Mainland Co-Working Heavyweight Ucommune Acquires Rival Fountown

Chinese co-working giant Ucommune continued its 2018 expansion streak by fully acquiring its Shanghai-based rival Fountown, adding 26 locations in Beijing and Shanghai to its mainland portfolio.

“I’m positive about the future growth outlook of the co-working economy in China given the increasing momentum of urbanization, upgrading to service-based economy and urban renewal,” said Mao Daqing, founder and chairman of the company, in a statement. The company did not disclose financial specifics of the transaction.

The purchase, which marked the fifth such tie-up by the company formerly known as UrWork within the last year and a half, would effectively make the three-year-old firm the largest office sharing brand in Asia, with 100,000 desks in over 200 co-working centers, according to figures from the Beijing-based company.

Ucommune Consolidates China’s Co-Working World

In the past 18 months, Beijing-based Ucommune has been actively acquiring smaller competitors including Wedo, Woo Space, New Space and Workingdom. In September, the company acquired Beijing-based interior design firm Daga Architecture and, in the following weeks, acquired workplace platform Huojian Technologies.

Shanghai-based Fountown, like Ucommune, was also established in 2015 and became a competitor of Ucommune. The company raised close to RMB200 million in Series A funding round in September 2016. Last year, Ucommune, which rebranded from UrWork after a contentious legal battle with American rival WeWork over a “confusingly similar” name, inked a joint venture agreement with Fountown to collaborate on “location, membership system (and) vertical integration of resources across the value chain.”

This week’s merger came two months after Ucommune raised $43.5 million in Series C funding round at $1.8 valuation. The company had previously revealed plans to raise another $200 million in Series D funding by end-year, paving the way for an IPO in early 2019.

Following this latest deal, Ucommune now claims a presence across 37 cities globally including Singapore, New York, Beijing, Taipei, Hong Kong, Shanghai. Among the company’s 15,000 corporate clients are some of China’s leading technology start-ups such as Liulishuo, KEEP, Logic Thinking, JoyRun, ByteDance, Kuaishou, Tiktok, Bilibili, Zhiguagua, ofo and Mobike. Beijing-based investment firm CEC Capital served as the exclusive financial advisor to Ucommune on the Fountown deal.

Mao Now the Chairman of Flexible Office M&A

“The macro environment has seen significant shifts in the past three years. We have seen greater uncertainty in the economy and an increasingly competitive environment with the arrival of new entrants. Therefore, mergers and acquisitions are necessary for leading companies to maintain their competitive advantage and stay relevant to client’s requirements,” said Mao, who was a China Vanke executive before leaving the company to ride the co-working wave.

Apart from mainland China, Ucommune has also hastened it pace of expansion in Hong Kong and Southeast Asia, with its pair of Singapore centres at Aya Rajah Crescent and Suntec City said to be at 100 percent and 60 percent capacity respectively. After signing its first Hong Kong lease in January, Ucommune expects to open that location at the edge of Central district in early December with another centre in Kowloon’s Mongkok district coming next year, the company said.

In a bid to consolidate its leadership in the mainland, Ucommune has also diversified its business into providing integrated service solutions to its tenants. The Chinese unicorn said it has launched initiatives such as UBespoke (a made-to-order design consultancy) and UBazaar (an exclusive online-to-offline service) to deliver smart technological solutions and AI into its product offering.

Co-Working Competitors Battle for Dominance in Asia

Ucommune’s string of acquisitions come as co-working pioneer WeWork continues to accelerate its expansion globally and here in Asia. Last week, SoftBank was reported to be in talks regarding taking a majority stake in the co-working pioneer by investing $15 to $20 billion, a massive top up from its last investment.

Closer to Ucommune’s home turf, WeWork also announced in July that it is committing $500 million in new investment to fuel growth in China. Currently the New York-based co-working pioneer supports 20,000 members spanning nearly 40 locations across three Chinese cities, with plans to expand to six new cities in 2018, including Shenzhen, Suzhou, Hangzhou, Chengdu, Nanjing, and Wuhan.

Supported by venture capital, co-working blossomed in China with a total 3,459 operators in 2017. By 2020, the number is expected to reach 5,000, according to data from Shenzhen-based market monitor, VC SaaS. Among the co-working brands tracked by VC SaaS, 28.1 percent are stagnant in development, while 3.8 percent on the verge of bankruptcy, it said.