Chinese firms ink bigger M&A deals

Chinese companies signed 98 merger-and-acquisition deals overseas in the first half of 2013, clocking up US$35.3 billion. Mega deals worth over US$1 billion accounted for 13 percent of overall activities.
Written by Eileen Yu, Senior Contributing Editor
Chinese companies say they acquire to buy over cutting-edge technology and expand their overseas market share.

Chinese companies inked 98 merger-and-acquisition (M&A) deals overseas in the first half of the year, clocking up US$35.3 billion compared to US$22.9 billion in the same period 2012 from 97 transactions. 

Citing stats from accounting firm Deloitte Touche Tohmatsu China, China Daily reported that M&A activities by local companies hit a new high, churning deals that were bigger and higher up the value chain. These were likely to remain buoyant, with Europe and U.S. the two main market targets among Chinese buyers--fueled by growing demand from local consumers for quality products. Valuations for such deals were expected to increase due to improving economic conditions in both regions. 

The Deloitte survey polled 100 "M&A practitioners" from China.

Mega deals worth over US$1 billion contributed 13 percent of overall deals in first-half 2013, while acquisitions priced under US$100 million accounted for 48.1 percent. Over half the 98 deals signed were in the energy, resources, and consumer sectors.  

Stanley Lah, a partner handling M&A transaction services at Deloitte China, said in the report: "With the U.S., European and Chinese economies having shown signs of growth over 2013 to date, it should be no surprise that Chinese companies are becoming more optimistic. Growing demand for branded quality products from Chinese consumers has moved outbound investors up the value chain as well, leading to higher deal value."

Lah added that the rising valuations would not be a deterrent to Chinese companies which were not overly concerned about price. Some three-quarters of the survey respondents said they were looking to buy overseas entities over the next three years.

Some 90 percent said they would acquire to buy over cutting-edge technology, while 86 percent would do so to secure resources, and another 86 percent aimed to expand their overseas market share.

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