Chinese M&A appetite shift: From mining to buildings and startups

Chinese cross-border M&A deals have shifted in terms of their industry focus from natural resources to luxury buildings and technology companies. To some extent, this is a reflection of Chinese investors shifting their bets from a growing China to preservation of wealth and low capital investment in technology companies.

China’s both private and governments sponsored investors flooded emerging economies starting in mid 2000s to gobble up opportunities in natural resources. These included oil fields, mining concessions and power plants.

However, more and more, we are seeing Chinese investors willing to invest outside of China. This is primarily driven by two factors. One of these has always been the case- to move hard (or easily earned) assets outside of China in order to protect personal wealth from the government. The second one, is a newer phenomena- lack of confidence in the Chinese growth story to deliver the same results and the opportunities to buy relatively cheap assets in Europe to protect wealth.

Another important aspect to observe is the overall decline in Chinese appetite for investments. The timing in the decline in overall M&A activity coincides with the shift from growth related investments to wealth preservation aimed investments.

Source: FT, Dealogic

Interestingly, although we are seeing maga M&A deals on the global market, such as last month’s AB Inbev’s USD 104 billion take over of SAB miller, October 2015 has been the worst October in terms of the number of deals since 1996! This is the worst in almost in 20 years, with a total of 2177 deals. This is 40% down from October’s average of 3521 deals according to data form Thomson Reuters.

 

Data source: Financial Times.

 

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