China mergers and acquisitions accelerate Covid recovery as attention shifts inward
Trading in China is proceeding at a record pace, with the value of domestic mergers and acquisitions this year totaling $ 77.5 billion – the busiest start to a year ever and almost three times the level of the same. period of 2020, according to data from Refinitiv.
The investment frenzy, which accelerated in the second half of last year as China recovered from the coronavirus pandemic, happened as Beijing did. focused on domestic demand to fuel its economy amid tensions with the United States.
“This is an exceptionally hot time for mergers and acquisitions” in China, said David Brown, PwC’s operations manager for Asia-Pacific. He cited a “perfect storm of factors,” including domestic demand for equity capital as the economy recovered, as well as government policy to reduce reliance on technology and markets. foreigners.
“A lot of firepower is directed at the consumer industries and other sectors that benefit from the inward-looking strategy,” Brown said.
From China economic growth accelerated until the end of 2020 and its stock market scale records, paving the way for a series of national agreements that experts said had been fueled by strong government support.
Make deals in China slumped in February of last year, as the country launched its first city-wide lockdowns as the coronavirus crisis hit. However, activity rebounded with the pandemic retreating, rising 30% for the full year to $ 734 billion, according to PwC.
“The feeling in China is that everything is under control and that business players are no longer waiting to pull the trigger on deals they may have delayed,” said Ivan Wong, managing director of M&A at Deloitte. China.
He noted that technology and logistics transactions had been dominant due to e-commerce boom during the pandemic.
Recent deals have included Xinjiang Tianshan, a cement company, which bought four regional competitors for 98 billion rmb ($ 15 billion); the buyout of Kerry Logistics for $ 2.3 billion by the Chinese courier group SF Holding; and the takeover of Chinese logistics company CJ Rokin by Hong Kong-based private equity firm FountainVest Partners.
“The hope that Chinese household wages and incomes will rise at a decent rate, at least to return to 2019 levels, is driving transaction growth in China,” said Alicia García-Herrero, chief economist for the Asia-Pacific at the Natixis investment bank.
Geopolitics also played a role, with Chinese transactions abroad being the lowest in ten years in value last year, according to PwC. The sharp drop in foreign transactions from China, exacerbated by tight relationships between Washington and Beijing as well as by coronavirus-related travel restrictions, has increased the focus on home activity, Brown said.
“This redirected a lot of capital that would previously have returned outside the country to domestic acquisitions,” he said.
Nonetheless, foreign M&A deals targeting China rose 14% in 2021 from the same period last year, to $ 5.4 billion, according to Refinitiv.
The American private equity group Blackstone announced in November that it had agreed to buy a majority stake in a logistics park in southern China for $ 1.1 billion, citing “strong momentum driven by trade trends electronic”.
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