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Chinese outbound M&A continues robust upward trend

By Cong Mu Source:Global Times Published: 2012-11-15 0:15:06

Outbound investments made by Chinese companies reached a record high in value in the first three quarters of the year, with energy and resources-related deals dominating the scene, according to a research report released by the UK-based accounting firm Deloitte Touche Tohmatsu in Beijing on Wednesday.

Data from Mergermarket, a unit of the Financial Times Group, showed that from January to September firms from China (including Hong Kong, Macao and Taiwan) closed 133 outbound merger and acquisition (M&A) deals worth $52.2 billion, up by 16.2 percent year-on-year, Deloitte said.

However, the number of M&A transactions dropped by 8.2 percent from 145 transactions recorded over the same period last year, the accountants said, noting that the average volume of a single M&A deal increased significantly.

"Energy and resources deals continued to dominate China's outbound M&A landscape over the first three quarters of this year, with Chinese businesses needing to feed the nation's appetite for raw materials in support of its manufacturing activities," Deloitte said in a press release.

"Outbound energy and resources-related M&A deals accounted for 29 percent of total deal volumes and 68 percent of total deal values over the period," it said.

Besides the hunger for resources, there are other drivers for Chinese outbound direct investment (ODI) this year, Gregory Van Bellinghen, investment director of Beijing-based private equity fund A Capital, told the Global Times Wednesday.

On expectation of an economic slowdown in China, Chinese firms have been putting yuan into overseas assets, he said, and cash-strapped foreign companies welcome the investments.

There is also a need for Chinese companies to move up the value chain, so they are keen to acquire foreign technologies that can help them strengthen their competitiveness, Van Bellinghen said. A Capital manages a European fund for China Investment Corp.

A major Chinese M&A deal in the third quarter was Dalian Wanda Group's $2.6 billion takeover of AMC Entertainment, the second largest theater chain in the US, in September.

A Deloitte poll of 69 M&A practitioners showed that 90 percent of the respondents believe Chinese ODI will increase over the next 12 months, but 78 percent of them expect individual deal sizes to be lower than $300 million.

If the trend continues of foreign direct investment (FDI) in China cooling off and Chinese ODI rising, A Capital expects the equity ODI amount will equal the FDI over the course of next year.

China National Offshore Oil Corp (CNOOC) expects to close a $15.1 billion deal to acquire Canadian energy producer Nexen Inc by the end of the year, CNOOC chairman Wang Yilin said on November 9, the Xinhua News Agency reported.

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