City lawyers predict that China’s efforts to relax regulations for overseas mergers and acquisitions will lead to greater cross-border investment, following a strong year for M&A globally.
Chinese M&A into Europe amounted to £14.6bn in 2014, up 300% on the previous year. The value of inbound M&A was £51bn, up from £17.9bn in 2013, with most of the investment coming from the rest of the Asia Pacific region. The volume of M&A by North American businesses also rose.
Clifford Chance partner Patrick Sarch (pictured) said Chinese inbound and outbound M&A was being stimulated by the Chinese government’s move to streamline its approval process for acquisitions.
‘Most recently, it raised the limit to trigger NDRC (National Development and Reform Commission) approvals to £663m for outbound investment and similarly for inbound in “encouraged” industries,’ Sarch said.
‘We expect the Chinese government to further relax regulations, which will encourage even more outbound and inbound investment.’
Sarch noted that the biggest drivers for Asia Pacific outbound M&A remained the adoption of global strategies by Asian companies, followed by a desire to enter new markets and secure know-how, technology, brands and supplies of natural resources, ‘and in many cases to bring the expertise acquired back home’, as highlighted by Chinese private equity firm Hony’s acquisition of Pizza Express and Bright Food’s acquisition of UK breakfast cereal maker Weetabix.
The total value of deals last year, as of 30 November, topped £1.78tn, ‘a level not seen since before the global financial crisis’, said Guy Norman, Clifford Chance’s global head of corporate, in a preview of the firm’s latest global M&A trends report.