Chinese executives bullish on M&A

Chinese company executives predict an improving environment for merger and acquisition in the next 12 months, according to the 19th Global Capital Confidence Barometer released by the professional services provider EY on Monday.

The Barometer surveyed more than 2,600 senior executives from 45 countries and regions, among which 174 were from China. Up to 75 percent of the interviewed Chinese executives see the global economy picking up. Therefore, 87 percent of the interviewees expect a rising momentum of the global M&A market in the next 12 months, 34 percent of them said they will actively pursue acquisitions in the short term.

Stella Yuan, leader of the transaction advisory services at EY Central China, said many Chinese companies will be more focused on the integration of recently acquired assets in the following 12 months, given the large number of deals last year.

At the same time, companies are actively assessing their portfolio of existing businesses, said Yuan. This is likely to result in new inventory of assets coming into the market in the next 12 to 24 months, and private equity is a possible buyer for many of these assets, she added.

Financial services, healthcare, telecommunications, real estate, hospitality and construction, oil and gas and industrials are the top six areas where Chinese companies will make acquisitions in the next 12 months. To explore access to new markets, to attain more talents and to secure supply chain are the three major reasons for acquisitions, according to EY.

The top five investment destinations for Chinese companies remain unchanged, including China, the United States, Singapore, Japan and Australia.

Ignatius Tong, leader of the operations advisory services at EY Asia-Pacific, warned that disruptive forces, especially technology, remain at the heart of the known risks.

"The pace of change wrought by technology, especially the technology that enables customers to adapt preferences or buying behaviors, cannot be underestimated. As customer pressure compels companies to operate outside traditional sector boundaries, M&A may be the fastest route for companies to respond to these challenges," he said.