China's overseas acquisitions have increased more than five-fold from 2006 to 2012. Most Chinese acquirers are headquartered in Beijing, with mining being the largest target industry. Chinese acquirers in mid-market deals are mostly private companies. Top destinations for Chinese M&A are Australia, New Zealand, and Asia, followed by North America and Europe. Differences in deal failure rates and duration between state-owned, private, and public acquirers are small after excluding mining deals.
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This document contains a proprietary analysis provided by Solveigh. Although care has been taken to ensure the
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Solveigh Greater China HK Ltd
23 August 2013
China’s Outbound M&A
Page 3
4. China Outbound M&A: Summary
China’s overseas acquisitions have increased more than five-fold from 2006 to 2012, reaching an aggregate (published)
annual investment amount of USD 60.4 billion by 2012. In 2012, the total value of outbound transactions again
increased by 21%. Supported by the nation’s “going-out strategy” and either in search of strategic resources, new
markets or key technologies, it is expected that many capital-rich Chinese companies will continue their quest for
investment opportunities overseas.
This overview provides an ‘average’ profile of Chinese Corporates investing and acquiring overseas including the
relevance of Hong Kong. Main findings:
Most Chinese acquirers are headquartered in Beijing. Shandong and Shanghai follow at significant distance.
Companies from various Chinese regions however seem to have different focuses in terms of preferred outbound
target industries
Mining is by far the largest category for outbound M&A, followed in distance by electronic/electrical equipment and
business services
Chinese acquirers in the mid-market are mostly private companies, followed by public companies and then SOEs
Buyers in electronics, machinery and business services are mostly public companies, hence easier to locate
Top destination for China mid-market outbound M&A are Australia and New Zealand, closely followed by Asia,
North America and Europe. South America and Africa are for M&A not very relevant to Chinese enterprises
For investments into Europe, manufacturing equipment/heavy machinery, food products, transportation and
electronic equipment are, next to mining, the most import M&A target industries for Chinese corporate investors
The HK outbound M&A market is currently approximately similar in size to the mainland Chinese outbound M&A
market. The share of mainland outbound M&A compared to Hong Kong outbound M&A has been rising steadily
over recent years
Around 10% of Hong Kong outbound deals are completed by subsidiaries of mainland Chinese companies
A large proportion of M&A failure cases are related to mining industry.
After excluding the mining industry, the difference in withdraw rate between SOEs, private and public firms is not
significant
Differences of deal duration among SOEs, private and public companies are not very large, but SOEs still have
longest average deal duration. There seems no significant relation between deal size and duration
23 August 2013 Page 4
China’s Outbound M&A
9. China Outbound Investment Industry Distribution
23 August 2013 Page 9
0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000
Mining
Oil and Gas; Petroleum Refining
Electronic and Electrical Equipment
Transportation Equipment
Investment & Commodity Firms,Dealers,Exchanges
Telecommunications
Wholesale Trade-Nondurable Goods
Food and Kindred Products
Machinery
Real Estate; Mortgage Bankers and Brokers
128
40
20
16
16
16
15
12
10
9
0 20 40 60 80 100 120 140
Mining
Electronic and Electrical Equipment
Business Services
Machinery
Oil and Gas; Petroleum Refining
Investment & Commodity Firms,Dealers,Exchanges
Food and Kindred Products
Transportation Equipment
Prepackaged Software
Wholesale Trade-Nondurable Goods
Top 10 Industry Ranking by Total Deal Value (USD $ Million)
Top 10 Industry by Number of Cases
China’s Outbound M&A
10. Average Deal Size (US$ Million) per Industry
23 August 2013 Page 10
168.10
103.12
91.58
88.39
88.18
74.38
68.26
67.82
51.97
51.84
47.93
41.73
32.90
30.59
23.92
10.10
0 20 40 60 80 100 120 140 160 180
Oil and Gas; Petroleum Refining
Chemicals and Allied Products
Transportation Equipment
Wholesale Trade-Nondurable Goods
Transportation and Shipping (except air)
Mining
Commercial Banks, Bank Holding Companies
Investment & Commodity Firms,Dealers,Exchanges
Food and Kindred Products
Measuring, Medical, Photo Equipment; Clocks
Machinery
Electronic and Electrical Equipment
Business Services
Textile and Apparel Products
Prepackaged Software
Drugs
*To avoid bias when taking averages, only industries with at least five completed deals are displayed
China’s Outbound M&A
11. China Mainland Outbound M&A Destination by
Numbers of Deals
23 August 2013 Page 11
ANZ, 103
Europe, 53
North America, 98
South America, 9
Africa, 8
Asia, 80
China’s Outbound M&A
12. Industry Distribution Re European Targets
23 August 2013 Page 12
8
7
6
6
4
3
2
2
2
2
2
2
2
2
2
5
Machinery
Mining
Food and Kindred Products
Transportation Equipment
Electronic and Electrical Equipment
Measuring, Medical, Photo Equipment; Clocks
Transportation and Shipping (except air)
Oil and Gas; Petroleum Refining
Metal and Metal Products
Hotels and Casinos
Telecommunications
Investment & Commodity Firms,Dealers,Exchanges
Chemicals and Allied Products
Business Services
Communications Equipment
Others
Number of Cases to Europe per Industry
China’s Outbound M&A
13. Beijing: Industry Distribution by Number of Deals
23 August 2013 Page 13
36%
9%
6%
6%
5%
4%
3%
3%
3%
3%
3%
3%
16%
Mining
Oil and Gas; Petroleum Refining
Food and Kindred Products
Commercial Banks, Bank Holding Companies
Electronic and Electrical Equipment
Prepackaged Software
Drugs
Transportation Equipment
Telecommunications
Business Services
Construction Firms
Investment & Commodity Firms,Dealers,Exchanges
other
China’s Outbound M&A
14. Regional Industry Distribution by Number of Deals
23 August 2013 Page 14
19%
15%
15%
11%
7%
33%
Business Services
Prepackaged Software
Electronic and
Electrical Equipment
Mining
Machinery
other
43%
13%
13%
9%
22%
Mining
Electronic and Electrical
Equipment
Textile and Apparel Products
Chemicals and Allied
Products
other
30%
20%
15%
30%
5%
Electronic and
Electrical Equipment
Mining
Transportation and
Shipping (except air)
Others
Telecommunications
27%
20%
53%
Electronic and Electrical
Equipment
Transportation Equipment
Others
Shanghai
Shenzhen
Shandong
Zhejiang
China’s Outbound M&A
15. Who are the Buyers?
23 August 2013 Page 15
Govt.
13%
Priv.
54%
Public
33%
Chinese Acquirers’ Parent Company’s Public Status
China’s Outbound M&A
16. Acquirers’ Ultimate Parent Public Status in Top 5 Industries
23 August 2013 Page 16
Priv.
63%
Govt.
23%
Public
14%
Mining
Public
50%
Priv.
47%
Govt.
3%
Electronic and Electrical Equipment
Public
50%
Priv.
45%
Govt.
5%
Business Services
Priv.
50%
Public
31%
Govt.
19%
Machinery
Govt.
19%
Priv.
50%
Public
31%
Oil and Gas; Petroleum Refining
China’s Outbound M&A
18. HK Outbound M&A Market
Compared to Mainland market, the share of HK outbound M&A deals is
decreasing overtime
About 8% of the HK outbound deals are done by subsidiaries of Mainland
companies.
23 August 2013 Page 18
China’s Outbound M&A
19. Trend of HK Outbound Deals by Numbers from
2005-2012
23 August 2013 Page 19
41
59
91
99 98 134
142 111
109
129
152
135 116 142
123 108
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005 2006 2007 2008 2009 2010 2011 2012
Mainland HK
China’s Outbound M&A
20. HK Outbound Deals Done by Subsidiaries of
Mainland Chinese Companies
23 August 2013 Page 20
2 8 4 8
16 16 16
9
109
129
152
135 116
142
123
108
2005 2006 2007 2008 2009 2010 2011 2012
HK Deals from Mainland All HK deals
China’s Outbound M&A
21. Target Industries of HK Outbound Deals Done by
Subsidiaries of Mainland Companies
23 August 2013 Page 21
19
13
7
6
5
5
5
4
4
3
0 2 4 6 8 10 12 14 16 18 20
Mining
Investment & Commodity Firms,Dealers,Exchanges
Transportation and Shipping (except air)
Measuring, Medical, Photo Equipment; Clocks
Business Services
Holding Companies, Except Banks
Machinery
Wholesale Trade-Durable Goods
Real Estate; Mortgage Bankers and Brokers
Oil and Gas; Petroleum Refining
China’s Outbound M&A
23. Failure Risk and Deal Duration
23 August 2013 Page 23
A large proportion cases that failed is related to the mining industry.
After excluding mining industry, the difference in withdrawal rate between
SOE’s, private and public firms is not significant. Capital intensive industries
usually take a longer time to finalize a deal. Wholesale industries also take
a longer time, probably due to the complication in due diligence in this
sector. Wholesale companies usually seek market, while it usually takes
longer time to understand a foreign market than to, for example, evaluate a
new technology.
Differences of deal duration among SOE’s, private and public companies
are not very large, but SOE’s still have longest average deal duration. There
seems no significant relation between deal size and duration.
China’s Outbound M&A
24. Industry Distribution of Withdrawn Cases
23 August 2013 Page 24
40
6
4
4
3
26
Mining
Oil and Gas; Petroleum
Refining
Metal and Metal Products
Transportation
Equipment
Chemicals and Allied
Products
Other
China’s Outbound M&A
25. Proportion of Withdrawn Cases in Each Category
23 August 2013 Page 25
16.67%
8.28%
9.09%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
Govt. Priv. Public
China’s Outbound M&A
26. No Significant Difference When Mining Excluded
23 August 2013 Page 26
4.65% 4.63%
5.98%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
Govt. Priv. Public
China’s Outbound M&A
27. Average Duration Announcement to Completion
23 August 2013 Page 27
281.00
250.50
232.78
193.73
188.00
187.17
184.18
162.50
140.77
137.61
133.60
131.88
124.43
119.45
108.14
96.78
89.79
80.78
67.86
64.92
Drugs
Commercial Banks, Bank Holding Companies
Chemicals and Allied Products
Transportation Equipment
Wholesale Trade-Nondurable Goods
Wholesale Trade-Durable Goods
Food and Kindred Products
Electric, Gas, and Water Distribution
Mining
Electronic and Electrical Equipment
Agriculture, Forestry, and Fishing
Telecommunications
Measuring, Medical, Photo Equipment; Clocks
Oil and Gas; Petroleum Refining
Textile and Apparel Products
Machinery
Business Services
Prepackaged Software
Metal and Metal Products
Investment & Commodity Firms,Dealers,Exchanges
*Deal duration is calculated as the days between announcement date and completion date
**To avoid bias when taking average, only industries with at least five completed deals are displayed
China’s Outbound M&A
28. Deal Duration by Acquirer Ultimate Public Status
23 August 2013 Page 28
163.00
129.71
144.71
0
20
40
60
80
100
120
140
160
180
Govt. Priv. Public
Duration(days)
China’s Outbound M&A
29. No Significant Relation Between Deal Value and Duration
23 August 2013 Page 29
.000
1000.000
2000.000
3000.000
4000.000
5000.000
6000.000
7000.000
8000.000
9000.000
10000.000
0 200 400 600 800 1000 1200 1400 1600 1800 2000
TracnsactionValue$mln
Duration
China’s Outbound M&A
30. Methodology
Data source used: Thomson Reuters SDC database from 2005 to 2012
Excluded: individual buyers, financial buyout deals and deals between HK and
mainland China
For the mainland market analysis: the sample focuses on mid-market transactions
and includes all published 313 successful outbound China deals ranging in deal size
from US$1mln to US$500mln
If a listed company is stated as state-owned in its company profile (deal “synopsis” in
the database), its ownership is marked as government (even though the company
might be listed)
For the Hong Kong market analysis: the sample includes all the 1060 outbound
successful deals from Hong Kong except to Chinese Mainland
For the withdraw risk and duration analysis: the sample includes 83 withdraw cases
and 420 Chinese mainland deals with valid deal announcement date and effective
date
23 August 2013 Page 30
China’s Outbound M&A
32. Introduction Solveigh Greater China
Solveigh is a Hong Kong based independent investment banking advisory firm specializing in
proprietary cross border corporate Mergers & Acquisitions between Asia and Europe.
Besides its office in Hong Kong, Solveigh has offices in China (Beijing) and Europe (Rotterdam,
the Netherlands). Solveigh has a blended team of Chinese and European professionals.
Solveigh has partners in over 50 countries with whom it has been cooperating and closing deals
for over 10 years. Hence, Solveigh has a strong international presence and high level local access
in most countries across the globe
Solveigh partners are well experienced, well connected and fully committed to their clients on an
exclusive basis. The team has a strong track record in terms of Chinese as well as European
experience.
Solveigh was founded in 1998 in The Netherlands by investment banking professionals that
wanted to create a more personalized alternative for demanding corporate clients having a need
for committed advisors on cross border M&A who can truly deliver quality solutions and offer
unbiased advise. In 2004 the Chinese offices kicked off and today the majority of business is done
from Hong Kong as a hub for China and Asia.
23 August 2013
China’s Outbound M&A
Page 32
33. Core Services Solveigh
Inbound acquisitions, Foreign Direct Investments and Western Sell-side advisory
• Full-service Acquisition Management for Western Corporations intending to invest in China
• Sell-side support for Western Companies looking for Chinese buyers in a strategic proprietary approach
• Transaction structuring
• Managing due diligence, relationship affairs, approval processes and legal arrangements
• Post-completion support
Outbound acquisitions, Overseas Direct Investments and Chinese Sell-side advisory
• Full-service Acquisition or Sell-side support for Chinese clients going abroad
• Market entry strategies for larger Chinese firms
• Transaction origination
• Full M&A process support including due diligence coordination, structuring and arrangements, legal matters
(contract negotiations, approvals)
Strategic development and local support
• Market review, market entry review and strategy development for China or abroad
• Business development and client representation for its China affairs
Other Solveigh services
• Equity and Debt structuring, Private Placements, Business Scanning, Due Diligence, Valuation, Technology
transfer, Joint Ventures
23 August 2013
China’s Outbound M&A
Page 33
34. Contact Details
SOLVEIGH| Mergers & Acquisitions
Hong Kong office
Unit 3604A, 36/F, Tower 2, Lippo Centre
89 Queensway, Hong Kong
T +852 3695 5001
F +852 2530 2885
E info@solveigh.com.cn
W www.solveigh.com.cn
Rotterdam office
Westersingel 106, 3015 LD Rotterdam
T +31 10 238 18 00
E info@solveigh.com
W www.solveigh.nl
Solveigh has offices in Rotterdam, Hong Kong, Brussels
and Beijing and is a partner firm in Global M&A
W www.globalma.com
23 August 2013 Page 34
Mr. Ernst Jan Kruis
CEO & Founder
ejkruis@solveigh.com
+852 9310 7137
Mr. Jona Kan
Director & Legal Counsel
jkan@solveigh.com
+852 9131 6079
China’s Outbound M&A
