Slowing economy spells opportunity for M&A activity in China

BEIJING - Industry experts are confident that a slower economy in China will lead to “great opportunities” for merger and acquisition activity in China, because it will bring target companies’ valuations down to more reasonable levels. Previously, the valuations of Chinese companies have been inflated due to perpetual forecasts of strong organic growth.

With the end of the ‘China growth’ story and the rise of intense competition/overcapacity, the situation has changed in favoUr of stakeholders such as Gaw Capital Partners, a major offshore private equity fund whose China head, Humbert Pang, said now is a “good time” for investors:
“Price corrections will drive industry consolidation and lead to rational valuations for us to acquire good projects,” he said.
A report from PwC says inbound M&As in China in the first half of 2014 reached a record-high US$12.5 billion, increasing from US$8.4 billion during the second half of 2013, with government organs such as the State Council and China Securities Regulatory Commission issuing guidelines designed to simplify and encourage M&As.
Still, recent policy doesn’t mean a notoriously complex process will now become simple and straightforward. A senior partner with a Shanghai-based cross-border M&A firm said the “trickiest part” with M&A in China is “whether your target company has stable leadership and if the boss is determined to do the deal.”  www.webershandwick.cn (ATI).