Going Global

Chinese companies pivot in overseas M&A activity, targeting healthcare, hotels and other value-added industries

PUBLISHED : Thursday, 13 October, 2016, 5:10pm
UPDATED : Thursday, 13 October, 2016, 5:10pm

As Chinese companies continue their acquisition sprees overseas, their tastes are changing. Companies in high-value added sectors are becoming preferred investments, according to a newly-released report from Moody’s Investors’ Service.

“The country’s structural reform drive is shifting the focus of mergers and acquisitions activity away from resource-related sectors and towards higher-value industries, in the pursuit of technology, brands and new markets,” Moody’s vice president and senior credit officer Rahul Ghosh said.

“Because of rising labour costs in China, companies in the country are eager to migrate to high-value-added production and expand their presence, especially to emerging markets,” Moody’s analyst Nino Siu said.

The share of deals by private companies has increased significantly and state-owned enterprises are expected to have a less prominent role in driving overseas mergers and acquisitions.

Privately owned enterprises have been particularly active in the technology industry, and also in consumer and entertainment-related sectors, such as healthcare products, media and hotels, according to the ratings agency.

The trend is expected to continue as Chinese companies have ambitious plans to become global leaders, meaning that they will look to expand their market presence worldwide and augment their product capabilities, said Moody’s.

During the nine months between January and September, the volume of completed and pending outbound mergers and acquisitions deals exceeded the record annual level reported in 2015, driven by the slowing domestic economy and supportive government policies, according to the report.