China fuelling Asia-Pacific M&A surge

A man carrying a kite in the shape of the Chinese national flag, walks along the Bund in Shanghai, China, on Oct 2, 2015.
A man carrying a kite in the shape of the Chinese national flag, walks along the Bund in Shanghai, China, on Oct 2, 2015. PHOTO: BLOOMBERG

BEIJING • China's outbound acquisitions spree this year helped push Asia-Pacific's annual deal value past US$1 trillion (S$1.4 trillion) for the first time, with next year set for a bigger splurge still as Chinese firms buy even more assets abroad to sidestep slowing domestic growth.

Asia-Pacific mergers and acquisitions (M&A) totalled US$1.2 trillion so far this year, up 46 per cent from last year, preliminary data from Thomson Reuters showed, as China rediscovered an appetite for outbound deals after last year's 20 per cent drop.

With private companies like Fosun International in the vanguard, Chinese firms have spent a record US$102 billion so far this year, the data shows.

As well as economic growth slowing to its weakest pace in years, bankers and analysts say a need to acquire cutting-edge technology to improve manufacturing, environmental issues and a weakening yuan will all help send Chinese firms searching for deals overseas next year.

Bankers and analysts say a need to acquire cutting-edge technology to improve manufacturing, environmental issues and a weakening yuan will all help send Chinese firms searching for deals overseas next year.

"China is on the move. We are preparing for a busy year for deal-making," said Mr Joseph Gallagher, head of M&A for Asia-Pacific at Credit Suisse.

"Chinese outbound activity is set to pick up with a focus on the semi-conductor, power and financial sectors," Mr Gallagher added.

A strong year for deal-making bodes well for global investment banks in the region. This year, Goldman Sachs was the top adviser with a 16.7 per cent market share, followed by Morgan Stanley and HSBC, after working on deals from Hong Kong tycoon Li Ka Shing.

China, Hong Kong and Australia were the three most active M&A markets in the Asia-Pacific region, the data showed.

China's large state-owned enterprises played a less active role this year in M&A compared with their mid-2000s heyday as President Xi Jinping's anti-graft investigations turned several officials cautious about making big decisions, bankers said.

Among the deals Chinese firms are currently working on is energy and waste treatment investment company Beijing Enterprise's pursuit of Germany's EEW, a deal potentially worth US$1.8 billion.

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 23, 2015, with the headline 'China fuelling Asia-Pacific M&A surge'. Print Edition | Subscribe