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.

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