China inbound deals fall to lowest in a decade, finds KPMG survey

China inbound deals fall to lowest in a decade...

Deal volumes involving China based acquisition targets fell to a decade low, driven by short-term economic uncertainties, finds a recent KPMG survey.

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Deal volumes involving China based acquisition targets fell to a decade low, driven by short-term economic uncertainties, finds a recent KPMG survey.

Cross-border acquisitions between developed-market acquirers and China declined by one third to 52 deals in the first six months of 2014, down from 78 registered a year earlier, according to the latest edition of KPMG’s High Growth Markets International Acquisition Tracker. Hong Kong remains the major acquirer in China’s deal flow, accounting for 32 out of 52 deals.

The KPMG survey includes data from completed transactions where a trade buyer has taken a minimum 5 percent shareholding in an overseas company. It tracks deal flows between 15 developed economies and 13 emerging economies, excludes deals backed by government, private equity firms or other financial institutions.

Rupert Chamberlain, Head of Transaction Services, KPMG China, said: “The dynamics of China M&A continue to change rapidly leading to volatility in quarter on quarter data. However, China remains an extremely important market globally, that despite short term concerns in some specific areas, cannot be ignored longer term.”

The survey also finds that China remains the most active high growth market acquirer. Even China’s acquisition in developed markets dropped 35.2 percent in the first half of 2014 to 35 deals, it is much more than South East Asia (24 deals) and India (22 deals) which ranks the second and third place. 

Separately, the survey finds that Hong Kong companies continue to be key acquisition targets for China, while Australia and United States are additional top choices.

Meanwhile, in terms of sectors, natural resources and energy is a key outbound target, driven by rising demand in China, according to KPMG data. Agribusiness and food sectors continue to see increased activity.  Additional deals were also recorded in the telecoms and technology sector as China continues to strengthen its presence in this area.

Chamberlain concludes: “Chinese companies continue to search for quality overseas acquisition targets to garner the resources and skills needed to enable them to compete domestically and on an increasingly global economic stage. In other words, although current well versed issues relating to the domestic economy have slowed down cross border M&A, particularly for corporate investors, it is inevitable that we will see a rebalancing of inbound, outbound and domestic deals as the market matures.”

 

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About the High Growth Markets Tracker  

Established in 2003, the Tracker includes data from completed transactions where a trade buyer has taken a minimum 5 percent shareholding in an overseas company. The Tracker looks at deal flows between 15 developed economies (or groups of economies) and 13 emerging economies (or groups of economies). The Tracker is produced every six months to give an up-to-date of cross-border merger and acquisition activity, with the current edition featuring deals between January and June 2014. All raw data is sourced from Thomson Reuters SDC and excludes deals backed by government, private equity firms or other financial institutions. 

 

About KPMG  

KPMG is a global network of professional firms providing Audit, Tax and Advisory services.  We operate in 155 countries and have 155,000 people working in member firms around the world.  The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such.

KPMG China has 16 offices in Beijing, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Xiamen,  Hong Kong SAR and Macau SAR, with around 9,000 people.

KPMG China refers to the member firms of KPMG International in Mainland China, Hong Kong SAR and Macau SAR.

 
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