Mergers & Acquisitions

Chinese CEOs bullish on M&As over next three years, KPMG survey shows

PUBLISHED : Friday, 01 June, 2018, 7:31am
UPDATED : Friday, 01 June, 2018, 7:31am

Almost 80 per cent of CEOs in China are seeking mergers and acquisitions (M&A) over the next three years to achieve their growth objectives and to meet the challenges wrought by technological change, according to a global survey of accounting firm KPMG.

“CEOs are embracing technological disruption and need to lead their companies and ensure they are at the forefront to face any technology challenges. Some may seek strategic alliances and M&As as an opportunity to collaborate with innovative partners to upgrade their technologies or transform their business model,” said KPMG China chairman Benny Liu in an interview with the South China Morning Post.

“Technology is a significant priority with a majority of respondents, who view technological disruption as an opportunity rather than a threat. They plan to continue to invest in innovation, data analytics and advanced technologies,” Liu said.

The findings from the 2018 China CEO Survey forms part of an annual global survey of 1,300 CEOs from Australia, China, France, Germany, India, Italy, Japan, Netherlands, Spain, the UK and the US. This includes 125 CEOs from mainland China and Hong Kong.

The survey showed that 76 per cent of China CEOs have either moderate or high appetite for M&As over the next three years, the same percentage as CEOs surveyed from Germany, but slightly higher than the 75 per cent of respondents in India and Japan, 74 per cent in Italy, Netherlands, and 72 per cent in the UK.

However, China’s buying appetite is lower than that of France at 87 per cent, Spain at 86 per cent, the US at 81 per cent and Australia at 80 per cent.

The strong appetite for M&As among CEOs comes amid Beijing’s restrictions on buying overseas assets, according to guidelines issued in August last year.

“The guidelines have helped remove any uncertainties in terms of what Chinese companies can purchase overseas. They need to avoid investments in industries such as sports, film studios or entertainment. They are able to invest in areas such as technology and infrastructure projects aligned with key strategic national initiatives such as the Belt and Road Initiative,” Liu said.

Liu said the survey showed that global CEOs are interested in M&As and strategic alliances, a reflection of their confidence in the growth outlook.

In terms of markets, 65 per cent of China CEOs indicated they want to invest into emerging markets, a higher percentage than India at 62 per cent, Germany at 59 per cent and the UK at 57 per cent, but below Japan at 77 per cent, Australia at 78 per cent and the US at 81 per cent.

In comparison, only 30 per cent of China CEOs surveyed plan to invest in developed markets, which is higher than the US at 18 per cent, Japan at 19 per cent and Australia at 14 per cent, but lower than the UK at 41 per cent, Germany at 38 per cent and India at 36 per cent.

“The China CEOs surveyed recognise the growing potential in emerging markets in Asia and their faster growth rate compared to developed markets,” Liu said.