Merge surge

There’s been a wave of M&A activity in China of late, but will complex regulatory requirements stem the deal flow? Richard Li reports

China’s economic downturn has prompted the stronger market players to swallow up the financially weak. The central government is also encouraging mergers and acquisitions (M&A) of domestic companies with outmoded production capacity, in order to ramp up the nation’s industrial structure.

Adding to this, Manuel Torres Salazar, a partner at Garrigues in Shanghai, believes the launch of a third round of quantitative easing (QE3) by the US government will push more foreign buyers into China. “The launch of QE3 will definitely influence the evaluation and price of assets, which may encourage foreign funds to have more onshore M&A activities [in China] to benefit from RMB appreciation,” he says.

Wang Jing, a Norton Rose partner in Beijing, shares this view of China’s potential for attracting foreign buyers. “It is almost certain that more international brands will turn to China for investment opportunities in certain sectors … mainly because of the increasing purchasing power of Chinese consumers.”