China M&A Tsunami Forecast

Filed in archive M&A on October 15, 2006

In recent years, Chinese companies have burst onto the global mergers-and-acquisitions (M&A) Scene, according to a published report from The Boston Consulting Group (BCG). Since 1986, Chinese companies have invested some $30 billion in non-Chinese companies, nearly a third in 2004 and 2005 alone.

According to BCG's comprehensive report, China's Global Challengers: The Strategic Implications of Chinese Outbound M&A , this activity is only the beginning of a powerful long-term trend. "A new generation of ambitious Chinese companies is breaking out of the Chinese home market," said Jim Hemerling, senior vice president in BCG's Shanghai office and a co-author of the report. "Financing is plentiful. The Chinese government is consciously creating national champions that are strong enough to compete globally. For some, acquisition is becoming a preferred strategy to quickly reach global scale."

The report analyzes some 500 deals involving Chinese companies that took place over the past two decades. In addition, it tracks the performance of a cross-industry sample of 16 recent transactions between Chinese and non-Chinese companies that have taken place since 2001.

On the inbound M&A scene, expect more SOE's to come on the market as the universe of target companies increases. This appears to be a genuine policy of economic engagement between China and the West!