Show us the money. Why China deals aren’t completing

Photo: REUTERS/JASON LEE

There was a moment earlier this year when China Inc. appeared to be single-handedly keeping M&A bankers in their Maseratis and Patek Philippes. Chinese companies have announced $128.5 billion of proposed, pending or completed outbound deals in 2016, well ahead of the $106.6 billion from the U.S., according to data compiled by Bloomberg.

With state-owned crane maker Zoomlion Heavy abandoning its pursuit of U.S. rival Terex last week, that wave shows signs of receding.

Transactions valued at billions of dollars have now fallen by the wayside. Philips sold shares in its lighting business on the Amsterdam stock exchange after a U.S. government panel objected to a $2.8 billion sale to China’s GO Scale Capital on national-security grounds. The same issue scuppered China Resources’ $2.5 billion bid for chipmaker Fairchild and Tsinghua Unisplendour’s attempt to invest $3.8 billion in disk-drive maker Western Digital.

There are also domestic hurdles. Zoomlion failed to gain support from China’s foreign-exchange regulator to convert yuan to dollars for the Terex purchase, an issue that’s also holding up a take-private offer for antivirus software business Qihoo 360Anbang Insurance‘s $14 billion bid for Starwood Hotels was scrapped in March, with Caixin Online reporting that Beijing’s insurance regulator had voiced opposition.

The biggest of the crop — ChemChina’s $43 billion acquisition of Swiss pesticide and seed-maker Syngenta — remains in limbo after several farm-state senators called on the U.S. government to again play the national security card.

In the mean time, the value of outbound deals in May looks set to decline for the third straight month, according to data compiled by Bloomberg, with the value of completed transactions heading to its lowest level since April 2015. With the yuan again weakening and some analysts predicting renewed capital outflows, regulators are even less likely to look kindly on currency-sapping overseas purchases. Don’t be surprised if the M&A tally continues to decline.

China’s outbound M&A total

$128.5 billion

That’s something that should really keep the bankers up at night: They don’t get their big payday unless a deal goes through.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Bloomberg

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.