Oct 11, 2018 (China Knowledge) - A sharp drop has been noticed in Chinese enterprises’ mergers and acquisitions (M&A) value across Asia Pacific region. According to a report released by Bain, the total value of overseas M&A by Chinese enterprises in the first half of 2018 was USD 22 billion, down from USD 56.7 billion YoY in 2017 and USD 118.7 billion YoY in 2016.
In 2015-2017, the proportion of overseas M&A transactions by Chinese enterprises in the Asia-Pacific region exceeded 40% for three consecutive years, but this proportion fell sharply in the first half of 2018. Nevertheless, Chinese companies are still gaining market share in utilities, construction and Internet businesses in Brazil and other countries by M&A. At the same time, Europe and North America remain the largest investment destination for Chinese enterprises to acquire overseas.
Bain research shows that Chinese enterprises still have a large number of overseas M&A opportunities. In 2017, China spent only 0.6% of its GDP on overseas M&A --- half of Japan's spending on overseas M&A, as measured by GDP.
The number of overseas M&A transactions of private enterprises is much faster than that of state-owned enterprises. Bain predicts that the number of cross-border M&A transactions driven by new capabilities to achieve domestic business growth and access to global markets will increase.
Bain made a performance analysis of more than 700 Chinese enterprises that had undertaken M&A transactions over 2013-2017 years. The analysis shows that the average return on shareholders of these companies is 11.6%. Among them, firms with higher frequency and larger scale of M&A performed better, with an average total return of 18.6% for shareholders.
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