China outbound M&A deal activity powers ahead
Although there were fewer larger overseas deals, with only three deals exceeding US$1 billion in the first half of 2011 compared to 12 in FY2010, there is strong interest in a wide array of industries including machinery and equipment manufacturers, and in consumer related companies. In fact, M&A in the industrial and consumer segments nearly doubled in the first half of 2011 compared to the same period in 2010. PwC Greater China Private Equity Group Leader David Brown said as production of China goods continued to move up the value chain and the country transitioned to a consumer-led economy, it was no surprise that buyers from China were keen to acquire more industrial know-how, technology and brands.
"China is hungrier than ever for good deals abroad," Mr Brown said. "Although there were fewer larger sized transactions in the first half of 2011, we expect a number of big deals to be announced in the second half of the year. China is in the driver's seat of global M&A, and there is no sign that interest in outbound M&A is waning."
While the reach is global, there is a noticeable increase in Europe as an investment target, with 30 announced transactions in the first half of 2011, which exceeded the total into Europe for all of 2010. The target sectors in Europe have been industrials and consumer related sectors besides the always popular resources sector. However Asia remains the top destination for outbound M&A overall, with 33 deals in the region. Resources tops the interest of Chinese buyers abroad, followed by Industrials, Energy and Power, as well as Technology. However as China's interest in overseas assets broadens and diversifies, resource deals have become a lower proportion of overall M&A activity.
Private equity funding SME growth
The private equity (PE) industry is fast emerging as a key provider of growth capital to China's privately owned SMEs. With some degree of fiscal tightening in China and volatility in equity markets, the role of PE and venture capital funds in this sector of the economy is set to grow. In the first half of 2011 there was a 31 per cent increase in the number of PE transactions with value more than US$10 million
The fund raising of PE has remained robust. A total of 66 foreign and domestic funds raised US$12.5 billion for Chinese investments in the first half of the year. Forty per cent of the funds raised were denominated in Chinese Yuan. Policymakers in China have introduced favourable new regulations governing foreign participation in Renminbi denominated fund raising and widening the scope of mainland Chinese entities entitled to participate in PE type investments.
"The privately owned SME sector is a vital part of China's economy, and private equity participation is key – that's why China is supporting the PE industry and that's why we expect the growth to continue," Mr Brown said.
While the PE industry in China is developing at a rapid pace, challenges remain including deal sourcing, valuation gaps between buyers and sellers, and a talent shortage as more and more players in the industry set up their own funds.
"With an IPO remaining the preferred exit alternative for private equity in 2011, a queue for the exit as more investments move toward the IPO stage could pose another challenge in a climate where the global economic outlook is far from certain," Mr Brown said.
M&A outlook amid global economic uncertainty
China's domestic strategic transactions grew at a pace of 10 per cent to a record level of 1,616 deals announced in the first half of the year. Foreign strategic buyers' inbound M&A activity remained broadly consistent with 2010.
PwC Southern China M&A Tax Leader Danny Po said overall strategic buyer activity in China will continue to grow steadily, a trend that is in line with the Government's 12th Five-Year Plan.
Inbound strategic transaction levels may drop as the EU and US debt crisis continues to unravel and cause economic uncertainty. However, strong overall M&A levels in China are expected to continue for the remainder of the year. Outbound M&A is expected to remain robust – although global turbulence could affect some existing deals in the pipeline, however a downturn could present buying opportunities for cashed-up Chinese investors.
The RSS for Press Releases is now available.
HK ENG: Subscribe to RSS feeds for our press releases updates - http://www.pwchk.com/home/eng/rss.html
HK CHI: 訂閱我們的RSS聚合資訊以獲得最新新聞內容 - http://www.pwchk.com/home/eng/rss_chi.html
Note to Editors:
About the Report
Statistics in this release are based on Thomson Reuters and ChinaVenture data. Thomson Reuters and ChinaVenture compile M&A statistics based on announced deals for which deal values have and have not been disclosed and of which Thomson Reuters and ChinaVenture were made aware. Acquisitions and investments in both public and private companies are included, as well as strategic placements in privatisations and buyouts. Greenfield investments are excluded as well as real estate, unless the asset represents a business operation. The data collated by Thomson Reuters and ChinaVenture is, to the best of their knowledge, reliable, and an accurate reflection of Asia's M&A industry. However, the data contained herein is not guaranteed by Thomson Reuters and ChinaVenture to be accurate, and should not necessarily be considered to be all-inclusive. Data is continuously updated and therefore subject to change. For further information, please contact Jason Pacannuayan at Thomson Reuters Tel: +632 858 7262 or email@example.com , or Wesley Li at ChinaVenture Tel: + 86 10 5979 9690; or firstname.lastname@example.org.
About PwC - Globally
PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See www.pwc.com for more information.
"PwC" is the brand under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Together, these firms form the PwC network. Each firm in the network is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way.
About PwC – China, Hong Kong, Singapore and Taiwan
PwC China, Hong Kong, Singapore and Taiwan work together on a collaborative basis, subject to local applicable laws. Collectively, we have an estimated 620 partners and a strength of 14,000 people.
Providing organisations with the advice they need, wherever they may be located, our highly qualified, experienced professionals listen to different points of view to help organisations solve their business issues and identify and maximise the opportunities they seek. Our industry specialisation allows us to help co-create solutions with our clients for their sector of interest.
We are located in these cities: Beijing, Hong Kong, Shanghai, Singapore, Taipei, Chongqing, Chungli, Dalian, Guangzhou, Hsinchu, Kaohsiung, Macau, Nanjing, Ningbo, Qingdao, Shenzhen, Suzhou, Taichung, Tainan, Tianjin, Xiamen and Xi'an.
2011 PricewaterhouseCoopers. All rights reserved.
Press Release and Documents
Mike DaviesDirector, Global CommunicationsUnited Kingdommike.email@example.com-+44 7803 974 136
More from News releases
Subscribe to rss feedXML
Quality of business reporting on the Sustainable Development Goals improves, but has a long way to go to meet and drive targets.
Governments should do more to unlock the potential of technology to facilitate tax compliance, says PwC and World Bank report
Despite increasing trade tensions business confidence in Asia Pacific remains high