Photo of Kheng Leong Cheah, J.P. Morgan Asset Management and Yue Zhao, Meituan-Dianping.
Given the pace at which Meituan-Dianping was growing, the unicorn (a private start-up valued at over US$1bn) had a major challenge to accurately forecast its cash flow beyond three months. It did not have a robust cash management structure in place, nor did it have an effective global cash investment strategy. The situation was compounded when the company received a US$4bn round of private equity funding in November 2017. This is a great example of a Chinese unicorn partnering with an experienced global asset manager, delivering a comprehensive liquidity investment solution to meet strategic business needs and dynamic market conditions.
Head of Treasury
Meituan-Dianping is China’s largest one-stop online platform for goods and services on-demand, from dining to mobility. With its massive user base, it completed 5.8bn transactions in 2017. Since its formation in the 2015 merger of Meituan and Dianping, its range of services has ballooned, as has its valuation (to the world’s third biggest “unicorn” before raising US$4.2bn through an initial public offering in Hong Kong in September 2018).
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A unicorn’s path to achieve world-class treasury
Given the pace at which Meituan-Dianping was growing, the unicorn* had a major challenge to accurately forecast its cash flow beyond three months. It did not have a robust cash management structure in place, nor did it have an effective global cash investment strategy. The situation was compounded when the company received a US$4bn round of private equity funding in November 2017. As Qiang Guo, Finance Director recalls, “We needed to maintain sufficient liquidity at all times for strategic acquisitions.”
The company’s chosen bank set about providing the following:
Analysed the cash investment strategy and treasury portfolio of Meituan-Dianping’s global peers (anonymously) as a benchmark, assessing the gaps.
Deepened the treasury team’s understanding on how to institute a cash investment policy, including cash segmentation (separating cash into operating and reserve segments) and the full spectrum of short-term investment tools.
Established a global multi-currency cash investment platform to manage the proceeds from a giant offshore USD funding round, as well as to facilitate onshore RMB spending and daily operations.
Meituan-Dianping believed J.P. Morgan Global Liquidity would strive to achieve principal safety and be flexible in accommodating large cash investment flows. Its treasury team found the comprehensive global cash investment solution it was seeking and invested a significant portion of the latest funding in J.P. Morgan Global Liquidity’s USD strategy. It is also setting up an account to manage its RMB cash through solutions distributed by J.P. Morgan Global Liquidity.
In April 2018 Meituan-Dianping acquired Mobike, one of China’s two biggest bike-sharing companies. Because the deal’s closing date was uncertain, Meituan-Dianping initiated the extremely large redemption request to J.P. Morgan Global Liquidity very shortly before the acquisition. It received the payment on time as promised, and successfully completed the acquisition.