China’s Recent M&A Activity
In spite of the severely illiquid global capital markets, the year 2009 set several milestones for Chinese M&A activity. The availability of discounted assets due to the international financial crisis in particular, helped embolden China’s outbound M&A activity.
Close to 25% of all Chinese M&A deals during the first three quarters of 2009 comprised of outbound deals. Compare this to 2007, where overseas M&A activity comprised only 8.5% of all M&A volumes for the entire year. In addition, the value of Chinese acquisitions abroad has also been steadily rising - over a quarter of the 20 largest outbound M&A transactions were announced in 2009 alone.
China’s overseas M&A activity has unfortunately, also become increasingly controversial. Many recent deals, such as Yanzhou Coal Mining’s US$2.6 billion bid for Australia’s Felix Resources, have encountered regulatory complications.
Public capital is increasingly being used to fund foreign acquisitions, with the China Development Bank recently loaning the state-owned China National Petroleum Corporation US$30 billion in order to fund its overseas M&A shopping spree. In addition, China’s sovereign wealth fund is making big moves, directly accounting for two multi-billion dollar M&A deals. These were the US$3 billion acquisition of a stake in US asset manager, Blackstone, in 2007 and the US$1.5 billion purchase of a 17.2% stake in Canada’s Teck Resources in 2009.