M&A deals set records in first half

China Daily (Hong Kong) - - BUSINESS COMPANIES - By CAI XIAO caix­iao@chi­nadaily.com.cn

The value of do­mes­tic and out­bound deals in the Chi­nese merger and ac­qui­si­tion mar­ket reached record highs in the first half of 2013, Zero2IPO Group Chair­man Ni Zheng­dong said on Thurs­day.

There were 359 do­mes­tic deals to­tal­ing 40.3 bil­lion yuan ($6.6 bil­lion), with out­bound deals val­ued at 27.6 bil­lion yuan, Ni said.

“Al­though the growth of the Chi­nese econ­omy slowed and the IPO win­dow was closed,” the M&A sec­tor in China was very ac­tive, said Ni.

The en­ergy and min­ing sec­tors were the most pop­u­lar, with deals val­ued at $17 bil­lion, ac­count­ing for 40 per­cent of the to­tal. Other ac­tive sec­tors in­cluded prop­erty, health­care, the In­ter­net, man­u­fac­tur­ing and clean tech­nol­ogy.

Pri­vate eq­uity in­vestors were most ac­tive in the health­care sec­tor, based on the num­ber of deals they were in­volved in, which stood at 22.

PE deals in the prop­erty, fi­nance and In­ter­net sec­tors in­volved the largest amounts, reach­ing $17.5 bil­lion.

Ni added that M&A funds set up by se­cu­ri­ties firms are mak­ing an ef­fort to de­velop busi­ness in China as the coun­try’s reg­u­la­tions are lib­er­al­ized.

Ni said the chal­lenges for th­ese funds in­clude dif­fi­cul­ties in rais­ing money and ex­it­ing in­vest­ments.

The ad­van­tages of M& A funds backed by se­cu­ri­ties firms in­clude busi­ness sup­port from par­ent com­pa­nies, con­nec­tions with in­vest­ment bank­ing and as­set man­age­ment and a pool of pro­fes­sional tal­ent.

“The vol­ume of the do­mes­tic merger and ac­qui­si­tion mar­ket can reach 6.5 tril­lion yuan dur­ing the 12th Five-Year Plan pe­riod (2011-15), which of­fers great po­ten­tial,” said Xu Bo, a man­ag­ing di­rec­tor at CITIC Buy­out Fund Man­age­ment Co Ltd, which was the first M&A fund set up by a Chi­nese se­cu­ri­ties com­pany.

Xu said the fund’s limited part­ners are govern­ment ve­hi­cles, large-scale pri­vate com­pa­nies and State-owned firms.

The buy­out fund fo­cuses on the pur­chase of con­trol­ling stakes and in­dus­try in­te­gra­tion, among other fac­tors, he added.

Be­sides CITIC Se­cu­ri­ties, Guangfa Se­cu­ri­ties Co Ltd, Ever­bright Se­cu­ri­ties Co Ltd and Haitong Se­cu­ri­ties Co are par­tic­i­pat­ing in the de­vel­op­ment of M&A funds.

From 2006 to 2011, there were 51 M& A funds ($ 64.2 bil­ion) es­tab­lished that were re­lated to the Chi­nese mar­ket.

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