Chinese outbound M&A deals expected to increase

Bain & Company, a global consultancy, projected a strong increase in Chinese outbound merger and acquisition deals over the short term for capturing new capabilities and accessing global market.

Zhou Hao, partner of Bain & Company, said in a press meeting on Thursday that in the past few years, Chinese outbound M&A activities have seen a quick increase in fields of high-tech, media, telecommunication, new energy, consumption, healthcare and retails, and he predicted such fields will see more deals in the future.

In the middle and long term, the major outbound M&A fields of strong potential will be in internet-based industry, new energy and public service, Zhou said, as he also warned such areas also came with high barriers, which required Chinese companies eyeing overseas markets to have a specific and careful plan.

"However, traditional areas like real estate will see a drop in outbound M&A deals from Chinese capital during to the domestic restriction," Zhou said.

According to Bain & Company, Chinese outbound M&A deal activity represented more than half of 40 percent of deals in Asia-Pacific from 2015 to 2017, despite of a sharp drop in the first half of 2018.

Based on Bain & Company's research, the drop in Chinese overseas M&A activities were caused by a number of factors including currency depreciation, concern over the global trade uncertainties, restrictions on investments in the United States, Germany, Australia and other markets as well as the careful monitoring on the outbound investment from Chinese government.

Zhou said the M&A situation will become more complicated in the next half of 2018 as the global market contains many uncertainties.

The report said the number of private enterprises acquiring overseas is growing much faster than acquisitions made by State-owned ones, and it expected to see an increase in deals aimed at capturing new capabilities required to grow business at home and for accessing global market.

"Chinese companies looking to acquire beyond China's borders focus on achieving dual goals—winning at home and exporting abroad, which enables them to strength their domestic competitive stance while simultaneously positioning for global expansion especially in developing markets," said Phil Leung, partner of Bain & Company.

"This latest stage of M&A is helping Chinese companies gain market share in utilities, construction and internet-based businesses in countries such as Brazil, India and Indonesia, though Europe and North America remain the largest capital destinations," he added.