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Chinese investors pave the way for European M&A activity

Clearwater Internationals Rainmaker report suggested that by the end of the decade China would be one of the leading cross-border investors.

This comes hand in hand with research from Deloitte, which found that 79 Chinese companies had announced takeover deals in Europe during 2014. Chinese buyers also proved to do larger deals than their European peers, announcing deals worth 249m on average, compared to 116m for European investors in China.

The growth in international transactions forms part of a broader increase in M&A activity across the globe, with 2015 already a record year and forming a springboard for growing activity across 2016. To add to that, a resurgence in lending from banks, increased appetite for refinancing and greater innovation and flexibility around deals should contribute to boosting buyout activity across the next 12 months.

Looking to 2016, Clearwater International claimed that levels of borrowing should increase and remain strong as the high level of activity in the market, and strong competition between lenders, drives business investment. Cross-border activity will also continue to be an ever bigger driver of activity.

Phil Burns, UK MD at Clearwater International, said: China is without a doubt the main player when it comes to cross-border investment, with global offshore assets set to reach $20tn by 2020. Yes, it is going through a re-structure with the shift to a more consumer-led economy, but there is no denying the influence it still holds and we certainly dont see a slowdown in Chinese investment. 

“To add to this, we are seeing growing appetite from other markets to similarly exploit global opportunities. There has been a complete range of cross-border deals over the last year, as investors are encouraged to hit the acquisition trail fueled in part by cheap and accessible debt. We are expecting this trend that to continue beyond 2016, spurred on by Chinas lead within this space.

High-profile deals such as Nikkeis purchase of the Financial Times Group for $1.3bn and Hutchison Whampoas 10.25bn takeover of telecoms giant O2, are just two recent examples of China’s appetite for M&A deals.  

This also includes Sanpowers 480m takeover of House of Fraser and Hony Capitals 900m acquisition of Pizza Express, as well as the agreement to a one-third stake in a new nuclear power plant at Hinkley Point taking place in October 2016.

The shift in the balance has profound consequences for dealmakers. Any seller of assets in Europe should be actively thinking about how to attract and include Chinese buyers in their sales processes , said Graham Matthews, lead China M&A partner for Deloitte.

In light of these trends, Matthews said those selling assets in Europe may want to think about ways in which they can appeal to Chinese investors.

He said: No European company or private equity fund has ever done a deal larger than 1bn in China, but last year alone there were five Chinese acquisitions in Europe of around this size.



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