Chinese firms spend record US$61 billion on outbound M&As in 2015 focusing on tech, entertainment, financial services and property
Companies in mainland China spent a record US$61 billion in global outbound mergers and acquisitions completed last year, which targeted major assets in the technology, entertainment, financial services and property sectors.
That total was around 16 per cent higher than in 2014, when global cross-border deals by Chinese companies reached US$53 billion, according to a report published Tuesday by research firm Rhodium Group.
China had a roughly 6 per cent share of the estimated US$1 trillion in global cross-border mergers and acquisitions transactions that were closed last year, it said. That was down from a high of nearly 10 per cent in 2013.
The United States, Australia and the 28 countries of the European Union accounted for almost two-thirds of all the Chinese outbound transactions completed in the past 12 months.
Analysts predicted that total Chinese direct investment in the US alone for 2015 would surpass US$10 billion for the third consecutive year, despite a stock market crash in China last summer.
“Greater appetite for mature assets and better awareness of political and commercial risks in emerging economies have further accelerated the shift of investment activity from developing to advanced economies,” Rhodium analysts Thilo Hanemann and Cassie Gao said in the report.
They pointed out that Chinese buyers’ appetite for energy and materials assets has plunged further, accounting for only 16 per cent of their cross-border spending last year, down from a peak of 83 per cent in 2011.
Forrester Research analyst Charlie Dai said Chinese will continue to be aggressive investors in technology companies abroad as the country builds up its hi-tech supply chain.
China’s central government is providing vital policy and long-term funding support to help speed up the development of the country’s semiconductor industry. That has led to a couple of major deals.
OmniVision Technologies, a US maker of advanced digital imaging sensors, was acquired last year for US$1.9 billion by Chinese private equity firms Hua Capital Management, Citic Capital and Goldstone Investment.
Integrated Silicon Solution, a designer and supplier of memory chips used in the automotive, communications and industrial markets, was sold last year for about US$765 million to another Chinese-backed consortium, Uphill Investment, led by Summitview Capital.
Chris Lane, a senior analyst at Bernstein, said China’s “Big Three” telecommunications network operators - China Mobile, China Unicom and China Telecom - were not active in cross-border mergers and acquisitions last year.
That could change, however, in the next 12 months when a couple of deals are expected to emerge.
“China Mobile, for example, continues to stress that further international expansion is a core part of its strategy,” Lane said.
“We believe that the Chinese telecommunications operators will focus on minority stakes in enterprises, in which they can contribute cash and 4G network operating experience.”
He added that these cross-border investments would be in emerging economies in Asia or Africa, “where investments are likely to cost US$1 billion or less”.
Rhodium analysts said Beijing’s “One Belt, One Road” initiative, which encourages more investments in the economies along the ancient Silk Road, resulted in “significant Chinese deals closed last year in Israel, Kazakhstan and Turkey”.