Domestic

China to account for 8-9% of global M&A deals: JPMorgan

By Terril Yue Jones (China Daily)
Updated: 2011-02-24 10:08

BEIJING - China should account for 8 to 9 percent of global mergers and acquisition (M&A)activity this year, continuing close to its strong levels in 2009 and 2010, according to the head of JPMorgan's China M&A unit, Brian Gu on Tuesday.

Consolidation in the consumer retail, real estate, healthcare, and chemical and industrial sectors is likely to power China's domestic M&A this year, he said.

Gas drilling operations in Chesapeake Energy's Ford shale project in Texas. In an M&A deal last year, CNOOC agreed to buy a 33.3 percent stake in the project. [Photo/ Agencies]

China's inbound and outbound M&A deals in 2010 amounted to $236 billion out of a global total of $2.8 trillion, or a little more than 8 percent, Gu said.

"Amid an overall recovery in M&A activity globally, China has seen a sharp rise, taking advantage of the financial crisis and maintained a pretty large share in this rebounding market last year," said Gu.

"Overall China, as a large component of global M&A activity, is here to stay," Gu said.

The country accounted for 2 to 4 percent of worldwide M&A activity from 2003 to 2007, according to the data analysis and consulting firm Dealogic. In 2009, China's share rose to its peak of 9 percent as the global financial crisis held back M&A activity abroad.

China will probably continue its performance in outbound M&A after chalking up a record $54 billion in 2010, Gu said.

Recent stumbles by Chinese firms seeking to acquire all or part of foreign companies, such as Huawei's attempt to acquire server technology firm 3Leaf and Xinmao Group's play for the Dutch cable maker Draka shouldn't cast a shadow on future outbound Chinese deals, Gu said.

Those deals had aspects unique to them that shouldn't bode ill for Chinese acquisitions in general.

Inbound deals are also unlikely to be much affected by China's recent announcement that it will set up a commission to review foreign investment projects in the country for national security implications.

"China has always regulated inbound M&A from a security perspective," Gu said.

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"I don't think this changes the regulatory environment; it doesn't mean it's more stringent or more loose," Gu said. "I think it does lay out a protocol that parties can actually point to as to the process by which they'll be evaluated."

JPMorgan handled the largest volume of cross-border Chinese M&A last year, with a transaction volume of $11.1 billion, or 10.6 percent of the market, according to Dealogic. Credit Suisse was a close second with $10.7 billion, or 10.2 percent.

Reuters