Increase of China’s Share of the Global M&A Market

China’s share of the international M&A market has markedly increased since the turn of the century. Both the value and the number of transactions in which Chinese enterprises participated, either as a buyer or as the target company, have increased. This development is, however, driven by a considerable increase in acquisitions made by foreign companies in China rather than by acquisitions made by Chinese companies abroad. This is highlighted by comparing the around 1000 acquisitions in China with a total value of EUR 38 billion in the period between 2000 and 2007 with the 161 transactions made by Chinese companies abroad with a total value of around EUR 18 billion. The targets of Chinese bidders are thus on average significantly larger than the targets of foreign companies in China. There is also evidence that M&A transactions in the raw materials sector worldwide are of major interest for Chinese firms. This is the result of a new study by the Centre for European Economic Research (ZEW), Mannheim, Germany and Bureau van Dijk Electronic Publishing.

Obviously China’s growing importance in the global economy is reflected by an increasing involvment of Chinese firms in the international M&A market. While China’s share in the value of international M&A transactions had been near to 0 per cent in the year 2000 it rose to almost 4.5 per cent in the second half of 2004 and was at about one per cent in the second half of 2007. With respect to the number of transactions the share of China had been at 0.5 per cent in 2000, rose to about 4.5 per cent in the second half of 2004 and was at 2.5 per cent in the second half of 2007.

Among the largest acquisitions is the acquisition of Pingguo Alluminium Co. by US aluminium producer Alcoa in March 2004 for EUR 1.6 billion as well as the acquisition of Fujian Sedrin Brewery Company by Belgian - Brazilian brewery InBev in June 2006 for more than half a billion euros. Large transactions carried out by Chinese companies in the raw materials sector stand out in particular; China Petroleum & Chemical Corporation acquired Russian oil company Udmurtneft in August 2006 for EUR 2.7 billion and Kazakh gas company JSC Karazhanbasmunai in December 2006 für EUR 1.4 billion.

Contact

Prof. Dr. Christoph Grimpe, E-mail: grimpe@zew.de