Cass publishes innovative research into Chinese Mergers and Acquisitions market.
Published (Updated )
The research focuses on cross-border acquisitions from China to the UK during the period 2012, when Chinese companies began making frequent acquisitions in the UK, to mid-2016 and is the first of its kind.
With the growth of Chinese outbound M&A activities and their foreign direct investment (FDI) becoming increasingly important to the world’s economy, the research is both timely and useful in examining whether these investments create value to shareholders of the acquiring firms and which factors will drive performance.
Solid, reliable data regarding M&A deals related to China is notoriously difficult to obtain and confirm. Therefore, this research was made possible by utilising the proprietary database of Chinese deals compiled by Grisons Peak LLP where the final sample was 44 UK acquisitions by Chinese publicly-listed companies where deal sizes were greater than $5 million and the deals resulted in control (over 50% ownership) of the target companies.
The results of this study show that:
- Deal volume of Chinese cross-border M&A into the UK hit a record high in 2016 Q2. The aggregated deal value was at a peak in 2015 Q1.
- Specifically targeted were British companies in the consumer and real estate sectors, with more recent activity in the healthcare sector.
- Chinese acquiring firms gained significant positive abnormal returns on the day following the event announcement but the positive returns disappeared as the event day progressed.
- Chinese acquiring firms engaged in real estate and other non-financial sector deals perform better than those targeting financial sector companies based in the UK.
- Acquisitions between Chinese firms and private firms in the UK show superior returns to acquiring companies that are publicly listed and smaller deals contributed more to acquirer success than larger deals.
Professor Moeller said, “This research breaks new ground because it focuses on the performance of Chinese acquirers in the UK, a relatively recent phenomenon. Many studies look only at the performance of acquiring companies in developed countries and/or cross-border deals generally, but because the home location of the acquirer can be such a large influencer on the deal, most of those studies reported mixed results. We therefore used a unique, detailed and proprietary database from Grisons Peak LLP to enable us to do detailed analysis of Chinese companies as acquirers when not lumped in with acquirers from other countries.’
You can read the full paper online: ‘An Analysis of Short-Term Performance of UK Cross-Border Mergers and Acquisitions by Chinese Listed Companies’. The research paper's authors are Lin Zhu, MSc student and researcher and Professor Scott Moeller.
Scott Moeller is Professor in the Practice of Finance and Director of the M&A Research Centre at Cass Business School.