BEIJING: China's outbound M&A deals could rise to US$150 billion this year, smashing last year's record as abundant liquidity allows firms to upgrade their technology and acquire brands, a top executive at the country's leading domestic investment bank said.
Chinese firms have launched US$103 billion worth of overseas M&A deals so far this year, approaching the annual record of US$106 billion in 2015, according to Thomson Reuters data.
But this could soar to US$130 billion-US$150 billion for the year with deals like state-owned ChemChina's record US$43 billion purchase of Swiss-based Syngenta still in the works, China International Capital Corporation (CICC) head of M&A Wang Zilong said.
"These large-scale deals are capital-driven and taking place during a period of ample liquidity, due to China's abundant foreign exchange reserves and high new loan growth created by economic stimulus," he said in an interview late on Wednesday. "The sustainability of the trend would be questionable if liquidity was the only driver."
CICC, which is advising ChemChina on the Syngenta deal and is part-owned by KKR & Co and TPG Capital, is expanding its M&A business to capitalise on Chinese firms' pursuit of overseas assets, Wang said.
Big private and state-owned companies, with interests in lifestyle industry, technology upgrading, infrastructure and health care, were the most active buyers in the market, he added.
But the pace of China's outbound M&A activity could slow in the second half, as Beijing took measures to control forex outflows to ease the pressure on its currency.
"Foreign exchange is an issue during transactions," Wang said. "Sellers pay attention to the certainty to close a deal.
Sometimes the seller won't select a Chinese bidder despite a higher offer under a competitive bidding process, if uncertainty is too high."
ROOM TO IMPROVE
CICC was ranked No. 2 behind Morgan Stanley in China-involved M&A last year, with an 11% market share, Thomson Reuters data show. This year CICC is ranked No.1 in China-involved M&A deals, partly helped by foreign investment banks scaling back their mainland China operations.
But Wang said the Beijing-based investment bank, which added 10 bankers to its M&A team last year, still needed to lift its game outside China.
"Foreign financial advisers, such as Goldman Sachs, have the capability of getting done sensitive, large-scale, cross-border transactions. On that front, CICC still has room for improvement," Wang said.
CICC is hiring staff from top foreign banks to build its overseas team, and has opened overseas offices in New York, London, Singapore since 2007 and in Hong Kong since 1998.
The investment bank has advised on HNA Group's US$6 billion acquisition of Ingram Micro, Haier Group's US$5.4 billion purchase of General Electric Co's appliance unit and Dalian Wanda's US$3.5 billion acquisition of Legendary Entertainment. - Reuters
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