China’s economic activity almost came to a halt at the beginning of the outbreak, and when the epidemic was under control in the middle of last year, the number of outbound M&A deals began to recover, but the number of outbound M&A deals fell by 30% year-on-year last year, and the value of the deals plunged by more than 50%. The French foreign trade bank published a report pointing out that although the volume of China’s overseas M&A transactions fell last year, European assets are still the popular M&A objects.
The bank cited the United Nations Conference on Trade and Development (UNCTAD) report, which showed that the global M&A transaction volume fell by 10% last year, a much lower decline than China’s 33% drop, reflecting a significant slowdown in overseas M&A by Chinese companies.
Due to the weak global economy and the U.S. Federal Reserve’s “zero interest rate” policy to boost the economy, the overall cost of overseas financing for Chinese companies fell, increasing potential acquisition opportunities, with M&A activity concentrated in the industrial category, followed by medical-related industries. According to Asia Pacific Chief Economist at BNP Paribas, China continues to see Europe as its main partner during the epidemic, and Europe was the region where China acquired the most companies last year, thus explaining why China expressed strong interest in signing the China-EU Investment Agreement.
In the fourth quarter of last year, Chinese companies resumed their overseas M&A efforts to a greater extent, reflecting their interest in “going global”, especially in terms of technological development, industrial upgrading, and market expansion. Among them, M&A deals by SOEs were concentrated in resource-related sectors, while private companies were mainly in industrial and consumer sectors.
Notably, Chinese overseas M&A deals targeting the U.S. rebounded last year despite the U.S.-China clash, with the number of deals not only essentially unchanged from 2019, but the amount rebounding to 2018 levels. Although last year was not a good year for Chinese companies to conduct overseas M&A, it is expected that the overseas M&A trend will continue this year as the economy has shown recovery in the second half of last year.
Recent Comments