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April 8, 2021

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M&A intent in China stays strong

Merger and acquisition intentions in China improved last year, with 57 percent intending to pursue deals in the next year, the highest figure in 10 years and beating the global average level of 45 percent, a survey by EY has found.

As many as 96 percent of Chinese entrepreneurs and executives expect business to return to pre-pandemic revenue and profitability levels by 2022, compared to 91 percent globally, according to the EY Global Capital Confidence Barometer survey of more than 2,400 senior executives around the world.

“Recent regulatory measures and tighter scrutiny of digital economy and fintech companies would not affect acquisition sentiment in the sector, and major technology players are still actively responding to changes in the market environment,” said Runald Li, EY China’s markets leader for strategy and transaction.

Chinese businesses’ confidence regarding appetite for acquisitions overtook those of their global counterparts for the first time since 2015, as successful pandemic control steps and new incentive measures have instilled confidence in executives to pursue business transformation and expansion, the report says.

Acquiring technology and innovative solutions, and responding to regulatory changes to secure supply chains are cited as key drivers for M&A activity.

Consumer goods, technology, automobile and transport are Chinese sectors with the strongest acquisition willingness.

About 49 percent of Chinese respondents believe the biggest growth opportunities come from local markets as they expect China’s economic momentum to continue. About a third think southeast Asian markets are attractive destinations.

As many as 85 percent are eyeing cross-border acquisition targets compared to 65 percent at a global level, despite potential geopolitical tensions.

The study was conducted between November and February with 750 respondents in the Asia Pacific region and 171 from China.

Respondents also see stronger competition when pursuing potential targets with private equity firms also actively seeking merger targets, thanks to the strong economic rebound and active IPO activities.




 

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