12 October 2020

Briefings: M&A trends in China and Asia

Euan Rellie

Euan Rellie, Co-Founder and Senior Managing Director of BDA, in New York, recently joined a webinar International Business Briefing: What is the Future of the China Market, hosted by the US-China Business Council and Faegre Drinker.

Euan shared insights on M&A trends in China and Asia:

  • China M&A Overview
    • In 2019, China-related M&A transactions slumped significantly, reaching the lowest transaction value since 2013
    • Major drivers were: Drop in outbound M&A (dropped 37% in value) and Drop in Private equity deals (dropped 22%)
    • Outbound deals have been discouraged by increased scrutiny of CFIUS review in the US; national security review in Europe; Beijing’s controls on outbound capital flows
    • Inbound transactions reached US$20bn in 2019, representing a 5.6% growth YoY
  • China as a market for US companies: Large inbound acquisitions in China have always been rare; acquisitions by US companies have mostly been small/medium sized
  • Impact of the trade war: Punitive actions against China will continue. Even if Trump loses in November, investors don’t expect a significant change in the US approach to China. The tone and tactics will change
  • Developments during the pandemic: China becomes a refuge for US companies after overcoming COVID-19. China’s economy is slowly recovering, growing by 3.2% in Q2 2020 as retail and luxury sales experience a strong rebound. The recovery is unbalanced, which has widened the wealth gap
  • Hong Kong isn’t over for foreign investors, despite the National Security Law: Hong Kong will remain the hub for inbound and outbound mainland investments
  • China M&A going forward:
    • In the short term, Chinese investors will be focused on domestic consolidation and less active in outbound M&A. Growth in inbound deals is expected, but a red-hot IPO market and high valuations in China could prevent this from growing fast
    • In the medium/long term, we expect frequent sales of family-owned businesses. As China faces rising tension with the US, the PRC Government work to ease regulations on inbound M&A

If you want a copy of the slides, or would like to discuss any of these topics, please contact us.

About BDA Partners

BDA Partners is the global investment banking advisor for Asia. We are a premium provider of Asia-related advice to sophisticated clients globally, with over 24 years’ experience advising on cross-border M&A, capital raising, and financial restructuring. We provide global reach with our teams in New York and London, and true regional depth through our seven Asian offices in Mumbai, Singapore, Ho Chi Minh City, Hong Kong, Shanghai, Seoul and Tokyo. BDA has deep expertise in the Chemicals, Consumer & Retail, Health, Industrials, Services and Technology sectors. We work relentlessly to earn our clients’ trust by delivering insightful advice and outstanding outcomes.

BDA Partners has strategic partnerships with William Blair, a premier global investment banking business, and with DBJ (Development Bank of Japan), a Japanese government-owned bank with US$150bn of assets.

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