Chinese companies to boost overseas acquisitions in 2018, analysts say

Overseas mergers and acquisitions (M&As) by Chinese enterprises will become more frequent and orderly in 2018, despite a drop this year, according to PwC.

Mainland China enterprises wrapped up 572 outbound deals worth US$97.7 billion in the first three quarters of 2017, down 39 per cent in value from a year ago, PwC said in a report on Thursday. In volume terms, activity was down 15 per cent on year.

After skyrocketing growth in 2016 – where the number of deals value nearly quadrupled – the pace of growth over the first three quarters of 2017 followed a more rational path, PwC said.

Still, the total number of deals and value so far this year almost matches the annual figures for 2014 and 2015 combined.

“Looking ahead, as the reform of the supply side deepens, in light of China’s industrial upgrading and the guidance related to the Belt and Road Initiative, overseas M&As should stay active as enterprises mull making strategic developments,” said Andrew Li, PwC China deals domestic leader.

Global professional service giant EY also sees China as a driver of M&A activities in Asia-Pacific for at least two years.

In the region, China still stands out as a “very significant capital mover” with both active inbound and outbound activities despite Beijing’s tight scrutiny to stop “irrational outbound investments”, said Harsha Basnayake, EY’s managing partner of transaction advisory services in Asia Pacific.

“M&A is emerging as a core part of the game plan that CEOs need to have for growth,” Basnayake said in an interview in Shanghai. “Assuming there is no geopolitical volatilities, I can’t see a disruption on the growth in Asia-Pacific.”

He added that markets in Asia-Pacific are expected to “obtain a lot of attention from Chinese investment”.

EY said it also sees strong merger and acquisition intentions from corporate executives reflected in its latest survey.

The poll of business executives in Asia-Pacific found 57 per cent plan to undertake a M&A deal in next six to 12 months, a three-year high.

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