China’s M&A activity enlivens with clear focus on EU

Alicia Garcia Herrero艾西亞
4 min readApr 1, 2021

Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, Bruegel Senior Fellow

The global economy tumbled into economic crisis over the past year because of the outbreak of Covid-19. As the first country to report the outbreak, China was also the first to feel the trauma, experiencing sharp economic recession in the first half of 2020.

Last year, China’s announced outbound mergers and acquisitions ended lower by nearly one-third in number and more than half in value than in 2019. Such a rapid deceleration seemed even worse than the global trend of announced M&A, which only declined by 10% during 2020, according to the UNCTAD Investment Trend Monitor.

All of this bad news seems to have turned around in the last quarter of 2020, with some obvious green shoots. In fact, after the initial outbreak of Covid-19, China successfully lifted its economy thanks to the government’s effective containment measures. This contrasts sharply with the still-weak situation in the rest of the world as Covid-19 expanded from March onward.

Also, the overall funding cost for Chinese corporates to go abroad edged much lower after the US Federal Reserve introduced a massive monetary stimulus to boost the economy. The fast recovery domestically, coupled with much laxer global financial conditions and the buying opportunities in Covid-hit countries, led to a sharp recovery of the value of the announced deals in the last quarter of 2020.

Both the value and number of the announced deals during that quarter were only moderately lower than in the last quarter of 2019.

Another feature of Chinese M&A activity in 2020 was the return of deals destined for the US. Not only was the number of US deals more stable compared with 2019, their total value rebounded to the 2018 level thanks to two giant deals.

It is important to note, though, that both deals are Chinese purchases from European owners. The biggest, by far, is Tencent’s acquisition of a 10% stake in Universal Music, majority-owned by French media conglomerate Vivendi.

The second is Shanghai RAAS’s acquisition of 45% of the Grifols Diagnostic solutions belonging to the Spanish pharmaceutical company Grifols in exchange for a 26.2% stake in the Chinese company.

Peru was the second-largest target for China because of Yangtze Power’s acquisition of Luz del Sur (LDS), one of Peru’s largest power companies.

Beyond the acquisitions from European companies on the US market, as has been the case since 2018, the most preferred region for Chinese acquisitions is the European Union, especially if we take into consideration that the deals with Universal Music and Grifols were also related to European companies.

In fact, the EU was the region to receive the largest number of Chinese deals in 2020, including Huazhu Group’s acquisition of Deutsche Hospitality and Guangdong Wencan Die Casting Corporation’s deal with the French car-parts maker Le Belier. That said, both the value and the number of EU deals were lower than in previous years.

When moving to the sectoral distribution of Chinese acquisitions, the industrial sector is still the key for Chinese overseas M&A, with a special focus on European Union countries. The second most important sector was health care. However, because of several big deals targeting energy and entertainment, the sectoral distribution in value terms was more evenly distributed in 2020 than in previous years.

In terms of ownership, acquisitions by Chinese state-owned enterprises (SOEs) gained strength in 2020 with a special focus on the Asia-Pacific and other regions, while those in the US and Europe became smaller. In particular, the share of deals from Chinese SOEs in Europe decreased. Most of these SOE acquisitions are still in the resource-related sectors, whereas private companies dominated in the industrial and consumer sectors.

All in all, 2020 was clearly not a good year for Chinese companies’ acquisitions overseas but the trend seemed to be recovering toward year-end. The reason might be the relative better performance of the Chinese economy in the second half of 2020 and also the very favorable global financial conditions.

Finally, China’s intentions to explore global market opportunities, as well as the thirst for technology and other types of industry upgrade, are also key supports of China’s engagement in the global M&A market.

The European Union is a central target, which should also explain China’s keen interest to sign the China-EU Comprehensive Investment Agreement (CAI) as 2020 was coming to an end. Keeping the EU market available for acquisitions is clearly important.

*This article was originally published by Asia Times at