The total overseas mergers and acquisitions (M&A) of Chinese enterprises in 2012 hit a record high of 65.2 billion U.S. dollars, up 54% year-on-year, according to a report recently released by PricewaterhouseCoopers.
Although there are cases like Huawei and ZTE that failed their applications for asset acquisitions in the United States last year, generally speaking, Chinese enterprises overseas M&A is blooming, mainly the result of international and domestic economic environment.
From the external environment's aspect, first of all, the European debt crisis weakened the stability of the capital and credit markets and market participants' confidence, and seriously hurt the lending function of the European banking system, leading to the corporate credit resources being extremely scarce, costly. For that reason a large number of corporate went bankrupt or struggle to survice. These corporations are eager for reshuffle, declined in asset prices, forming the M&A buyer's market. Among them are companies such as German cement pump manufacturer Putzmeister which was acquired by Sany, and French company Diva Bordeaux which was bought by state-owned food group Bright Food. Prior to this, these enterprises were unattainable for the Chinese business.
Secondly, affected by the European debt crisis, in 2012 the euro devaluated against major currencies, depreciated by 7.18 percent against the U.S. dollar, 9.93 percent against the renminbi, which further reduces the market risk of Chinese enterprises to acquire those foreign enterprises with advanced technology.
From the domestic environment's aspect, the spread of the debt crisis triggered a global economic downturn and risks rising. In 2012, Chinese investment, consumption, exports, and other economic activities witnessed a big slowdown as a result. Overcapacity and weak market led to a lack of investment opportunities. At the same time, Chinese companies are eager to crack the bottleneck of energy and resources, and look forward to defuse the enormous pressure that manufacturing enterprises, especially private enterprises are facing in market competition and during the process of upgrading and restructuring. These factors become inherent power of the overseas M&A.
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