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China outbound deals to grow double digits in 2012
2012-02-07
Brief:China's outbound investments have grown steadily in these years.
China's overseas acquisitions, which reached a record in 2011, will continue double-digit growth this year as increasingly sophisticated Chinese buyers seek bargains amid the global downturn, said consultancy PriceWaterhouseCoopers (PwC).

China's outbound investments have grown steadily in the aftermath of the 2007-2008 global financial crisis, with most deals targeting resource-rich regions, but there has been a surge of Chinese interest since last year in Europe in the industrial and consumer sectors, a trend that PwC said would likely continue.

"The euro zone debt crisis has definitely created opportunities for Chinese companies, giving them easier access to the European market," Gabriel Wong, head of PwC China Corporate Finance told Reuters in an interview. "I believe it's just a start."

Europe emerged as a key destination for Chinese acquisitions in 2011, with the number of deals in the region surging 76 percent to 44, many in the industrial and consumer sectors, according to Thomson Reuters data.

Last year also saw record China outbound activity, with the number of deals up 10 percent at 207 with combined value rising 12 percent to $42.9 billion. Some high profile deals announced last year include China's Investment Corp's (CIC) $4.2 billion investment in French utility GDF Suez SA and Yanzhou Coal Mining Co Ltd's $2.05 billion bid for Australia's Gloucester Coal Ltd.

"The numbers suggest the appetite for deals among investors in China is stronger than ever," said PwC China Transaction Services Partner Roger Liu. "As China's economy moves into a new phase, M&As are emerging as a key enabler of consolidation, growth, market positioning and the acquisition of strategic assets and expertise."

In another sign of increased interest in overseas acquisitions, PwC's Wong said he had closed four China outbound deals in the past 12 months and still had about a dozen deals in the pipeline.

"Chinese companies are taking advantage of the current crisis to acquire technologies to improve their competitiveness -- something that cannot be done overnight through organic growth alone," he said.

Wong warned, however, that there would be risks in overseas acquisitions, as many European companies had complicated financial structures, and many deals encountered cultural conflicts during the integration phase.

"The key really is to maximize synergy, and that's the beauty of overseas acquisitions," he said.

Another risk is that some foreign companies would be unwilling to transfer technologies or brands to Chinese companies.

For example, the planned purchase of Swedish car maker Saab by China's Pangda Automobile Trade Co Ltd was aborted after General Motors Co blocked the deal.

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