China’s Companies Accelerate Pace on Overseas Mergers and Acquisitions

March 4, 2016 Updated: March 4, 2016

In recent years, China’s enterprises have been very aggressive in the global mergers and acquisitions (M&A) market, hitting a record high of more than US$100 billion in value last year.

Despite the fall in oil prices and fears of a slowdown in China’s economic growth, the pace of overseas M&A did not lose steam. Within only two months this year, there were 102 cases of China’s enterprises making overseas acquisition agreements, an increase of 40 percent compared to last year’s 72 cases during the same period.

Analysts believe that the tide of moving assets may be a major factor for the accelerated M&A. However, this rapid expansion has been frustrated from time to time, with some companies losing money, while some deals fell through because of intervention by the U.S. national security department.

“Having been in this line for so long, this is the first time that I am seeing so many cases,” said Mr. Chen, director of a Hong Kong-based international investment bank.

Chen’s job was to help mainland China’s state-owned enterprises, as well as some well-known private enterprises, to engage in overseas acquisitions. Due to the recent increased demand of China’s overseas M&A, business has been booming for his company.

Not only did Chen have to make business trips to mainland China and overseas, he had to work overtime during the Chinese New Year period. In contrast to other departments which had to retrench staff, Chen’s department was making plans for expansion.

Chen told Epoch Times that 2013 saw a peak in China’s overseas M&A activities, and after a slight dip in 2014, last year was “another easy victory.”

Chen said there were two factors behind the rise in M&A. The external factor was the decline in international commodity prices, and the internal factor was that enterprises were pushed to move assets abroad.

“After the significant devaluation of the yuan and falling asset prices, enterprises sought after overseas assets through M&A, and transferred funds abroad at the same time,” said Chen.

Having been in this line for so long, this is the first time that I am seeing so many cases.
— Mr. Chen, director of a Hong Kong-based international investment bank.

Last year’s record broken

According to Dealogic the value of the 102 Chinese M&A agreements in January and February this year amounts to US$81.6 billion while the 72 agreements in the same period last year amounted to US$11 billion.

China’s HNA Group said it would acquire the technology distributor Ingram Micro for US$6 billion on Feb. 17.

Dealogic data showed that the acquisition of U.S. companies by China’s enterprises has reached US$23 billion in 2016 so far with HNA’s deal, breaking records for the whole of last year.

Heavily reviewed

However, China’s overseas M&A has not been totally smooth sailing. Chen said there were two cases last year that were not successful.

Due to strict reviews by the United States, clients have turned to Europe for acquisitions. Projects also tended to avoid the high-tech industries.

According to the U.S. Treasury Department, more buyers from China have been reviewed by national security officials than buyers from other countries for three consecutive years. In 2014, officials reviewed 147 deals, up from 97 cases in 2013.

Currently, the deals under review include China National Chemical Corporation’s acquisition bid for Syngenta, Western Digital’s proposed sale of a 15 percent stake to Tsinghua Unisplendour, and the planned sale of the Chicago Stock Exchange to Chongqing Casin Enterprise Group, reported Bloomberg.

Translated by Benjamin Ng. Written in English by Sally Appert.