Number of mergers and acquisitions expected to rise in mainland China and Hong Kong
High-quality mergers and acquisitions are expected to increase in the coming years, with the development of technology and infrastructure being the key drivers
More mergers and acquisition (M&A) activities are expected to take place on the mainland and in Hong Kong. Despite uncertainties in terms of regulatory risk and regional political tension, the stock market and investors in mainland China have become more sophisticated over the past decade, and the hedge-fund industry is also booming.
According to Barry Tong, an advisory partner at Grant Thornton Hong Kong, there will be more value creation and high quality M&A activities in the coming years.
“Key drivers for faster future growth in M&A activities are the development of technology and infrastructure,” Tong says. “China’s undertaking to transform its economy from export-driven manufacturing to one driven by technology has been mirrored in the way Chinese buyers have evolved. As global markets become more attractive to mainland companies, Chinese companies are increasingly positioned to become international market leaders. The rapid development of big data, cloud computing, games and entertainment and internet technology reflect the major areas of growth ...”
Other major initiatives and policies introduced by the government to support strategic investment, such as Beijing’s global trade strategy, the “Belt and Road Initiative”, have also been welcomed by the business community, Tong says. “Another area of potential M&A growth comes from the slowdown of China’s organic GDP growth, switching to M&A for business expansion or higher valuation. Previous consolidation among small and medium-sized companies in China has also resulted in a relative scarcity of appropriate domestic assets, which encourages mainland buyers to look to outbound M&A and Hong Kong.”
Key drivers for faster future growth in M&A activities are the development of technology and infrastructure
Tong notes, however, that there is the prospect of controls being imposed by China’s authorities to cool private Chinese companies’ international investing reach. As Chinese regulatory authorities tighten rules on capital outflow, this may have a chilling effect on M&A activity to some degree.
