Tidal Wave of Mergers and Acquisitions by Chinese Companies Expected over Next Few Years
Global Intelligence Alliance (GIA), a global strategic market intelligence and advisory group, predicts that Chinese outbound merger and acquisition (M&A) activity looks likely to continue strongly in the next few years, driven by an appetite for deal-making in China as well as relatively attractive asset valuations in overseas markets.
Geographically, China will continue its acquisition spree in places such as Africa and Latin America, where there are abundant natural resources available. China's M&A activity into US assets will continue into 2010 and beyond, with buyers primarily eyeing assets to boost their technological capabilities. China is also working to strengthen ties with the EU, in order to drive economic integration and gain market economy status, which will most likely boost Chinese acquisitions of European assets in the years ahead.
Investments will focus on sectors such as automotive, mining and resources, agriculture and financial services for the short to medium term, despite the existence of significant operational and political barriers to deal flow that may continue to hamper some transactions.
In his interview with Bloomberg Television on April 16, 2010 on China’s overseas acquisitions of energy and mining companies, Nicolas Pechet, Vice President and Head of GIA Group's operation in China and head of the firm’s global M&A and Private Equity practice, said, “China is essentially the wealthiest country on the planet - we are looking at reserves of 2.4 trillion dollars in the hands of the Government - and the reality is that still today, most industries in China, energy included, are controlled by the Government... Capital is not going to be an issue.”
GIA notes that some Chinese bidders may have undertaken poorly executed investments and that Chinese acquirers can benefit from better pre-deal planning of cross-border M&A strategies. In many cases the strategic intent of the deal was widely agreed to be unsound in the post-deal analysis. Better commercial due diligence and strategic analysis based on in depth assessments of synergies could help to address this.
For more information, please view the Question and Answer with Nicolas Pechet on Chinese outbound M&As or email media (at)globalintelligence.com.
About Global Intelligence Alliance
Global Intelligence Alliance (GIA) is a strategic market intelligence and advisory group. GIA was formed in 1995 when a team of market intelligence specialists, management consultants, industry analysts and technology experts came together to build a powerful suite of customized solutions ranging from outsourced market monitoring services and software, to strategic analysis and advisory.
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