Core Viewpoint - The article analyzes the challenges in comparing pricing discounts in China's secondary private equity market (S market), highlighting the lack of reliable data and the unique characteristics of the domestic market compared to overseas markets [4][11]. Group 1: Reasons for Difficulty in Discount Statistics - The global S fund market exhibits a strong Matthew effect, with 60-70% of transactions led by intermediaries and a concentrated buyer base, making it easier to calculate market prices [6]. - Most transactions involve merger fund assets, where General Partners (GPs) have better information resources for market value management, leading to more accurate pricing [6]. - Liquidity and financial demands dominate market transactions, with many sellers willing to sell below cost due to various strategic and compliance reasons [7]. Group 2: Characteristics of China's S Fund Market - The Chinese S fund market is highly fragmented, lacking long-term concentrated information, with 45% of institutional buyers in 2024 having never invested in any assets in 2023 [8]. - The intermediary ecosystem in China's S fund market is underdeveloped, leading to difficulties in establishing a general pricing trend [8]. - Chinese private equity funds primarily invest in minority stakes of growth-stage companies, resulting in a lack of sufficient information and distorted valuations due to the introduction of non-financial investors [9]. Group 3: Pricing Considerations in Transactions - The bottom line for S transactions in China is achieving a return of capital, with many transactions evaluated based on past returns and total multiples rather than current book value discounts [10]. - The majority of Limited Partners (LPs) with state-owned attributes cannot make decisions on transactions below cost, necessitating a minimum of 2x net returns for negotiation space [10]. - The lack of representative pricing statistics in the domestic S market means that each transaction must be evaluated individually [11]. Group 4: Buyer Pricing Strategies - The main valuation approach involves ensuring a margin of safety based on the core assets of the target and projected future cash flows [13]. - Buyers may pay a premium for companies with strong listing expectations, while discounts apply to those whose development lags behind previous valuations [14]. - Innovative transaction models, such as back-end profit sharing and structured financing, have emerged, complicating pricing transparency but providing market growth opportunities [15]. Group 5: Suggested Reference Points for Pricing - Historical prices of transferred sub-fund shares can serve as a reference for pricing, as GPs are obligated to disclose these during inquiries [17]. - Sellers can actively set prices based on growth rates and expected returns, aligning with internal requirements and risk control [18]. - Market-based inquiries can be conducted to gather multiple buyer quotes, enhancing pricing transparency and market engagement [19].