M&A TEAMS worldwide might be wondering what to do with themselves as the economy slows, but Chinese target M&A has just hit its highest volume ever.
According to the latest deals intelligence from Thomson Reuters, Chinese target M&A volume reached $76.1 billion in the year-to-date 2008 periods — the highest year-to-date and full-year level in history.
Jim Dunstan, the executive partner for Asia for Allens Arthur Robinson, said the substantial amount of domestic M&A occurring in China is reflective of the rapid economic growth of the past few years.
Wan Li, a partner at Minter Ellison, agrees, but adds that regulatory changes for M&A — including revisions to regulations on foreign investment in the telecommunications, mining and commercial sectors — “naturally also contribute to the increase in M&A deals in China”.
Dunstan notes, however, that international M&A work has declined in the past six months, a reflection of the current state of financial markets. “Our involvement in M&A has been steady, but not growing,” he said. “This reflects the essentially foreign base to our practice in the M&A area.”
The economic slowdown, said Li, will inevitably affect investment into China from overseas, but will not necessarily contribute to a slowdown in outbound investment from China — particularly directed to assets in the energy and resources sector. “Overall we do not expect the world to slow down over the coming 12 months,” he said.
Even despite the global financial crisis, Chinese corporates appear especially keen to grow their opportunities in Australian and South East Asian markets.
“What we have seen growing very strongly is investment by Chinese corporates into both the Australian and South East Asian markets,” said Dunstan. “We are almost uniquely positioned to pick up work into countries like Indonesia and Vietnam as we have quite large offices in most of the major markets in that area in addition to our very strong presence around Australia.”
Dunstan adds that, as potential targets in China fall with the slowing economy, well-positioned companies should be well placed to acquire long term-assets at sensible prices. “The current situation should lead to some good buying opportunities for cashed up foreign companies looking to engage in China,” he said.
The Thomson Reuters intelligence found the previous record was in 2007, when Chinese target M&A volume reached $75.8 billion for the full year. China accounts for 2.9 per cent of total worldwide M&A, with materials targets leading all transactions, followed by real estate, financials, industrials, energy and power and consumer staples.