Greater China outbound investment reached record high in first three quarters of 2012 amid wider economic volatilityDOWNLOAD
Publish date: 14 November 2012
Despite the uncertain global macroeconomic landscape witnessed over the first nine months of 2012, 'The Resurgent Dragon – Searching for value in troubled times' (the “Report"), the 2012 Greater China outbound M&A spotlight issued by professional services organization Deloitte Touche Tohmatsu, shows that outbound mergers and acquisitions (M&A) activity by Greater China businesses thrived, with a record-breaking amount of investment flowing overseas over the first three quarters of 2012. Furthermore, M&A experts predict that Greater China M&A activity will continue to rise over the coming 12 months, at least partly influenced by the continued implementation of China's 12th Five-Year Plan as well as other drivers.
This Report is the fourth edition of Deloitte China's Greater China outbound M&A spotlight, which utilizes data derived from mergermarket, the independent M&A intelligence provider. The data featured in the report covers M&A transactions undertaken by bidders from the Chinese Mainland, Hong Kong, Macau and Taiwan between 1 January 2005 and 30 September 2012.
The data shows that over the first three quarters of 2012, some 133 Chinese outbound M&A deals were announced, a 8.2% fall from the 145 transactions announced over the same period in 2011. However, outbound investments by value rose by 16.2% to US$52.2 billion, from US$44.9 billion over the first three quarters of last year and the highest level witnessed since 2005.
"Chinese outbound M&A activity continued to be vibrant over the first nine months of 2012 and has seemingly not yet been impacted by China's confusing macroeconomic picture. Indeed, over the first three quarters of this year, outbound investment hit a record-breaking amount," said Mr. Lawrence Chia, Head of Deloitte China M&A Services and Co-Chairman of Deloitte Global Chinese Services Group.
The Report also cites that outbound energy & resources deals continued to dominate China's outbound M&A landscape over the first three quarters of this year, with Chinese businesses needing to feed the nation's appetite for raw materials in support of its manufacturing activities. Over the first three quarters of 2012, outbound energy & resources-related M&A deals accounted for 29% of total deal volumes and 68% of total deal values over the period.
Meanwhile, consumer business & transportation industry M&A transactions came second in terms of deal volumes and deal values, with a share of 20% and 13% of the overall market respectively.
From a geographical perspective, Mr. Chia said that over the years, the bulk of Chinese outbound M&A volumes have been undertaken in Western Europe, the U.S. and Southeast Asia. However, in terms of deal values Mr. Chia pointed out that over the past seven-and-three-quarter years, Chinese overseas acquirers were likely to purchase energy & resources assets in either Canada or Australasia.
The Report also presents the opinions of an online survey conducted among 69 M&A practitioners with experience or knowledge of a Greater China M&A transaction between August and September 2012.
Looking ahead, despite a confused economic outlook, 90% of survey respondents believe Chinese outbound M&A deals will increase over the next 12 months, while 78% of them expect deal sizes to be lower than US$300 million.
Mr. Chia elaborated, "The respondents went on to note that the reason why Chinese acquirers would likely acquire in the U.S. would be to acquire technological know-how, while they would most likely buy in Europe in order to secure brand names. Meanwhile, they are expected to buy into the Asia Pacific region so as to expand their market share."
Mr. Chia also went on to note that the bulk of respondents who had conducted an overseas transaction went on to say that the outcome of their deal was only marginally successful or not successful at all. "In order to ensure the success of their transaction, we recommend that Chinese bidders carry out a comprehensive amount of due diligence during the deal. The impact of this can be clearly seen in the survey results, which shows that respondents who undertook the least due diligence work went on to suggest that the outcomes of their M&A deals were relatively unsuccessful."