Chinese M&A bids in US may be ‘in jeopardy’ after Trump victory, says analyst

Chinese merger and acquisition bids into the US have reached a record high this year, but may be in jeopardy after Donald Trump’s surprise victory

PUBLISHED : Thursday, 10 November, 2016, 8:26pm
UPDATED : Thursday, 10 November, 2016, 10:19pm

Chinese bids for United States companies may now be “in jeopardy” after former reality TV star and real estate mogul Donald Trump’s surprise presidential victory, according to Mergermarket research.

Bids for US companies have reached record highs so far this year, with US$51.1 billion offered across 65 deals – 462.7 per cent up on the same period last year, the merger and acquisition research company found.

In total, countries around the world have bid US$401.67 billion for US companies so far this year.

But Trump’s election had created more political risk, which needed to be priced into deals, Mergermarket’s financial researcher Jennifer Zhang said.

“Chinese bids into the US may now be in jeopardy with Trump in the White House...[as he] has already blamed the Chinese for domestic job losses and is likely to increase oversight of foreign transactions, particularly those involving Chinese acquirers,” she said.

She said it was too early to tell exactly how the election result would affect deal flow.

“While President Trump will set the tone of the administration, there are many things that he can’t do on his own.”

Despite this, Zhang said M&A interest in the US was unlikely to drop significantly because of how huge and important the market was.

Mergermarket data shows there have already been four bids from China this quarter, worth US$10.45 billion in total.

Standard Chartered’s head of economic research Mike Moran said it remained to be seen whether Trump followed through on his campaign promises.

However, “It is clear that his protectionist and anti-globalisation platform will be central to his policy agenda,” he said.

Daiwa analyst Kevin Lai said if Trump didn’t live up to what he promised, he might ruin his credibility as president.

Foreign direct investments on the mainland were likely to be repatriated if Trump imposed his proposed 45 per cent tariff on imported Chinese goods, he said.

“We would expect the significant relocation of export-manufacturing capacity from China to the US or other countries.”

For the first time, China undertook more global cross-border M&As than any other nation in the first nine months of the year, with Europe the most targeted region.

Volumes reached a new annual high of US$173.9 billion, up 68 per cent on last year’s record US$103.2 billion, Dealogic data released in October showed.