Mainland companies bullish on M&A in 1st quarter

Chinese companies' appetite for investing overseas and diversifying their business has not been impaired, but rather encouraged, despite the economic slowdown and volatile international market.

The latest Thomson Reuters data show that China's outbound cross-border merger and acquisition activity hit a record high of $101.1 billion in the first quarter. That accounts for one-sixth of the global total during the same monitoring period and nearly surpasses China's full-year record of $109.5 billion, set last year.

The global total in the first quarter was $669 billion, down 14 percent year-on-year.

"Although domestic economic growth has been slower than before, China's growth momentum continues and is much stronger than that of a lot of its foreign counterparts. As a result, Chinese companies are not short of cash or the willingness to march into global competition," said Zhao Zhongxiu, vice-president of the University of International Business and Economics.

Ma Weihua, director-general of the China Entrepreneur Club, said Chinese companies' determination for outbound M&As will only be strengthened and not subject to domestic economic slowdown.

Gabriel Wong, PricewaterhouseCoopers' China corporate finance leader, predicted that such outbound M&A activity will continue to grow by 20 percent this year, with technology merger and acquisitions taking the lead. Insurers and financial technology and payment companies will aim for financial product manufacturing capability and household brands.

However, Wong said that differences between countries in culture and consumer habits and companies' different backgrounds will pose major risks for acquisitions.

James Shepherd, executive director of property services provider DTZ/Cushman & Wakefield, said the primary macroeconomic risk factor for outbound investment this year will be the fluctuation of the renminbi exchange rate.

China National Chemical Corp made the biggest acquisition so far this year, buying Swiss agricultural group Syngenta for $43 billion — the largest recorded acquisition in the chemical industry.

Linus Hilderbrandt, principal for energy process industries of market consultancy A.T. Kearney Greater China, said that such an acquisition is targeted at obtaining world-class know-how and growth opportunities outside China.

Chinese companies also invest overseas to build their presence in mature markets such as the United States and Europe, according to professional services firm Deloitte.