China’s outbound M&A engine has shifted its focus to new industries, including consumer goods and technology, and new companies in Europe and North America. With the right strategies in place, Chinese businesses can overcome their current obstacles in outbound M&A and be primed to take advantage of the opportunity for growth with overseas industry.
China has become a strong player in the global economy, and the country’s rate of outbound M&A is one clear sign of that growth. Over the past ten years, outbound Chinese acquisitions have seen double-digit growth, and they’re set for continued growth in the coming years.
There are two primary factors for China’s growth in outbound M&A:
Together, these two factors help give Chinese business leaders more independence in striking deals with foreign companies and improve the ability to effectively complete outbound M&A activities.
For years, the Chinese government eyed energy and resource M&A opportunities primarily to support its economy. But today there is a new focus on gaining market share and core capabilities. Chinese outbound M&A deals now work to acquire technology, consumer goods, finance, media, and telecommunications organizations, to include far more diversified industries.
The result is that in the past five years, roughly 75% of China’s outbound M&A deals were aimed at accessing technology, brands, and market share; less than 20% of deals were aimed at acquiring strategic resources.
Another shift within China’s outbound M&A activities is a new view of target markets. Rather than focusing primarily on other Asian countries, China is now conducting more deals in Europe and North America.
While outbound M&A is growing, there is room for improvement., and acquirers report only 32% of those deals are trouble-free. In order to improve the success rate, Chinese businesses may need—depending on past experience—to overcome several hurdles to create sustainable value with oversea M&A transactions. Prevailing challenges that leadership face and need to address are:
There are three keys to overcoming the current challenges faced by Chinese businesses to experience successful outbound deal-making: