China M&A frenzy around the world set to continue according to Freshfields

Tracey Boles
Chinese celebrate new year
China celebrates (Source: Getty)

CHINA'S vast appetite for overseas acquisitions is laid bare in new M&A monitor by law firm Freshfields Bruckhaus Deringer.

The law firm found that China leads outbound M&A with 173 signed deals valued at $128.7bn, including a number of massive acquisitions in the first half of 2016 such as ChemChina’s $43bn bid for Swiss agrichemicals maker Syngenta and Haier’s $5.4bn offer for GE Appliances.

Although Europe has been the favoured destination for Chinese buyers with 101 deals worth $76.5bn, the recently announced acquisition of US-based aluminium rolled products producer Aleris Corporation, by Zhongwang USA, shows that Chinese buyers are also looking to North American targets.

The $2.3bn acquisition of Aleris is the highest price ever paid by a Chinese buyer for an overseas metals producer to date.

Freshfields said yesterday: “We expect China’s appetite for overseas acquisitions to continue, particularly in the industrials and chemicals, technology, energy and mining sectors.”

It also noted the that UK is open for business following the referendum, pointing to a “number of significant deals” in the last quarter that affect UK businesses.

The first, SoftBank’s acquisition of ARM Holdings, represented a significant sale of the Cambridge-based business to a Japanese acquirer. This was followed up with the recent acquisition by UK-based Micro Focus of HP Enterprise’s software division.

“Following takeover attempts by foreign businesses, the UK’s Brexit vote has highlighted the public interest angle of such deals,” Freshfields said.

“Whilst Theresa May suggested that the UK should be capable of stepping in to defend a sector where needed, we expect that we will not see a step change in approach and consequently the UK is still open to overseas investment. This is despite the UK Government publishing a briefing paper in September raising the prospect of a UK public interest test on foreign takeovers.

“Foreign acquirers of substantial UK assets may well have to follow the SoftBank lead and make commitments to jobs and growth in the UK. The regime to police such commitments has been in place for some time (post the Cadbury–Kraft deal) but the SoftBank–ARM transaction was the first that saw these commitments made in a way that can be directly enforced by the UK Takeover Panel.”

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