Out­bound merg­ers, ac­qui­si­tions hit record

China Daily (Canada) - - LIFE - By CAI XIAO caix­iao@chi­nadaily.com.cn

Chi­nese out­bound merg­ers and ac­qui­si­tions hit a record in the first half of 2016, ben­e­fit­ing from smooth fi­nanc­ing in the A-share mar­ket and the rise of fi­nan­cial in­vestors, ac­cord­ing to a re­port from Price­wa­ter­house­Coop­ers on Wed­nes­day.

There were 493 out­bound merger and ac­qui­si­tion deals made in the first six months, an in­crease of 178.5 per­cent year-on-year. Their value to­taled $134.3 bil­lion, an in­crease of 346.2 per­cent year-on-year, more than that of the pre­vi­ous two full years com­bined, PwC data showed.

Even af­ter de­duct­ing China Na­tional Chem­i­cal Cor­po­ra­tion’s $43 bil­lion bid for Swiss seeds and pes­ti­cides group Syn­genta AG, the big­gest ever out­boundM&Adeal by a Chi­nese buyer, the value of China’s out­bound M&A ac­tiv­ity grew by 203.3 per­centyear.

“The dra­matic growth in out­bound M&A deals is sup­ported by the smooth fi­nanc­ing in the stock mar­ket and the rise of al­ter­na­tive fi­nan­cial in­vestors, such as the in­vest­ment arms of large cor­po­ra­tions and State-owned enterprises and in­sur­ers,” said Ge­orge Lu, PwC China trans­ac­tion ser­vices part­ner.

Lu added that Chi­nese com­pa­nies sought ad­vanced tech­nol­ogy, know-how and brands. They looked fa­vor­ably on low val­u­a­tions of some over­seas as­sets and al­lo­cated funds glob­ally to pre­vent risks.

“There was a sharp in­crease in out­bound deal ac­tiv­ity by both State-owned and pri­vate enterprises in the first half,” said Leon Qian, PwC China trans­ac­tion ser­vices north­ern China leader.

“But while pri­vate enterprises have dom­i­nated in yearon- terms of out­bound M&A deals for some time, they have over­taken SOEs in terms of deal value as well, ” saidQian, adding that two-thirds of the 20 largest out­bound M&A deals in the first half were made by pri­vate enterprises.

Tech­nol­ogy, con­sumer, me­dia and en­ter­tain­ment sec­tors be­came the most pop­u­lar in the first half among Chi­nese buy­ers since they can pro­vide ser­vices to the emerg­ing mid­dle class and grow­ing con­sumer cul­ture in China, the re­port said.

Pri­vate equity in­vestors and other al­ter­na­tive fi­nan­cial buy­ers with a huge sup­ply of in­vestable cap­i­tal played an im­por­tant role in out­bound merg­ers and ac­qui­si­tions.

De­vel­oped economies con­tin­ued to at­tract Chi­nese buy­ers be­cause they have tech­nolo­gies, plat­forms and brands. Plus, they have large and ma­ture con­sumer

Be­cause of the strong per­for­mance of out­bound merg­ers and ac­qui­si­tions, China’s to­tal merger and ac­qui­si­tion ac­tiv­ity also hit a record in the first six months — grow­ing to $412.5 bil­lion. This is up 21.2 per­cent by deal vol­ume and 26.7 per­cent by deal value year-on-year.

“The out­bound M&As will con­tinue to be strong in the se­cond half and Chi­nese buy­ers can be ag­gres­sive bid­ders in auc­tion sit­u­a­tions,” said Qian.

Qian said Chi­nese out­bound M&A ac­tiv­i­ties by fi­nan­cial in­vestors will con­tinue to grow be­cause ma­jor deals re­quire huge funds avail­able in China. “2016 is al­ready a record year for China’s out­bound M&As, and the full-year deal value is ex­pected to be more than 3 times the pre­vi­ous record set in 2015,” saidQian. mar­kets.

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