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UK experiences increase in Chinese outbound M&A

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Chinese outbound M&A activity to the UK has increased this year, according to figures released from Thomson Reuters.

 

The data shows Chinese buyers made 29 acquisitions in the UK, totalling £12.9bn, including the £10.5bn acquisition of Logicore by the China Investment Corporation. Last year, 25 deals were made, valued at £3bn. There are suggestions that the weaker pound is a contributory factor towards the rise of M&A in the UK.

 

£12.9bn puts the UK second in terms of Chinese outbound M&A deal values, behind Singapore at £15bn. However, this news comes against a backdrop of reduced outbound M&A deals globally, down 42% at a total value of £66bn, amid stricter controls on capital outflow from the Chinese government.

 

The controls on capital outflow are intended to strengthen the value of the Yuan, reduce debt-fuelled acquisitions and increase scrutiny over deals unrelated to an investor’s core business. Real estate investments have particularly been disrupted by these rules. In the wake of these developments, Chinese property company Dalian Wanda pulled out of a £470m deal to purchase Nine Elms Square in south-west London.

 

There are differing views of how regulations will impact the real estate market in the UK going forward. Indeed, there are conflicting examples such as the successful purchase of Logicore and the failed purchase of Nine Elms Square. Of course, the Logicore deal represents an enormous share of total deals, and putting this aside, attention is then drawn to other sectors in focus from China. Given the intense scrutiny from Chinese regulators on what investors can purchase, buyers are looking to make deals with organisations relating to their existing business, or companies which could transform their own business model. There has been an increase in Chinese investments in UK and European sectors such as technology, renewable energy and healthcare.

 

The Corporate M&A Exchange will be discussing Chinese outbound M&A. Book your place at the conference to gauge Chinese investor appetite of UK sectors.

 

 

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