Battle of the strategics

Financial institutions make an interesting addition to the mix. Last week an affiliate of Ping An Insurance Group acquired SmartPay, one of the country's leading mobile payment providers. The investment facilitated the exit of Lunar Capital, RRE Ventures and Icon.

From SmartPay's perspective, the buyer could have been a domestic e-commerce platform, some of which might like to own one of the channels customers use to pay for products. Ping An, however, wanted to slot SmartPay into its own electronic payments offering, scale up the business and create a viable challenger to market leader Alipay, part of the Alibaba empire.

The BATS are pursuing acquisitions for a combination of financial and strategic reasons. They are under pressure from shareholders to deploy capital and diversify their portfolios and have sufficient resources to achieve this through inorganic rather than organic expansion.

Baidu, for example, built its search engine business on PCs but is now responding to growth in smart phone usage by targeting mobile platforms. Hence its acquisitions of 91 Wireless, a mobile app store and game operator, and iQiyi, which is an online video platform popular with mobile users.

China's financial services companies are in a similar position. They didn't emerge online but have invested in creating a presence there, and now they must do the same with mobile.

Competition between financial services providers and internet companies is unlikely to be as intense as that between the internet companies themselves.

First, financial services in China are still highly regulated and profits are to a large extent dictated by government-set product prices. Second, they are not trying to develop broader platforms at the expense of one another. And third, in the most part they are targeting different kinds of assets.

But for a start-up with a technology that is applicable e-commerce - online payment platforms, customer verification software, or anything that facilitates the transition from bricks and mortar to mobile - the universe of trade buyers is bigger than one might think.

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• Topics
• Exits
• Greater China
• Technology
• Financials
• Financial Services
• TMT
• Exit
• China
• Trade sale