Private-owned Enterprises Dominate in Cross-border M&As
BEIJING, April 24 /Xinhua-PRNewswire/ -- Zero2IPO Research Center, the research arm of Zero2IPO Group, recently published its “China Merger & Acquisition Report Q1 2008”. According to the report, 29 transactions were closed in TMT, Bio/healthcare and Energy sectors, 23 of which disclosed a value of US$1.93B. In addition, there were ten cross-border deals, five of which disclosed a value of US$253.14M, considerably dropped during this quarter.
The following report summarizes the highlights of the Chinese M&A market during Q1’08:
Cross-border M&A Value Drops by 75.6% Year-on-year
This quarter cross-border M&A deals dropped considerably from the corresponding quarter last year. There were only ten cross-border deals closed this quarter. Five of these deals disclosed approximately US$253.14M, dropped by 75.6% this quarter. In addition, the average value this quarter recorded only US$50.63M, a 51.2% decrease in comparison to the corresponding quarter last year. Zero2IPO Research Center concludes the following reasons for this phenomenon:
First, state-owned enterprises played a crucial role in cross-border M&As in recent years. The M&A deals launched by state-owned large-scale enterprises were generally of greater size and primarily targeted the natural resources sector. This quarter state-owned large-scale enterprises did not launch such M&A deals with over 20.0% stakes acquired, forcing the cross-border value to decline substantially this quarter. Additionally, domestic private-owned enterprises played an active role in cross-border M&A deals this quarter. Most notably, the acquisition of US-based AppTec Laboratory Services Inc by WuXi PharmaTech and the acquisition of VAL-LEVERDE by Aokang Group.
Second, the side effects of the US subprime mortgage crisis have yet to vanish, and continue to influence the efficiency of financing channels. Meanwhile, China’s tight policies regarding relevant sectors restrict foreign capital-launched M&As and tend to favor domestic enterprises.
Third, there are a number of large-scale cross-border M&A deals still in the works that are expected to take shape within the next few quarters.
This quarter foreign capital leads the way acquiring the majority of domestic enterprises and assets. Among the ten cross-border deals, eight were initiated by foreign enterprises.
Table 1: Distribution of Cross-border Transactions by Quarter
Total Deals with Total Average Value
Deals Disclosed Value (US$M)
Value (US$M)
2006Q1 12 9 1,091.95 121.33
2006Q2 9 4 998.45 249.61
2006Q3 23 14 2,477.55 176.97
2006Q4 26 16 4,521.02 282.56
2007Q1 15 10 1,036.96 103.70
2007Q2 19 15 2,127.59 141.84
2007Q3 18 9 1,645.67 182.85
2007Q4 32 29 13,858.89 477.89
2008Q1 10 5 253.14 50.63
Note: 1. Cross-border transactions: At least one party involved in the
transactions is a mainland-based company. Here “party” refers
to either the target company or the acquirer.
2. Total value：It refers to the total disclosed value for all the
deals that disclosed value during a given period.
3. Average value：It refers to the mean of “Total value”.
Source: Zero2IPO Research Center
Figure 1: Distribution of Cross-border Transactions by Quarter
(Please Click the Link at the end of the release)
More M&As Closed in TMT; Energy and Bio/healthcare Remain Active
Figure 2: M&As in TMT by Quarter
(Please Click the Link at the end of the release)
The Zero2IPO Research Center focuses heavily on the TMT, Energy and Bio/healthcare sectors. Of these three sectors TMT was the most active with eighteen deals closed. Thirteen of these deals disclosed an approximate value of US$961.18M and averaged US$73.94M. Notably, large-size state-owned telecom operators dominated in TMT M&A deals this quarter. In addition, Bio/healthcare remained relatively active with five deals closed, four of which disclosed a value of US$165.94M and averaged US$41.49M. WuXi PharmaTech’s acquisition of US-based AppTec Laboratory Services Inc. marked the first-ever deal launched by a domestic CRO enterprise towards a foreign counterpart in the same sector. In the Energy sector six deals were finalized with US$799.58M disclosed. The average value reached US$133.26M, topping that of other sectors.
Table 2: Industrial Distribution of M&As (by Target)
Total Deals with Total Average
Deals Disclosed Value Value
Value Value Value (US$M) (US$M)
TMT 18 13 961.18 73.94
Energy 6 6 799.58 133.26
Bio/healthcare 5 4 165.94 41.49
Total 29 23 1,926.70 83.77
Source: Zero2IPO Research Center
Figure 3: Industrial Distribution of Average Value (by Target) (US$M)
(Please Click the Link at the end of the release)
VC/PE-related M&As Drop in Deal Number and Value
Five of the VC/PE-related M&As Zero2IPO analyzed closed this quarter -- a 50.0% decrease in comparison to the corresponding period last year. Of these five, four closed in Broad IT and Services sectors evenly, but they were of smaller size. In contrast, the only transaction in Traditional sector was of a larger size.
Table 3: Industrial Distribution of VC/PE-related M&As
Sector Total Deals with Total Average
Deals Disclosed Value Value
Value (US$M) (US$M)
Broad IT 2 1 0.43 0.43
Services 2 1 5.00 5.00
Traditional 1 1 18.52 18.52
Total 5 3 23.95 7.98
Source: Zero2IPO Research Center
Figure 4: Industrial Distribution of VC/PE-related M&As
(Please Click the Link at the end of the release)
Note: The research scope of Zero2IPO Research Center covers:
a. At least one party involved in the deal is a Mainland-based
company. Here “party” refers to either a target company or an
acquirer.
b. Deals where acquirers take 20% or above of the target companies’
stake.
c. The research scope of Zero2IPO Research Center covers:
(1) M&A activities in TMT, Bio/Healthcare and Energy sectors,
(2) Cross-border M&A transactions
(3) VC/PE-related M&A transactions
An equity transaction is included into our M&A research scope if it is between two enterprises and both of them are non-financial investors, with at least one party invested by a VC/PE. For transactions between two parties where at least one party is VC/PE are categorized into VC/PE research field.
For more information please click:
http://www.zero2ipo.com.hk/china_this_week/detail.asp?id=6378
About Zero2IPO Research Center
Founded in November 2001, the Zero2IPO Research Center provides a full range of business research reports and customized research solutions for investment professionals in the Greater China Region. Our research ranges from Venture Capital, Private Equity, IPO, M&A to TMT industries. The Zero2IPO Research Center sets itself apart from competitors as the most prestigious research institute in the Chinese VC and PE spheres.
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