'Ambitious' China firms on hunt for overseas M&A

Outbound mergers and acquisitions (M&A) will remain active next year as "ambitious" mainland firms continue to seek growth by tapping foreign markets and acquiring new technologies, according to a senior executive with Bank of America Merrill Lynch.

Opportunities were emerging for mainland companies to expand as the European debt crisis has hit growth and lowered valuations at potential targets, said Zhang Xiuping, managing director and head of Asia mergers and acquisitions with the United States-based investment bank.

"Most state-owned enterprises (SOEs) have dedicated teams that actively screen investment opportunities overseas," Zhang said. "China SOEs are growing much more sophisticated in doing international deals and we are often impressed with their knowledge on sector and target."

The zeal was unprecedented, according to Zhang, who has 15 years' experience of investment banking, the first five of which were spent advising on asset sales by US companies, followed by five years of facilitating US investment into China, and the past five helping cash-rich mainland firms with M&As.

She has worked with more than 20 large SOEs on outbound investments since 2006 and closed a dozen deals, including landmark transactions such as State Grid's US$942 million acquisition of Brazilian transmission assets from ACS in Spain this year; and Sinopec's US$4.5 billion acquisition in 2010 of ConocoPhillips' 9 per cent stake in Syncrude, the largest oil sands project in the world.

SOEs in the mainland would continue to seek energy and resources, including oil, gas, iron ore, and copper, to increase capacity, while M&A activity also would take place in the machinery and consumer products sector by SOEs and private companies, she said.