Buying up foreign assets is one thing, integrating them another

Start the drum roll, pop the champagne cork. China has overtaken the United States in foreign mergers and acquisitions for the first time, taking their total value to US$173.9 billion in the first nine months of this year, a jump of 68 per cent from 2015. For years, America has been the big spender in foreign buying. China is catching up. But after the frantic global M&A activities from last year, the slowdown, which is almost across the board this year, is to be expected. Foreign purchases are down year on year by 27 per cent in the US, 18 per cent in Europe and 27 per cent in Asia-Pacific in the first half of this year.

So, in a slower year, China has emerged as No 1. Nevertheless, this trend is likely to continue for China.

State-owned firms are expanding their global reach, with particular interest in strategic sectors such as energy, agriculture and resources. But the private sector is catching up as the home market is becoming saturated and too competitive.

As the Chinese middle class expands, foreign buying is no longer confined to what the state dictates, but what ordinary Chinese consumers want, most notably Hollywood entertainment. Hence the twin purchases of US film companies Carmike Cinemas for US$1.1 billion and Legendary Entertainment, the company that produced such mega hits as The Dark Knight and Jurassic World, for US$3.5 billion by Dalian Wanda, the mainland conglomerate.

Meanwhile, as Europe continues to struggle, assets in many places are being targeted. ChemChina, the chemicals group, is attempting the country’s largest buyout of a foreign company with a US$43.8 billion, all-cash offer for the Swiss agri-giant Syngeta. China’s Midea has taken over Kuka, a jewel of Germany’s robotic engineering sector. But this has raised serious concerns in Berlin and elsewhere.