China not a top M&A target for FTSE 100 firms

 
Oliver Smith
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CHINA is not ranked among the top mergers and acquisitions (M&A) investment destinations for FTSE 100 companies over the past decade, according to research out today from international law firm Freshfields.

Of the £391.5bn of total M&A investment by FTSE 100 companies between 2003 and 2013, the top 10 countries attracted over 81 per cent of the investment, with China failing to rank among them with just one per cent of the FTSE 100’s total investment (£4.8bn over 111 deals).

On the lack of M&A activity in China, Freshfields India Group chairman Pratap Amin said: “Growth in China has been largely organic over the past decade and many international companies have gained a foothold in the region by pursuing joint venture models rather than outright acquisitions.”

The energy sector has been the most active M&A sector, with almost a third of all investment – £122bn across 472 deals – while the financial sector accounted for a fifth of the total investment – £69.8bn across 358 deals.

Freshfields global head of corporate Edward Braham said: “The FTSE 100 have continued to globalise their businesses over the last 10 years. For several companies, only a relatively small proportion of their global turnover and operations are now in Britain.”

Of emerging markets India has continued to be the frontrunner for the FTSE 100’s M&A investment, attracting 4.8 per cent of total investment.

“India has been more open to international investment in a range of sectors over the past decade, particularly those that are capital-intensive and have needed international expertise,” said Amin.

“British companies have been keen to capitalise on the opportunity and make the most of established historical, cultural and diplomatic ties.”

While investment levels are recovering from their declines during the financial crisis, Freshfields said that firms are still favouring cash reserves as defensive buffers over pursuing takeovers and mergers.

“Despite a few notable mega-deals, we are yet to see M&A levels recovering to historic norms. There seems to be more confidence in the boardroom and Britain’s largest companies are continuing to look for growth in developing markets, particularly in Asia and Africa,” said Braham.