The Chinese Spending Spree

Friday 24 May 2013

News Release

The Chinese spending spree: the value of Chinese M&A deals into mature markets soars to a record high

The Chinese shopping cart is filling fast as more of China’s private and state-owned businesses look to mature markets, such as New Zealand and Australia, for investment opportunities.

Over the past five years, the value of Chinese M&A (Mergers & Acquisitions) deals overseas has increased from NZ$12.6 billion in 2008 to a record high of NZ$79.9 billion in 2012, according to announced data and PwC analysis.

PwC Partner and China sector specialist Colum Rice says, “China’s outbound investment has grown six-fold in just five years, which signals the beginning of a new global M&A environment where more high growth market companies are seeking to step out of their domestic market to invest in mature market economies.

“China is already a critical trading partner, recently overtaking Australia to officially become New Zealand’s number one export market for the March 2013 quarter.

“We now need to make New Zealand’s trade relationship with China sticky by working hard to attract more permanent investment into our country and compete not only with our neighbours but with other attractive markets overseas. There should be no doubt in the minds of New Zealanders, our relationship with China is underpinning our economic performance.

“Ambitious Kiwi businesses have a decision to make, are they in or will they let the Chinese opportunity slip away to more welcoming and proactive investment destinations?” asks Mr Rice.

Between 2008 and 2012, high growth market companies invested NZ$197.2 billion into mature market companies, outstripping the opposite flow of NZ$184.9 billion, found PwC in a recently released report.

The report also shows among five high growth markets, China has been the leader since 2009, accounting for nearly 70% of high growth market investment into mature markets in terms of deal value in 2012.  

“Chinese companies are actively looking for outbound investment opportunities. The time when sovereign wealth funds and state owned enterprises looking to secure resources were the main drivers of overseas investment is over. Private companies are now key players,” adds Mr Rice.  

“These companies are looking for access to sales channels, supply chains, resources, technology, know-how, brands or management experience that we in mature markets can provide. Investing into mature markets gives high growth market companies the ladder they need to succeed on a global scale.

“Savvy Kiwi companies also recognise that inbound investment can give them the partnerships and relationships they need to help them access high growth markets and grow their firms,” explains Mr Rice.

“Cross-border M&A deals are always complex as contrasting differences in culture, political and economic approaches and processes need to be added to the high pressure environment that exists in any major transaction. We recommend coming to grips with the hurdles early and ensuring both buyers and sellers know what it is the other wants from the deal.

“We can expect the type of high growth market to mature market M&A trend to accelerate in the coming year as companies look for investment opportunities their domestic markets can’t offer. New Zealand businesses have an opportunity to further seize the day or risk overseas competitors gaining the benefits from alliances with high growth markets that should be ours,” concludes Mr Rice.

Report:
http://img.scoop.co.nz/media/pdfs/1305/PwC_Resetting_the_compass_report.pdf

ENDS

© Scoop Media