Chinese Firms Not Affected By the Economic And Financial Crisis In Their Worldwide M&A Activities

The economic and financial crisis has lead to heavy losses in the worldwide mergers and acquisitions (M&A). However, this development did not stop the buying mood of Chinese firms. In the second half of 2009 alone, Chinese investors engaged in 145 M&A transactions on all continents. Since 2000, this has been the highest number of transactions made by Chinese investors. Regarding their M&A activities abroad, firms in China are particularly interested in companies with access to raw material and industrial engineering companies. Moreover, M&A activities of Russian and Indian investors are gathering momentum again. Acquisition candidates for these investors are, in particular, investment houses, banks and firms in the chemical industry and engineering. These are the findings of a survey conducted by the Centre for European Economic Research (ZEW). The survey is based on the ZEPHYR database by Bureau van Dijk, which includes detailed information on mergers and acquisitions worldwide, initial public offerings and private equity transactions.

In the first six months of 2010, the M&A activities of Chinese firms with more than 130 transactions prove to be robust. Chinese investors are still especially interested in raw material and technology suppliers. According to industry experts, the Chinese companies Sinopec and CNOOC aim at buying shares at the Brazilian oil company OGX. The attempts to acquire the Canadian fertilizer producer Potash by the Chinese state-owned firm Sinochem indicate the importance of raw material for the Chinese market. In Europe, Chinese investors particularly contemplate buying companies whose products are not subject to any risks. For instance, this is the case for the power supply system in Great Britain, which Electricité de France wants to sell to the Cheung Kong Group from Hong Kong. Moreover, European firms whose products can be placed on the Chinese market are of interest for Chinese investors. For example, the Chinese buyer of Volvo group gained access to the European market and also was able to supply the market in China with the Volvo brand by this transaction.

The financial crisis hardly affected Russian investors either. In the first six months of 2010, they already made 87 M&A transactions. Similar to Chinese firms, the Russian investors are looking for raw material suppliers worldwide. For instance, the Russian steal manufacturer Severstal plans to buy shares at the gold mining company Crew Gold with its headquarters in Great Britain. Banks and investment houses are also on the top of the list for Russian investors.

The M&A activities of Indian companies were considerably affected by the economic and financial crisis. However, with a total of 81 transactions in the first half of 2010, the number of M&A transactions with Indian investors is increasing again. Indian investors mainly focus on firms in the chemical industry and engineering as well as the service sector. The latest example is the acquisition of Lycos by the Indian service provider Ybrant Digital for around 28 million euros.

The Chinese M&A activities mainly focus on the American continent, South America in particular. Most Russian investments are made in Europe, particularly Western Europe. Indian M&A activities also focus on Western Europe. However, they have companies in North America on their buying list, too. From 2000 until the first half of 2010 in Western Europe, there were 370 transactions with Indian investors, 320 transactions with Russian and 120 with Chinese investors. In South and Central America, the Chinese investors rank on the top position. Indian ranks second with around 40 transactions, followed by Russia with 30 transactions.

For further information please contact

Dr. Vigen Nikogosian, E-mail: nikogosian@zew.de