Tuesday, November 27, 2012

China's outbound M&As' to keep rising

Deloitte: China's outbound M&As to keep rising
Updated: 2012-11-15 08:03
ByLi Jiabao ( China Daily)
Chinese buyers of European targets 'are likely to be challenged by different management cultures'
China's outbound mergers and acquisitions will continue to increase in the next 12 months, according to a report released by Deloitte China on Wednesday.
The company said the value of outbound M&As was $52.2 billion in the first three quarters of this year, despite a slowdown in economic growth.
Up to 90 percent of survey respondents suggested that Chinese outbound M&A flows will increase in the next 12 months, and 66 percent said they believed that the increase will be more than 10 percent.
"Despite a confusing macroeconomic outlook, M&A commentators remain bullish on future Chinese outbound deal flows," said the report, which was based on an online survey.
The survey was conducted by Deloitte China in August and September and polled 69 M&A practitioners with experience or knowledge of Greater China M&A transactions.
"However, more than three-quarters, or 78 percent, of respondents believe that the bulk of outbound deals over the next 12 months are likely to be worth less than $300 million apiece," Lawrence Chia, managing partner and co-chairman of global Chinese services group of Deloitte Touche Tohmatsu Ltd, said during a news briefing on Wednesday.
The first three quarters of this year saw Greater China outbound M&As' value reach $52.2 billion with 133 deals. Compared with the $44.9 billion investment of 145 transactions in the same period of 2011, the number of deals this year fell by 8.2 percent, while the value of outbound investments rose by 16.2 percent to its highest level since 2005, the report said.
Energy and resources deals continued to dominate the outbound M&A landscape, accounting for 29 percent of the total number in the first three quarters and 68 percent of the total transaction value in the same period.
Consumer business and transportation deals were the second-most numerous and valuable, accounting for 26 transactions that were collectively worth $6.8 billion. This equates to a 20 percent market share by deal numbers and a 13 percent share by value, according to the report.
Western Europe received the majority of Chinese investment in the first three quarters, getting 31 announced bids worth a total of $12.5 billion. And the bids were mainly targeted at advanced manufacturing, according to Chia.
"Nonetheless, Chinese investors spent more acquiring assets in North America than in Western Europe, primarily because of CNOOC's $17.6 billion bid to acquire Canada's Nexen, a deal announced in July 2012," he added.
As for deal size, the number of transactions worth $5 million to $300 million accounted for 59 percent of all transactions in the first three quarters, up 1 percent from a year earlier.
"Respondents believed that the continued implementation of the 12th Five-Year Plan (2011-15) will have the most positive effect on Chinese outbound M&A activity, while softening economic growth is unlikely to have much effect on potential outbound deal flow at all," Chia said.
Dirk Haellmayr, partner in Chinese Services Group of Deloitte & Touche GmbH, added: "As China boosts its emerging strategic industries and brings its economy to upper industrial chains, it will look around the world for advanced technology and new forms of innovation".
Chinese investors are likely to acquire technological best practices through investment in North America and to purchase reputable brands and technological best practices by buying European targets, the report said.
South America and Asia were listed as the most likely destinations for outbound manufacturing acquisitions, while South America is likely to witness the majority of Chinese outbound energy and resources acquisitions. Technology, media and telecommunications acquisitions are likely to continue to target North American assets over 2013 despite regulatory obstacles.
Chia warned that domestic regulations that discourage foreign ownership of local assets will be the biggest obstacle facing potential Chinese bidders that target North American businesses in 2013. Likewise, Chinese buyers of European targets are likely to be challenged by different management cultures, while Chinese acquirers of Asian targets could come across reliability issues when dealing with counterparties, according to the report.
Close to one-fifth of the respondents held their own deal as being "not successful" or worse, while 44 percent said that their transactions were successful, the report said.
Deloitte: China's outbound M&As to keep rising

(China Daily 11/15/2012 page14

Thursday, May 3, 2012

Bright Foods Weetabix acquisition signals growing interest of emerging markets for Europe

The acquisition of Weetabix is the biggest sign yet of emerging market interest in Europe, according to industry commentators.

Monday, January 16, 2012

Outbound M&A hits record high, says PwC report

By Hu Yuanyuan (January 13, 2012 9:56 PM)      

BEIJING - Chinese outbound merger and acquisition (M&A) deals reached a record high of $42.9 billion in 2011, an increase of 12 percent year- on-year, despite the global economic slowdown, according to the accountancy company PricewaterhouseCoopers LLP (PwC) on Friday.

A total of 207 outbound M&A deals were signed last year, up 10 percent from 2010.

"Those figures indicate that Chinese investors' appetite for deals is stronger than ever, across a wide range of industries and geographical locations," said Leon Qian, PwC China's Transaction Services Partner.

The strong growth in outbound deals also pushed the country's overall M&A activity up by 5 percent to 5,364 deals, the highest-ever annual total. Domestic deals climbed 11 percent to 3,262.

"Despite the global macroeconomic climate, confidence among investors looking for M&A deals both within China and abroad remains surprisingly robust," Qian added.

As China moves into a new phase, M&A is emerging as a key enabler of consolidation, growth, market positioning and the acquisition of strategic assets and expertise.

There were 16 outbound M&A deals valued at more than $1 billion by Chinese buyers last year, compared with 12 in 2010. Fourteen of those deals were in the resources and energy sectors.

"Chinese buyers now attach more attention to M&A opportunities in the industrial-products sectors, reflecting the country's gradual shift to a consumer-driven economy," said Edwin Wong, PwC China's International Tax Services Leader. The sluggish global economy, however, is affecting foreign M&A buyers wanting to make a strategic purchase in China, PwC said in the report. 

Economic uncertainties in home markets led to an 11 percent decline in foreign M&A activity in China to 482 deals, falling most notably in the second half of last year after a rebound in 2010.

Meanwhile, private equity (PE) is emerging as a key provider of growth capital for China's small and medium-sized enterprises, as they aim to expand despite challenges in raising funds amid fiscal tightening and uncertainty in the equity markets.

The number of larger PE deals (those exceeding $10 million) increased by 18 percent to 437 transactions in 2011 - the highest number ever, according to the PwC report. Private-equity fundraising also reached a record high in 2011, totaling $44.1 billion for investment in China. Yuan-denominated funds accounted for 60 percent of the total, continuing the trend of the previous two years.

"A key trend is the expansion of the domestic Chinese PE industry; there are now many domestic players who can compare advantageously to their better-known global peers," said Qian.