wholly owned subsidiaries through listing • In the process of non-enterprise privatization, shares of listed

companies are repurchased or cancelled in the open market

• The divestment of companies, departments and operating assets has

led to changes in control rights at the parent company level

• Balance sheet restructuring or internal restructuring

• A reverse takeover • Investment in new projects

• Re-capitalization

• The joint venture was bought as a whole

• A joint venture

• Receivership or receivership and auction

• Tracking stock

• Delisting of listed companies

Data collection methods and disclaimers

30

Contact us

Leon Qian

PwC Mainland China and HK Deals Domestic Market Leader

PwC Mainland China and HK Healthcare Deals Leader

+86 (10) 6533 2940

[email protected]

Kushal Chadha

PwC Mainland China and HK Deals Partner

+852 2289 1815

[email protected]

This content is for general information purposes only, and should not be used as a substitute for

consultation with professional advisors.

@ 2020 PricewaterhouseCoopers Consultants (Shenzhen) Limited. All right reserved. “PwC” refers to

the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the

context requires, individual member firms of the PwC network. Please see www.pwc.com/structure for

further details.

http://www.pwc.com/structure

Documents

2013-2019 China Healthcare Services M&A Review ......2 Table of Contents Overview of the development of China healthcare service industry 3 1. Overview of M&A activities (2013-2019)