Chinese companies’ outbound M&A value doubles year-on-year in first 3 months

Source:Global Times Published: 2016-4-25 21:33:01

A total of 115 Chinese outbound merger and acquisition (M&A) deals were announced in the first quarter of 2016 with a total value of $82.6 billion, double the year-earlier figure, according to a report released by PwC on Monday.

"China outbound M&A will reach historic highs in 2016," Li Ming, advisory leader of Central China from PwC China, said at a press conference in Shanghai on Monday. "Outbound M&A has become part of the long-term strategy for many Chinese companies [and it] is less likely to be affected by temporary fluctuations of the Chinese economy and yuan depreciation."

Also, the country is trying to simplify the approval process of outbound investment and encourage more outbound M&A deals. On April 13, the National Development and Reform Commission, the country's top economic planner, released for public comment a draft containing revisions of administrative measures for approval and record-filing on overseas investment projects, which was issued in 2014.

For instance, for some sensitive projects with a deal value exceeding $2 billion, the company needs approval from the State Council, according to the current administrative measures. Under the revised regulations, the State Council won't be involved.

The administrative verification process must become easier and simpler for Chinese companies making outbound investments, Jenny Chong, international tax services leader of PwC Asia Pacific, said at the press conference.

However, Chinese companies will face more tax risks as the regulations are different in many countries, said Chong.

Also, many Chinese companies lack management experience, so they will face problems in managing international companies they acquire, said Li.

For Chinese companies, developed markets including Europe and the US will continue to be the most popular destinations, said the report from PwC.

And the number of outbound M&A deals in North America increased 20.73 percent to 99 in 2015, and the volume rose 39.47 percent to 106 in Europe. The number in Asia increased 63 percent year-on-year to 93 in 2015.

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