Report: Outbound M&As set to pick up pace in coming months

Outbound mergers and acquisitions by Chinese companies grew at a much smaller pace than the growth in deal volume, which hit a high of $177 billion in China during the first six months of this year, according to figures from global news agency Thomson Reuters.

The total value of announced M&A deals involving Chinese companies grew by 47.4 percent on a year-on-year basis, during the first six months. However, in the same period, the total value of China's outbound mergers and acquisitions dropped by 21.6 percent to $25 billion.

The energy and power sector accounted for most of the outbound M&A activities, with an 18.6 percent market share worth $4.7 billion during the first half, a 65.3 percent decline from the corresponding period in 2013.

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In terms of outbound destinations, Southeast Asia is fast becoming the destination of choice. Compared with a total deal value of $198 million in transactions during the first six months of last year, deal volumes in Southeast Asia jumped to $5.6 billion in the same period this year.

Much of that increase was driven by the big-ticket M&A deal involving Singapore-based Noble Group. COFCO Corp, China's largest grain trader, and private-equity firm Hopu Investment Management Co paid $4 billion to buy Noble, according to Thomson Reuters.

Confronted with the sluggish global economy, rising yuan interest rates and also China's increasing trade friction with some countries, Chinese companies are encountering several difficulties vis-a-vis overseas deals and thus are becoming more prudent in decision-making, experts said.

"Chinese companies tend to conduct M&As in developed markets and focus on industrial investment in less-developed regions such as Africa," said Jin Bosong, a researcher at the Chinese Academy of International Trade and Economic Cooperation, a government think tank.

"State-owned and private companies from China are facing several difficulties in overseas deals," said Jin. He cited the case of Chinese telecom providers Huawei and ZTE being blacklisted by the US government for security reasons in May.

However, China's outward investment is likely to surpass foreign direct investment inflows this year, Jin said adding that, "the transaction volume will vary a lot in different countries and areas."

On the other hand, overseas companies continued to remain bullish on investments in China. Overseas companies closed China acquisition deals worth $22.4 billion during the first six months, a 29.8 percent growth over the corresponding period in 2013.

Most of the inbound acquisitions were in the real estate sector, which in terms of value grew by 84 percent to $9.1 billion, and accounted for a market share of 40.4 percent.

Domestic M&A deals went up to $128.5 billion, accounting for more than 70 percent of China's total M&A deals. In terms of value, the financial industry accounted for 32.3 percent of China's total M&A volume, which rose to $57 billion, more than triple from that of the same period last year.

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