Mainland M&A value surges 25pc to US$80.1b

PUBLISHED : Wednesday, 19 December, 2007, 12:00am
UPDATED : Wednesday, 19 December, 2007, 12:00am

The mainland's inbound and outbound mergers and acquisitions accelerated this year on the back of the country's strong economy, according to a report from PricewaterhouseCoopers.

The number of mergers and acquisitions on the mainland, Hong Kong and Macau reached 1,738 in the first 11 months of the year, an increase of 269 or 18 per cent over all of last year, the report said.

The total transaction value has correspondingly risen 25 per cent to US$80.1 billion, it said.

Outbound acquisitions, with the total transaction value surging 108 per cent to US$16.4 billion, have also grown to 66 from 46 last year.

The report revealed deals this year continued to be no longer driven largely by foreign direct investment, with the total number of domestically funded transactions rising 45 per cent to 987 in the first 11 months from 680 last year.

The transaction value of domestically funded deals has leapt 53 per cent to US$50.6 billion. That compared with US$16.6 billion invested by foreign buyers on 339 deals in the country, a 27 per cent drop.

Private equity acquisitions, which accounted for just about 13 per cent of the country's total transaction value, have grown steadily this year with total transactions increasing to 140 from 110 last year, with the total transaction value jumping 86 per cent to US$10.6 billion.

Xie Tao, transactions partner at PricewaterhouseCoopers, says the country's rapid economic growth has 'facilitated an active market' for mergers and acquisitions as companies look to restructure, expand or tap new markets.

'The equity market, internally generated funds and bank lending have provided ample liquidity to finance deals and the government's support for domestic M&As has also helped fuel these activities,' Mr Xie said.

David Brown, another transactions partner at PricewaterhouseCoopers, said mergers and acquisitions activity would grow strongly next year, continuing to benefit from an active market, efficient liquidity and government support.

He said that with the impact of the credit crunch expected to linger until next year, more private equity funds and professionals might relocate their resources from mature markets such as the United States to Asia, benefiting the mainland's private equity sector.

He expects to see 'one or two big outbound deals' by mainland firms next year, though the country's overseas acquisition picture remains 'choppy'.

'We stand by our earlier forecast that by 2011, the country's outbound activities will grow 10 times from 2006 levels,' Mr Brown said without elaborating.