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]
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1 Source: Kennedy;”Business Advisory Services Marketplace 2009-2011″ ©BNA Subsidiaries, LLC. Reproduced under license.
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