Domestic

Chinese firms hot on M&A opportunities

By Chen Jia (China Daily)
Updated: 2011-02-18 10:17

Executives of foreign companies are less optimistic about global recovery

BEIJING - More Chinese companies intend to seek growth opportunities in mergers and acquisitions in the next half year, reflecting their greater optimism about global economic recovery than their foreign counterparts, according to a report from Ernst & Young.

The survey showed that 31 percent of the 62 Chinese C-level respondents will try to take advantage of merger and acquisition opportunities in the next six months, though they still view organic growth as the most important means of expansion.

By comparison, only 29 percent of foreign executives are enthusiastic about mergers and acquisitions in that period.

According to the report, Chinese companies are more optimistic about global economic recovery, and they are bullish about the local economy.

Chinese in merger and acquisition activities will increase in 2011 to the highest level since 2008, said Cai Lin, a Transaction Advisory Services partner at Ernst & Young.

In 2010, the total trading value of mergers and acquisitions undertaken by Chinese listed companies was 133.8 billion yuan ($20.3 billion), and local capital markets played an important role in the deals, Yang Hua, an official from China Securities Regulatory Commission (CSRC), was quoted by China Securities Journal as saying.

The CSRC will continue to support and regulate companies' activities in merger and acquisition markets, the newspaper said.

Chinese companies, 71 percent of the respondents, saw more improvement in credit and capital conditions than the global average in the past six months, the report said.

"They are broadly optimistic about credit conditions because of the abundant liquidity," said Bob Partridge, managing director of Transaction Advisory Services and Venture Capital Advisory Group from Ernst & Young in China .

"Companies will focus more on strategic growth after they improve their financial situations, and acquisition is a major way to increase profits," Liu Dongdong, a consultant from Grant Thornton, was quoted by Xinhua News Agency.

Related readings:  China boosts efforts to tackle trade surplus  Chinese company to build luxury helicopters  Bear welfare activists object to company's plan for public offering  Dairy company denies yogurt bid talk

Chinese executives see emerging markets as a priority for investment, and they undertake joint ventures and alliances as other popular ways to grow inorganically, according to Ernst & Young.

In addition, the respondents said they will focus on organic growth and cost efficiencies through investment in existing businesses.

Operational synergies and capital generation through asset sales also drew executives' attention.