Exclusive | Daniel Zhang Joins Primavera Capital, Continuing His Unfettered Path in M&A

By Jing Liu and Zhiyan Chen

Any Waves has learned exclusively that Daniel Zhang (Xiaoyaozi), former Alibaba Group chairman and CEO, will join Firstred Capital as managing partner alongside founder Xiaodan Liu.

This news is both unexpected and entirely logical.

Unexpected because last September, when Zhang stepped down from his series of management roles at Alibaba, many speculated he would launch his own fund. But objectively speaking, investing is a business where timing matters, and the current moment is perhaps not the most favorable for founding a new institution.

Logical because, in many respects, this path marries Zhang's professional履历 and investing almost perfectly.

Unlike traditional financial investment funds, Firstred has, since its founding in 2019, made its positioning unmistakably clear: it is a buyout fund.

As the founder of this institution, Xiaodan Liu is best known for the sweeping reforms she implemented at Huatai United Securities — transforming a little-known regional brokerage into a domestic M&A leader in just a few years. The "Hua" in China's top-tier domestic investment banks "San Zhong Yi Hua" refers to Huatai under Liu's leadership. It was during this period that she earned the moniker "Queen of M&A."

The essence of investing is always buying low and selling high. But the difference lies in what you earn: financial investors profit from valuation spreads, while buyout investors earn more complex, harder-won returns. This is because the challenge of M&A lies not merely in the transaction itself, but in the second half of the story: how to make a company better, or in other words, create value. This perspective is closer to that of a founder or operator than an investor.

This is likely where the complementarity between Zhang and Liu lies.

A graduate of Shanghai University of Finance and Economics, Zhang worked at the accounting firms Arthur Andersen and PwC from 1995 to 2005. He then joined Shanda Group as finance director, eventually rising to CFO. During this time, he built out the company's financial and investment systems, expanding Shanda's capital ambitions.

A former Shanda executive once told Any Waves that Zhang, as the company's financial chief, was deeply involved in decision-making and due diligence for the company's successive investment activities.

In August 2007, after Shanda reported its quarterly earnings, Zhang officially joined what Chen Tianqiao called a "relatively small private company" — Alibaba — as CFO of Taobao. In May 2015, Zhang succeeded as Alibaba Group CEO, and four years later, in September 2019, became Alibaba Group chairman, guiding the massive organization through dramatic environmental shifts and a series of challenges.

These experiences may well be why Zhang chose Firstred.

M&A in China has long been a difficult road. Over the past two decades of China's capital markets, it has been a concept frequently discussed yet perpetually falling just short of critical mass. At its core, M&A tends to be a hallmark and product of more mature capital markets — and business systems more broadly.

As Liu once summarized, the US became a mature M&A market because three elements emerged simultaneously: industrial competition, capital markets, and corporate governance. But in a March 2023 sharing session, she said that for the first time, she felt these three elements were simultaneously flickering into existence in China — "systemic opportunities in the M&A market have emerged."

Liu once said: "Management is necessarily difficult, and this is precisely the foundation of value creation for buyout funds." The combination of her and Zhang may help push more companies and investors to reconsider the value of M&A, stimulating vitality in the M&A market.

Firstred has completed numerous investment and M&A transactions. Its most representative cases include: In March 2020, it entered Hualan Vaccine and later scored the fund's first IPO. In May of the same year, it made a RMB 100 million strategic investment in BYD Semiconductor. In November, Firstred invested RMB 344 million in CALB, a leading power battery company, securing another IPO. In 2021, Firstred worked with its team to rapidly establish Ruichen Pet Hospital through M&A integration, which in 2022 received investment backing from Aier Medical and KKR. And earlier this year came news that Mindray Medical's acquisition of controlling stakes in Wepion Medical completed the first "A-controls-A" deal on the STAR Market, with Firstred playing a distinctive role — seen as a bellwether for China's big year of M&A.

Following a decade of frenzied scrambling in the venture capital industry, there is indeed now a substantial stock of existing assets presenting opportunities for M&A and restructuring optimization.

Any Waves understands that nearly all secondary-market investment banks and primary-market financial advisory firms have made M&A a 2024 business priority. iFinD data also shows that as of March 18, 430 M&A and restructuring deals have been disclosed in the A-share market this year, with 63 completed and 367 ongoing.

Looking at today's capital markets, Zhang appears to have made a brilliant choice that maximizes his advantages.

Notably, among those close to both Zhang and Liu, a common thread runs through their assessments of the two: "They are genuinely low-key." In a noisy industry, this shared temperament may be the very foundation of their collaborative chemistry.

Here's to him — Zhang, the investor.

Image source: IC photo

Layout: Yunxiao Guo