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Treasury & Capital Markets
How regulations shift China’s M&A activity in 2017
Merger and acquisition (M&A) activity in Asia-Pacific, outside of Japan, has pulled back in the first half of 2017 on the back of the slowdown of deal flow in China. Deal value fell 7% to US$272.9 billion compared with US$293.5 billion in the same period a year ago.
The Asset 11 Jul 2017

Merger and acquisition (M&A) activity in Asia-Pacific, outside of Japan, has pulled back in the first half of 2017 on the back of the slowdown of deal flow in China. Deal value fell 7% to US$272.9 billion compared with US$293.5 billion in the same period a year ago.

Figures provided by Mergermarket show that China, which accounted for 49.1% of Asian deals, suffered a 23.8% drop in deal value with US$134 billion across 675 deals, down from US$175.9 billion across 774 deals in the first half of 2016, during which it contributed almost a 60% share of the region’s M&A activity.

Outbound M&A transactions plunged 58.1% in deal value to US$55.7 billion due to tighter controls imposed by the Chinese regulators, with a significant impact on large ticket transactions. There were only 59 Chinese deals into Europe, with the value falling 65.8% to US$25.6 billion in the first half of 2017, compared with US$74.8 billion across 86 deals in the corresponding period of 2016.

With regulations restricting capital outflow, China has seen a shift back towards domestic M&A activity with deals between Chinese bidders and targets comprising eight of the top 20 transactions in the region.

The largest of these transactions saw a consortium of 11 investors acquire a 14.74% stake in Hengda Real Estate Group for US$5.8 billion, the fourth-biggest deal in Asia-Pacific so far this year. Domestic deals accounted for 69% of Chinese deal-making compared with 56.3% in the first half of 2016.

The energy, mining and utilities (EMU) sector was the most active during the first half of 2017 with US$45 billion worth of deals across 136 transactions. Australia outperformed all other countries in Asia by value with over 50.4% of the EMU deals in the region, totalling 31 transactions valued at US$22.6 billion.

Three of the top five EMU deals in Asia involved Australian targets, including the acquisition of a 50.4% stake in Endeavour Energy for US$5.6 billion in May.

Industrials and chemicals registered a higher deal value despite having fewer transactions: US$41.9 billion across 328 deals in the first half of 2017, compared with US$39.7 billion across 370 deals from a year ago.

Technology, meanwhile, slipped 35.3% to US$34.3 billion from 217 deals during January-June 2017 – the lowest half-year value since the second half of 2014 when it amounted to US$22.5 billion from 211 deals.

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