Chinese buyers have continued to show their strength in 2011 despite ongoing global economic uncertainty, according to a new report from Robert W Baird & Co, a global investment bank with extensive experience in middle market, cross-border M&A and offices in Shanghai and Hong Kong.
Baird’s latest twice-yearly China M&A Market report shows that outbound M&A rose strongly in the first half of this year, with the number of majority-interest deals up more than 40% on the same period in 2010. In value terms, the rise was 50%. The story for inbound M&A was in stark contrast, as the deal count decreased by 5.5% reflecting reduced confidence amid slowing economic conditions.
“The robustness of the Chinese economy is clearly demonstrated by the growing power of Chinese buyers and their desire to seek a broader footprint through acquisitions,” says Anthony Siu, Managing Director and Head of Asia Investment Banking at Baird. “The rapid uptick in the outbound figures was driven by greater optimism, as domestic growth remained well above official goals, combined with relatively attractive valuations for targets.”
Outbound deal count in the first half of 2011 is up more than 40% on the same period last year, to 164 from 116. Outbound deal value doubled to USD12 billion.
Inbound deal count meanwhile, is down 5.5%, with deal value down by more than one third – albeit from a record level in 2010.
Domestic M&A is up sharply, to USD52 billion from USD41 billion. Mining proved the strongest sector for outbound deals, with electronics and professional services the most popular sectors for inbound targets.
Valuations continuing a sustained fall, reaching 7.7x EV/Ebitda – down from a peak of 9.6x in 2007.
Looking forward, even though growth has slowed from peak levels, China’s economy presents better prospects than most other parts of the world. Baird expects outbound M&A to continue to outperform, as China becomes an increasingly important participant in cross-border M&A over the long term.
