Private firms lead SOEs in outbound mergers in 2014

Completed more than twice as many M&A deals than State enterprises

Outbound mergers and acquisitions (M&As) completed by China's private firms more than doubled the number of such transactions completed by State-owned enterprises (SOEs) in the first three quarters of 2014, making private firms the major force in the outbound M&A market, a report showed Monday.

Chinese private firms completed 120 M&A deals in the first three quarters of the year, compared with 56 deals completed by SOEs, according to the report released by accounting firm PricewaterhouseCoopers (PwC).

The total value of outbound M&As completed by private firms was up more than 120 percent year-on-year in the first nine months, while the value of deals completed by SOEs dropped for the first time in the same period, with a year-on-year decline of 37 percent, the report indicated.

However, the value of deals completed by SOEs reached $23.1 billion in the first nine months, still higher than the $17.7 billion registered by private firms, it said.

Private companies have always performed better in overseas investment in terms of the number of transactions than SOEs, but the value of individual deals was always relatively small in the past, -Liang Guining, a research fellow with the Chinese Academy of International Trade and Economic Cooperation, told the Global Times Monday.

These private companies began eyeing large-scale overseas investment as they became more experienced in handling international M&A deals and sought to obtain advanced technology and strong brands to boost their international status, Liang said.

Lenovo Group Ltd, the world's largest PC maker in terms of shipment, announced in January that it would buy the Motorola Mobility business from Google Inc for $2.91 billion. The deal is yet to be completed.

In October, Lenovo completed the acquisition of IBM's x86 server business at approximately $2.1 billion.

The drop in the value of outbound M&As by SOEs was perhaps due to the high base, which was partly pushed up by the CNOOC deal last year, and there always has to be a period of calm after a massive M&A wave to give SOEs some time to integrate and operate their new firms, Liang said.

China National Offshore Oil Corporation (CNOOC), China's largest offshore oil and gas producer, announced last year that it had closed a deal to acquire Canada's Nexen Inc for $15.1 billion in February 2013, marking it the biggest overseas acquisition made by a Chinese company up to that time.

Lu Guchun, a transaction services partner in the Beijing office of PwC, attributed the decline in the value of outbound M&A deals by SOEs to the reforms implemented by SOEs in the energy and financial sectors this year, which meant these companies had little time for large-scale overseas M&As.

Unlike SOEs which mainly target resource-related deals, private enterprises focus on industries such as advanced technology, telecommunications and retail to seek more diversified investment opportunities, the report said.

Chinese private companies are seeking different financing channels such as introducing private equity funds investment or issuing bonds in overseas market, Lu said.