New Trends In M&A Activity Predicted As Chinese Economy Evolves

摘要

Chinese-owned companies in the coming year are increasingly likely to pursue merger and acquisition (M&A) deals with U.S. and other foreign companies with manufacturing operations in the United States and elsewhere outside China, and also may seek to acquire firms that produce consumer goods, luxury brands and retail assets in order to profit from China's projected future growth in domestic consumption, according to a U.S. M&A analyst. These new trends are likely to emerge amid what are likely to be "historic levels" of Chinese M&A activity in 2012, said Paul Louie, the managing director of the middle market practice group of the boutique investment bank Cascadia Capital. Some of Cascadia's Chinese clients are for the first time expressing interest in buying foreign firms that include manufacturing operations outside China, Louie said in a Jan. 12 interview. He attributed the new interest not to an intention to substitute foreign jobs for Chinese jobs, but "as a hedge against a trend [in China] of 20 to 25 percent hourly wage increases since 2007." Manufacturing operations in past years was a "redundancy" that Chinese firms "did not want," he said. Instead, they were on the lookout for brand names and distribution assets that could help them expand their sales abroad, he noted. But these companies are now saying they would like to include as M&A targets firms that also have manufacturing assets. "It's not to replace what they are doing, but to hedge and supplement and diversify from what they are doing to diversify in China," he said.