Mergers and acquisitions in China - statistics & facts
A merger is a process by which two or more companies merge as one new company, while acquisition often refers to the process when a financially stronger company acquires over 50 percent of shares of another company and folds it into its operation. The motivation for mergers and acquisitions is to increase the present capabilities of a company and get better prospects for further development. Since the two processes both involve the process of combining two companies, the use of the two terms has become increasingly blended. Instead of using merger or acquisition separately, the process of corporate combinations is just described as merger and acquisition (M&A) transactions.
Development of the Chinese M&A market
In recent years, the M&A market landscape in China has witnessed fundamental changes. Between 2009 and 2016, the market size increased tremendously from less than 300 to more than 3,000 deals completed with a market value of more than 1.8 trillion yuan. This trend affected both domestic and cross-border M&A deals. Beginning in 2017 however, the total deal volume gradually declined to around 700 deals in 2020. This was due to global uncertainties and increased policy measures to control the market. However, the overall market size is still slightly larger than a decade ago.
In the context of Chinese tech giants competing for market share, some M&A transactions of internet companies were particularly worth mentioning. In 2018, Alibaba has taken full control of the startup Ele.me which specializes in local food delivery services. This deal indicates Alibaba’s great ambition in the local services sector. Real estate industry, financial sector, and mechanical engineering were sectors where large deal values of M&A transactions took place.
An isolated industry
Most M&A transactions of Chinese companies take place in the domestic market. The economically better-developed regions, including China’s largest cities Beijing and Shanghai, are still leading the market. In 2021, 119 M&A transactions were completed in Beijing. Foreign inbound M&A activities have seen an increase in deal values in recent years and are backed by further market opening measures initiated in 2018. However, in 2020, on the background of the COVID-19 pandemic, the value of foreign-backed deals decreased.
The outbound M&A market has been strongly influenced by market uncertainties and political restrictions in recent years. Especially the number of large-sized deals has declined, affecting U.S. and European markets in particular. However, Chinese companies still try to acquire technology, know-how, intellectual property, and brands from abroad through smaller-sized transactions. Nonetheless, the value of announced takeovers decreased in 2020.
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Research expert covering finance, real estate, and technology in Greater China