AUSTRALIA is becoming a safe haven for Chinese M&A, a new law firm report reveals, and is now the fifth largest inbound target market for M&A deals.
Global economic uncertainty is doing little to deter China's interest in Australian targets, a new report by Allen & Overy says. The past year saw China undertake eight transactions involving Australian targets, totalling US$6,424 million.
The report confirms Australia's position as the China's top target country for M&A in 2011 and the world's fifth inbound target market with a total of 54 deals taking place.
The fourth quarter of last year saw the acquisition of a stake in Extract Resources Limited, an Australian uranium mining company, by CGNPC Uranium Resources Co. Ltd, a Chinese clean energy enterprise focused on nuclear power, for US$1,203m.
The year was not focused entirely on energy and resources. SABMiller's AUD12.3 billion hostile acquisition of Australian brewer Foster's was the year’s largest inbound M&A transaction for Australia.
Aaron Kenavan, Sydney-based corporate partner at Allen & Overy, said 2012 is expected to continue as the past year did.
"2011 saw solid but lumpy Australian cross-border M&A activity. We expect 2012 to have similar themes as 2011. W will continue to attract billions of foreign investment dollars given our relatively attractive economic fundamentals and the strategic positioning of our industries. Subject to resolution of the situation in Europe, we also expect to see a continuation of the uptick in outbound investment by Australian corporates reflecting their increasing cash reserves and high Australian dollar."
The Allen & Overy report highlights the extent to which countries have become active in each others' markets as businesses continue to look abroad for new growth opportunities.
The M&A Index is backed up by independently commissioned quarterly research on the volume and value of global M&A deal types (disclosed value USD100m+). Countries were assigned a net score, which is calculated by subtracting inbound from outbound M&A.
The report also found that Japan and China's outbound M&A growth are amongst the strongest of all countries. China is now ranked 6th most active cross-border outbound acquirer, up from 18th in 2007. China's growth represents a 195 per cent increase in the number of outbound acquisitions since 2007. Japan has risen from 13th to 3rd, representing a 158 per cent increase in volume of outbound M&A.
According to the report, the UAE has slipped out of the world's top 20 outbound acquirers since 2007, when it ranked 10th with 36 transactions worth US$36,385bn. Brazil, The Republic of Ireland and South Korea have all joined the top 20 outbound acquirers with 11, 12 and 16 outbound acquisitions respectively.
The report found that across 12 major global economies there has been a 17 per cent increase in cash held on balance sheets in 2011, and a 32 per cent increase compared to two years ago, as companies remain reluctant or unable to deploy capital for M&A.