After fuelling $1 trillion Asia deal spree, China's M&A set to hit new heights in 2016

Tue Dec 22, 2015 6:06am EST
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By Denny Thomas

HONG KONG (Reuters) - China Inc's outbound acquisitions spree in 2015 helped push Asia-Pacific's annual deal value past $1 trillion for the first time, with 2016 set for a bigger splurge still as Chinese firms buy even more assets abroad to sidestep slowing domestic growth.

Asia-Pacific M&A totaled $1.2 trillion so far this year, up 46 percent from last year, preliminary data from Thomson Reuters showed, as China rediscovered an appetite for outbound deals after 2014's 20 percent drop. With private companies like Fosun International Ltd in the vanguard, Chinese firms spent a record $102 billion so far in 2015, the data shows.

As well as economic growth slowing to its weakest pace in years, bankers and analysts say a need to acquire cutting-edge technology to improve manufacturing, environmental issues and a weakening yuan will all help send Chinese firms like chipmakers and agrochemicals suppliers searching for deals overseas next year.

"China is on the move, we are preparing for a busy year for deal making," said Joseph Gallagher, head of M&A for Asia Pacific at Credit Suisse. "Chinese outbound activity is set to pick up with a focus on the semi-conductor, power and financial sectors," Gallagher added.

A strong year for deal-making bodes well for global investment banks in the region. This year, Goldman Sachs was the top adviser with a 16.7 percent market share, followed by Morgan Stanley and HSBC Holdings, surging from 28th rank in 2014 after working on a slew of deals from billionaire Hong Kong tycoon Li Ka-shing.

China, Hong Kong and Australia were the three most active M&A markets in Asia Pacific, the data showed.

China's large state-owned enterprises (SOE) played a less active role in 2015's M&A compared to their mid-2000s heyday as President Xi Jinping's wide-ranging anti-graft investigations turned several official cautious about making big decisions, bankers said.

But Beijing ardently backs deals in niche areas like semi-conductors and agrochemicals, bankers said. A prime example it state-backed Tsinghua Unigroup Ltd: It plans to invest 300 billion yuan ($47 billion) over the next five years in a bid to become the world's third-biggest player in chipmaking, muscling its way into a trio made up of Intel Corp, Samsung Electronics Co Ltd and Qualcomm Inc.   Continued...

A vendor holds Chinese Yuan notes at a market in Beijing in this August 12, 2015 file photo.   REUTERS/Jason Lee/Files