Last year, Chinese M&A market basically maintain the same level as 2017 with total transaction amount of 678 billion US dollars, according to the last report of PwC China.
The first half of 2018, China’s M&A market was quite active, mainly driven by megadeals, but the activities fell in the second half year.
Outbound M&A market
Suffered by the Sino-U.S. trade war and heightened CFIUS (The Committee on Foreign Investment in the United States) scrutiny, China’s outbound M&A volume in 2018 had a decline of 23% according to the 2019 Global M&A Outlook from JP Morgan. Despite this decrease, 2018 China outbound M&A volume was still roughly one-third higher than the levels before the 2016 peak in terms of total deal values.
In spite of the commercial tensions between the US and China, as well as some divestments from European or North American companies, China continues to consolidate the geographic and sectorial diversification policy for overseas investment.
Moderation in China’s economic growth continues to drive the need to identify attractive growth opportunities aboard. Reasonably abundant capital availability and financing alternatives still enable Chinese acquirer to have strong purchasing power. Many large-scale outbound transactions happened in 2018, including ANTA Sports’ proposed $6.4 billion acquisition of Amer Sports.
Even with capital control and measures to curb “irrational” outbound investments, the Chinese government continues to support strategic outbound investments. Enterprise Outbound Investment Regulations (“Order No.11”) enacted by NDRC (National Development and R took effect in March 2018, simplifying and formalizing administrative procedures for outbound investments, potentially shortening review cycle time.
Inbound M&A market
On the other hand, China inbound M&A had a year-over-year increase of 2% in 2018. China has been demonstrating its continued willingness to gradually open its market to foreign investors, as evidenced by the release in June 2018 of a new Negative List and associated measures to remove restrictions on foreign investors.
Chinese M&A in Spain
Spain was the sixth preferred European country for the Chinese investors in 2018 according to the report of Baker McKenzie. The investments in Spain have reached to 1,179 million dollars, which means an increase of 162% comparing to 2017.
Last year, large M&A deals happened in Spain, China also contributed one of them. The acquisition of 53.5% shares of Imagina Media by Orient Hontai Capital was the fifth large investment from China in Europe.
According to Baker McKenzie, the Chinese investor’s appetite has increased notably in Spain, Sweden, Canada, Germany and France in relevant sectors with high added value.
Trends for China M&A in 2019
On the background of the stability of yuan and the irreversible trend of cross-border cooperation, it expects several possible trends for China outbound M&A in 2019:
- Chinese acquirer’s intention in strategic outbound M&A will remain reasonably active, especially companies could give access to advanced technology, well-organized brands, international distribution networks or key natural resources.
- China is expected to further open up for inbound foreign investments in sectors including autos and financial services since different jurisdictions seek greater reciprocity from China regarding its support for foreign investment, in return for continued China inbound M&A activities.
- Certain Chinese companies will continue to actively pursue deleveraging strategies and therefore continue to sell their assets, while controlling financial sector risk, which is still one of the country’s top priorities.
- In order to prepare China for future international expansion in strategic sectors, China SOE consolidation will remain active.
