Cross-border M&A deals have been a hot topic recently, especially when they include Chinese acquirers and U.S. targets. The deal capturing headlines during the past two weeks has been the bidding war between Marriott and a private consortium led by Anbang Insurance Group over the purchase of Starwood Hotels & Resorts Worldwide. Anbang and the consortium ended up walking away from the deal late last week.
There have been an abundance of these deal types in the first quarter. Just days ago, Chinese healthcare company Humanwell acquired U.S pharma firm Epic Pharma for $529 million. In mid-March, China’s Anbang Insurance Group agreed to purchase Strategic Hotels & Resorts in a deal valued at $8.1 billion, the largest acquisition on record of a U.S. company by a Chinese acquirer.
A note about values: The values of deals cited in this report refer to transaction values. We calculate transaction value as base equity value plus the value of the target’s outstanding net debt (where applicable). The target’s outstanding net debt is defined as the total amount of short and long term interest-bearing debt less any cash and cash equivalents.
Highest Number of Announced Deals with a Chinese Acquirer and U.S. Target to Start a Year
Chinese companies pursuing firms based in the United States isn’t a new trend in the M&A space, but it looks to be a growing one. In the first three months of 2016, 17 transactions were announced in which a Chinese acquirer purchased a U.S. target. This marked the largest transaction count of this deal type in the first three months of a year on record. The deals this year summed to an aggregate transaction value of $28.8 billion, which has already surpassed the previous high of $5.7 billion for all of 2015. This data includes both completed and pending mergers and acquisitions.
Chinese Firms Most Active in U.S. Semiconductor Industry
During the past two years, Chinese firms have been the most active in the United States Semiconductor industry. Since the start of 2014, there were seven transactions in which a Chinese company purchased a U.S.-based semiconductor firm. This represented the highest number of transactions in any FactSet industry across this time period.
The aggregate transaction value for the deals in the Semiconductor industry totaled nearly $4 billion since the beginning of 2014. The largest deal within the group was the $2.4 billion acquisition of Fairchild Semiconductor International by China Resources Microelectronics and Hua Capital Management, which was announced in early January of this year. The second most active U.S. industry for Chinese acquirers has been the Financial Conglomerates group. There were six transactions in this group involving a Chinese acquirer and U.S target since the start of 2014. The total transaction value for the deals was relatively small, however, summing only to $145 million.
Cross Border Deals with Chinese Acquirer Amounts to $80B in Transaction Value to Start 2016
Chinese companies have not only focused on U.S companies when pursuing acquisitions. They have been active globally in the M&A market. 2015 marked the largest year for Chinese acquirers taking over global targets (non-Chinese targets) both in terms of aggregate transaction value of these deals ($105.8 billion) and the number of transactions (364 deals). In the first three months of 2016, cross border deals with a China-based acquirer amounted to 80 transactions and summed to $80 billion in total transaction value.
The largest deal on record in which a China-based company acquired a non-Chinese target was the recent acquisition of Swiss-based agribusiness Syngenta AG by state-owned China National Chemical. The transaction value of this pending deal was $43.7 billion. Another large cross-border deal with a Chinese acquirer was the acquisition of Canada-based upstream oil and gas company Nexen Energy in 2012 by government-controlled information services firm CNOOC Ltd. The transaction value of this pending deal was $17.5 billion.
The increase in cross-border deals involving Chinese acquirers is a trend to watch as China’s economy continues to face slower growth and more Chinese firms start to look abroad for more profitable investment opportunities.
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