The Urethane Blog

Overseas Chinese Acquisitions Hit Record

Chinese Outbound Mergers, Acquisitions Reach Record High in First Six Months

  • China National Chemical Corporation made the biggest M&A deal with its $43-billion bid for Swiss seeds and pesticides group Syngenta AG.

China National Chemical Corporation made the biggest M&A deal with its $43-billion bid for Swiss seeds and pesticides group Syngenta AG. (Photo : Getty Images)

Driven by the A-share market’s smooth performance and the rise of financial investors coming from state-owned enterprises and private companies, the outbound mergers and acquisitions saw a significant growth in the first half of 2016, a report from PricewaterhouseCoopers (PwC) said on Wednesday, Aug. 10.

According to the PwC data, mergers and acquisition deals made by Chinese companies reached a total of 493 in the first six months, up by 178.5 percent year-on-year, which totaled $134.3 billion, an increase of 346.2 percent year-on-year from the two previous years combined.

China Daily┬áreported that the mergers and acquisition┬ádeals grew by 203.3 percent year-on-year, even without the inclusion of China National Chemical Corporation’s $43 billion bid for Syngenta AG, a Swiss seeds and pesticides group, the biggest M&A deal ever made by a Chinese firm.

“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,” George Lu, PwC China transaction services partner, said.

Chinese companies which entered in M&A are seeking advanced technology, skills and brands, and they are looking at overseas assets with low valuation 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,” Leon Qian, PwC China transaction services northern China leader, said.

“But while private enterprises have dominated in terms of outbound M&A deals for some time, they have overtaken SOEs in terms of deal value as well, ” Qian said. He also noted that private companies made two-thirds of the 20 largest outbound M&A deals in the first half.

According to the PwC report, among Chinese buyers, the most popular deals are related to consumer, technology, media and entertainment sectors, since they believe they can provide services to the growing middle class and rising consumer culture in the country.

In the outbound M&A, private equity investors and other alternative financial buyers, both of which have huge capital, played an important role.

Chinese buyers were attracted to developed economies for their technologies and brands as well as large and mature consumers, the report said.

The country’s total M&A activity is now growing to $412.5 billion, due to its strong performance in the first six months, which increased 21.2 percent by deal volume and 26.7 percent by deal value year-on-year.

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

Qian said that the outbound M&A activities will continue to grow because Chinese buyers have huge funds available.

“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,” Qian remarked.