“China Outbound M&A Deal Activity Hits Record Highs – Market Turmoil Good Time For Chinese Buyers As They Extend Reach; Canada Represents Only 11% of Outbound Deal Volume and Limited to Two Sectors” PwC Report

Aug 25, 2011 | Corporate Member News

Outbound merger and acquisition activity by Chinese entities has reached a new record for the first half of 2011, a 14% increase compared to last year, according to a PwC report.  

Although Chinese buyers continued to favour targets close to home, they expressed a heightened interest in European targets – 28% of all outbound activity was in Europe, nearly double the prior year volume. Canada represented a mere 11% of outbound deal volume, up from 9% in 2010.

“Distressed conditions in Europe present Chinese buyers with compelling value propositions,” says Ken Su, a Partner with PwC’s Transaction Services in Beijing. “This may be a signal to North American buyers of what lies ahead for China-led M&A during current tumultuous conditions in Canadian and American markets.”  

The relatively small level of outbound activity in Canada is largely due to a shift in sectors targeted by Chinese entities.  During the first half of 2011, the resource sector represented a lower proportion of total outbound deals for the first time (27% of activity in the first half of 2011 versus 36% of activity in 2010).  Instead, Chinese entities were observed actively acquiring companies in the machinery, equipment and consumer sectors (36% of activity in the first half of 2011 versus 23% of activity in 2010).  

Overall, Canada was the 5th most popular nation targeted by Chinese entities, with 100% of deals confined to the materials, energy and power sectors.

“Canada is not a major recipient of outbound M&A by China, compared to other countries, unless the transactions are related to raw materials and energy.  We think this will soon change,” says Krisitan Knibutat, PwC’s National Deals Leader.  “As production of Chinese goods continues to move up the value chain and China evolves into a consumer-led economy, buyers will be most keen to acquire more industrial know-how, technology and brands. We have already observed this type of activity in Europe.” 

PwC expects that current market turmoil may be the perfect buying opportunity for cash-rich, deal hungry Chinese acquirers.  

The private equity (PE) industry is fast emerging as a key provider of growth to China’s privately owned SME’s.

“Fiscal tightening in China and volatility in equity markets will create a massive opportunity for PE and venture capital funds in China,” says Ken Su.

In the first half of 2011 PwC observed a 31 per cent increase in the number of PE transactions with value more than $10 million. 

“Canadian financial buyers would be well advised to consider opportunities in the fast-growing Chinese domestic market, especially in light of recent regulatory changes that favour foreign participation in Renminbi fundraising,” says Su.  

Statistics in this release are based on Thomson Reuters and ChinaVenture data. Thomson Reuters and ChinaVenture compile M&A statistics based on announced deals for which deal values have and have not been disclosed and of which Thomson Reuters and ChinaVenture were made aware. A media briefing Power Point presentation with graphs and tables breaking out data from the report is available from [email protected]  

Follow PwC on Twitter at @PwC_Canada_LLP and on Facebook at http://www.facebook.com/pwccanada.  

About PwC’s Deal Team
PwC’s Deal Team (www.pwc.com/ca/deals) helps clients to achieve deal success—from concept to close and beyond. As part of the world’s largest Transaction Advisory practice1, and with our global Corporate Finance group being 2010 Upper Mid Market M&A Advisor of the Year2, the PwC Canada Deals Team is your gateway to an exciting new world of emerging M&A opportunities.  

About PwC
The firms of the PwC network provide industry-focused assurance, tax and advisory services to enhance value for clients. More than 161,000 people in 154 countries in PwC firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP, an Ontario limited liability partnership, and its related entities have more than 5,700 partners and staff in offices across the country. Click here  for more information.  

“PwC” is the brand under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Together, these firms form the PwC network. Each firm in the network is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way.  Note to Editors: PwC changed its name from PricewaterhouseCoopers to PwC in the fall of 2010. “PwC” is written in text with a capital “P” and capital “C.” Only when you use the PwC logo is the name represented in lower case.  _________________________________
1 Source: Kennedy;”Business Advisory Services Marketplace 2009-2011″ ©BNA Subsidiaries, LLC. Reproduced under license.
2 Source: Acquisitions Monthly Awards 2010  “PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. For further information:  

Contact            David Rowney
Tel.: 416 365 8858
Email: [email protected] OR:
Kiran Chauhan
Tel.: 416 947 8983
Email: [email protected]  

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