Bain & Company’s second China outbound M&A report identifies a winning formula to help companies use acquisitions to win both at home and overseas
BEIJING, Oct. 11, 2018 (GLOBE NEWSWIRE) -- Chinese outbound M&A deal activity represented more than 40 percent of deals in Asia-Pacific from 2015-2017, but saw this share drop dramatically in the first half of 2018. Despite this dip, the latest stage of M&A is helping Chinese companies gain market share in utilities, construction and Internet-based businesses in countries such as Brazil.
The number of Chinese outbound deals for 100 percent ownership from 2016 to 2017 more than doubled vs. 2013 to 2015, and the number of deals for 50 percent to 100 percent ownership jumped more than threefold.
According to Bain & Company’s second China outbound M&A report, More Rigor Means Better Results in China’s Global Pursuit, a host of factors contributed to the decline in deal activity. Currency depreciation took a toll, as did fears of the effects of the US–China trade wars on both domestic company profits and US opportunities. Deals were hurt by restrictions on investments in the US, Germany, Australia and other markets, as well as by the Chinese government, who are more carefully and closely monitoring outbound investments.
Yet, the research suggests there are still ample opportunities for more overseas acquisitions. In 2017, China spent only 0.6 percent of its GDP on outbound M&A – as a percentage of GDP, China usually spends half of what Japan usually spends on outbound M&A.
Another significant evolution: The number of private enterprises acquiring overseas is growing much faster than acquisitions made by state-owned enterprises. As a result, Bain & Company anticipates an increase in deals aimed at capturing new capabilities required to grow businesses at home and for accessing global markets.
“Chinese companies looking to acquire beyond China’s borders focus on achieving dual goals: winning at home and exporting abroad, which enables them to strengthen their domestic competitive stance while simultaneously positioning for global expansion, especially in other developing markets,” said Phil Leung, who leads Bain & Company’s Asia-Pacific Mergers & Acquisitions practice. “This latest stage of M&A is helping Chinese companies gain market share in utilities, construction and Internet-based businesses in countries such as Brazil, India and Indonesia, though Europe and North America remain the largest capital destinations.”
The shift to using acquisitions to win both at home and overseas brings with it new and more complicated rules for success. Based on its work with leading Chinese acquirers, Bain & Company has identified a winning formula to help companies avoid costly mistakes and apply more rigor to their acquisitions:
“China’s outbound boom will only continue as companies look to capture new capabilities that strengthen their domestic position, while also growing overseas for a leadership position in industries in which they can gain a competitive edge,” said Hao Zhou, partner with Bain & Company and head of Greater China M&A. “But as they build their repeatable models, they will also need to keep one eye on the future. In China, as elsewhere, winning outbound acquirers will be those that make the necessary adjustments to evolve their M&A strategy along with a global market that never stops changing.”
Editor’s note: To receive a copy of the report or arrange an interview with the authors, please contact: Nicholas Worley at email@example.com or +852-2978-8830.
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