Losing dominance in Asia-Pacific M&A

CHINA’S outbound share of M&A activity in the Asia-Pacific region plunged to 14 percent in the first half of the year from an average 40 percent during 20152017, Bain & Company says in its latest China outbound M&A report.

Chinese companies use overseas mergers and acquisitions to help them win at home or gain leadership in selected industries overseas.

As Chinese companies become more experienced at outbound M&A, they gain sophistication in critical capabilities, such as developing a clear investment thesis, due diligence skills and merger integration.

“In China, as elsewhere, winning outbound acquirers will be those that make the necessary adjustments to evolve their M&A strategy along with a global market that never stops changing,” said Zhou Hao, partner with Bain & Company and head of its China M&A operations.

“China’s outbound boom will only continue as companies look to capture new capabilities that strengthen their domestic position, while also growing overseas for a leadership position in industries in which they can gain a competitive edge.”

Companies with more frequent and large deals did much better in terms of total shareholder return, according to Bain’s analysis of the performance of more than 700 Chinese companies that made acquisitions from 2013 to 2017. The number of Chinese outbound deals for full ownership from 2016 to 2017 more than doubled from 2013 to 2015.