The COVID-19 pandemic may have posed significant challenges to global cross-border M&A. The fallout may be deeper and longer than the 2008-09 global financial crisis as supply chains are now more globalized.
One major challenge brought by the pandemic is the increase in regulatory barriers and scrutiny of foreign acquisitions, as governments seek to safeguard national interest, especially in sensitive and strategic sectors like healthcare.
Gloomy financial market performance has also reduced the cash available for deal-making, while widespread restrictions on personal travel have made it hard to settle transactions and conduct due diligence.
However, the recent Global Capital Confidence Barometer report from EY paints a more positive picture within the Asia-Pacific region. Although most companies have seen revenues and profits decline, Asia-Pacific executives are confident in their ability to navigate the crisis and believe they have outperformed their competitors in operational stability.
In preparation for a post-pandemic world, nearly nine in ten Asia-Pacific executives say they conducted a comprehensive strategy and portfolio review, accelerated by shifting events. M&A appetite remains robust compared to previous editions, as Asia-Pacific companies look within the region for growth and opportunities over the next three years.
Chinese investment in Mergers and Acquisitions
According to the Ministry of Commerce, in the first quarter of 2021, China’s total foreign direct investment reached USD31.79 billion. The total amount of outbound M&A announced by Chinese enterprises reached USD17.2 billion, a significant increase of 135% over the same period last year; The announcement of 120 outbound M&A deals stood at almost the same level as last year.
Based on transaction value, TMT (Technology, Media, Telecom), consumer goods and advanced manufacturing and transportation account for 34% of the top three industries. The total volume of transactions was basically the same as that of last year, but the number of large projects increased significantly, with 26 new projects signed with value over USD100 million, more than double the same period last year.
Affected by multiple factors such as vaccine outreach and China’s economic recovery, Chinese enterprises’ overseas M&A began to rebound in the fourth quarter of last year, and the growth rate in the first quarter of this year was more than double compared with the same period last year. Chinese enterprises’ attention to the overseas market is gradually rising.
Candice Zhao – Senior Associate – Research
- Ministry of Commerce People’s Republic of China
- Corporate Counsel Business Journal
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