According to an exclusive report by the Chinese media outlet “Waves”, Daniel Zhang, the former Chairman and CEO of Alibaba Group, is set to join Firstred Capital as a managing partner. Zhang will be working alongside Liu Xiaodan, the founder of the firm.
Daniel Zhang’s move to Firstred Capital comes after he stepped down from various management roles at Alibaba in September, 2023. At the time, there was speculation that he might establish a new fund. However, the investment industry highly values experience, making it potentially challenging to start a new firm at this juncture. Instead, joining Firstred Capital appears to be a fitting choice for Zhang, aligning well with his career history and investment experience.
Firstred Capital, established in 2019, distinguishes itself from traditional financial investment funds by focusing on mergers and acquisitions (M&A). Liu Xiaodan, the firm’s founder, is renowned for her transformative work at Huatai United. She turned a relatively unknown local securities firm into a leader in domestic M&A within a few years, earning her the title of “M&A Queen”.
Daniel Zhang’s career trajectory has prepared him well for his new role. A graduate of Shanghai University of Finance and Economics, Zhang spent a decade at Andersen and PricewaterhouseCoopers before joining Shanda Group as a finance director, later becoming CFO. During his tenure, he significantly improved the company’s financial and investment system, expanding Shanda’s capital reach. Zhang then moved to Alibaba in 2007, serving as CFO of Taobao before becoming CEO and eventually Chairman of Alibaba Group in September 2019. His leadership saw the organization through significant environmental changes and challenges.
M&A in China is a complex and lengthy process. Despite being a frequently discussed topic in the domestic capital market over the past twenty years, readiness has often been lacking. M&A is generally seen as an indicator of a mature capital market and business system. Liu Xiaodan has noted that the U.S. matured as an M&A market due to the simultaneous development of industrial competition, capital markets, and corporate governance. As of March 2023, she felt for the first time that these three elements have come together in China, signifying the emergence of a systematic opportunity in the M&A market.
Liu’s collaboration with Zhang could inspire more companies and investors to reconsider the value of M&A, potentially invigorating the market. Firstred Capital has already seen several successful investment and acquisition cases. These include entering Walvax Biotechnology in March 2020 and achieving the fund’s first IPO, making a strategic investment in BYD Semiconductor in the same year, and investing in Zhongchuang Xinhang, a leading power battery contender. In 2021, Firstred Capital established Ruichen Pet Hospital through rapid M&A integration, which received investment boosts in 2022.
The start of this year saw Mindray Medical acquire a controlling stake in Wellyon Medical, marking the first “A controls A” M&A on the Science and Technology Innovation Board. Firstred Capital played a significant role in this deal, which is seen as a harbinger of China’s M&A Year.
As the venture capital industry has undergone tumultuous development over the past decade, there are numerous existing assets ripe for M&A and reorganization. It is reported that almost all secondary investment banks and primary market FAs have prioritized M&A business for 2024. Data from Tonghuashun iFinD shows that as of March 18, 430 M&A reorganizations have been announced in the A-share market this year, with 63 completed and 367 in progress.
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