An Acuris Company Regional Overview China & Hong Kong Trend Report In association with H1 2021 mergermarket.com Mergermarket Regional Trend Report China & Hong Kong 2 US$296bn +41% +59% Increase in number of energy, Increase in tech M&A value mining & utilities (115 deals, to US$45.8bn Value of China and Hong Kong M&A US$19.8bn) deals versus H1 2020, in H1 2021, up 88.5% on H1 2020 the largest sector increase this half US$39bn US$27bn Private equity (PE) investment 4 in H1 2021. China and Hong Number of quarters in which China China and Hong Kong outbound Kong have now seen at least and Hong Kong has seen at least M&A, only 17.5% behind the US$100bn in M&A activity full-year 2020 value US$10bn worth of PE investment for five successive quarters mergermarket.com Mergermarket.com Mergermarket Regional Trend Report China & Hong Kong 3 Amid international angst, dealmakers look to domestic successes The economies of China and Hong Kong are between Chinese infrastructure companies China & Hong Kong M&A activity bouncing back following the impact of the Sichuan Railway Investment Group and 2016-H1 2021 COVID-19 pandemic. With growth of 2.3%, Sichuan Transportation Investment Group – China was the only major economy to have the largest deal of the year by far. expanded in 2020 and is expected to see The second largest deal through the first six growth of 8.1% in 2021, according to the 500 months of this year – Xinjiang Tianshan Cement 2,500 Asian Development Bank. While Hong Kong’s Co’s US$15.2bn acquisition of controlling economy shrank by 6.1% amid the pandemic, stakes in four regional peers – also fell in the the local government is forecasting growth of construction sector. $126.3bn between 3.5%-5.5% in 2021. 400 2,000 As a result of such mega-mergers, regional “Compared with the developed economies, domestic deal value looks on track to set China has much more momentum,” says John $109.6bn a new benchmark, having already totalled $144.7bn Yuan, head of China and Southeast Asia at $93.9bn US$276.4bn in H1 on 873 deal announcements, iDeals Solutions Group. “The country’s GDP almost double the aggregate value of the 732 300 1,500 growth rate is much higher. At the same time count Deal domestic transactions logged during the same $109.5bn the renminbi is in a relatively strong position, $84.8bn $205.1bn period last year. which is motivating companies to go out and $110.9bn buy high-quality targets.” “The amount of domestic M&A activity has $107.3bn Deal value (US$bn) value Deal 200 1,000 increased significantly. There are a few major $191.3bn This improving economic outlook is $62.6bn drivers, including, on a global scale, inflation translating into greater deal activity. Together, and the depreciation of the dollar, as well as, $124.7bn China and Hong Kong recorded 963 deal $95.7bn here in Asia-Pacific, the presence of strong $89.5bn announcements worth US$296.4bn in H1 2021, $65.7bn $89.7bn state and government investment support,” 100 500 representing a 88.5% year-on-year increase reports Yuan. from the same period last year, and with 148 $105.1bn $80.6bn $89.6bn more deals recorded. Hong Kong also saw domestic activity ramp $73.8bn $81.6bn $67.6bn up in H1. The most valuable deal to take Domestic dealmaking reaches new highs 0 place between local firms was multinational 0 Domestic activity was strong in H1, as Chinese 2016 2017 2018 2019 2020 YTD 2021 conglomerate Jardine Matheson Holdings’ and Hong Kongese companies looked inward delisting of its second-largest unit, Jardine to take advantage of local opportunities. All but Strategic, in a US$5.5bn buyout deal aimed at Q1 Q2 Q3 Q4 one of the ten largest deals were intranational, simplifying the company’s complex structure. including the mammoth US$111.5bn merger Deal count mergermarket.com Mergermarket Regional Trend Report China & Hong Kong 4 Data analysis continued US buyers flock to China Deals such as the US$4bn purchase of Outlook International appetite for Chinese and Hong mobile and video games developer Shanghai The surge in domestic dealmaking in both Kongese assets remained high in H1 2021, Moonton by ByteDance’s video games unit China and Hong Kong witnessed in H1 implies particularly in respect of US buyers. A total of Nuverse highlight the rapid growth of China’s an inward focus amid an uncertain global just under US$20bn-worth of inbound deals gaming industry. The move into the video economic outlook. This looks set to continue were recorded, on 90 transactions, roughly on gaming business puts TikTok-owner ByteDance through H2 2021, as local firms – particularly par with H1 2020. in direct competition with Tencent, China’s large state-owned enterprises – continue to biggest video game company. look for opportunities to consolidate. The largest inbound deal of H1 was Blackstone’s US$5.7bn acquisition of a “China’s M&Aa market will continue to grow China and Hong Kong remains a draw for majority stake in real estate firm SOHO China, steadily in terms of transaction volume and international investors, with corporates and Looking for more insights into the a developer of office buildings. Blackstone is value, and I think TMT will continue to stay at PE houses alike securing deals in the first half China & Hong Kong markets? said to be confident about China’s long-term the centre of that activity,” says Yuan. “Internet of the year. The high-growth tech sector will View our discussion here economic prospects and the potential of the companies will acquire high-quality overseas continue to attract investment as international office market in Beijing and Shanghai. targets and look for new cross-regional firms look to gain a foothold in the burgeoning business growth opportunities.” Asian market. Hong Kong attracts European interest Inbound dealmaking targeting the Hong Kong Hong Kong also saw its fair share of tech market was also pronounced in the first half of dealmaking, exemplified by the US$4.4bn the year. Hong Kongese assets are attracting take-private of e-commerce platform China attention across Europe, particularly Austria Youzan by a consortium led by the company’s and France. CEO and founder, Zhu Ning, which reflects e-commerce’s growing prominence in Asia. One significant deal carried out by a European bidder was French utility Suez’s acquisition of China buyouts on the rise the remaining 42% stake in Suez NWS – its The Chinese deal market saw a year-on-year China-focused wastewater treatment services uptick in buyout activity. A total of 98 buyouts provider – for US$538m. The deal makes clear in H1 2021 was up on both the preceding the French utility firm’s ambitions to expand its six months (97) and H1 2020 (71). Value, operations within the region. meanwhile, reached US$38.5bn, the highest half-yearly sum since H1 2018’s US$45bn. Tech deals power ahead Dealmakers in both China and Hong Kong “People are trying to identify the most remained active in the technology sector in H1. attractive subsectors for PE investment, based There was a total of 119 deals worth US$45.7bn on changing consumer behaviours,” says Yuan. in aggregate (15.4% across all industries, second “We can see that they are most interested in only to construction’s massive 44.3% share of digital healthcare, e-commerce and e-learning. proceedings in H1) targeting tech firms in the There are signs, too, that projects related to region, representing a year-on-year increase of carbon neutrality are also coming towards 59.2% in value terms on 23 more deals. centre stage.” mergermarket.com Mergermarket Regional Trend Report China & Hong Kong 5 Top deals Announcement Target company Target dominant Target dominant Bidder company Bidder dominant Seller company Seller dominant Deal value date sector geography geography geography (US$m) 02-Apr-21 Sichuan Transportation Investment Construction China Sichuan Railway Investment China 111,535 Group Co Ltd Group Co Ltd 03-Mar-21 China United Cement Group Co Ltd; Construction China Xinjiang Tianshan Cement Co Ltd China An investor group led by China 15,173 South Cement Company Limited China National Building (99.93% stake); Sinoma Cement Co Material Co Ltd Ltd; and Southwest Cement Co Ltd (95.72% stake) 30-Apr-21 Peking University Founder Group Co Technology China Ping An Insurance (Group) China 8,177 Ltd (73% stake) Company of China Ltd; and Zhuhai Huafa Group Co Ltd 16-Jun-21 SOHO China Limited Real estate China Blackstone Group Inc USA Cititrust Private Trust China 5,747 (Cayman) Ltd 08-Mar-21 Jardine Strategic Holdings Ltd Other Hong Kong Jardine Matheson Holdings Hong Kong 5,528 (15.11% stake) Limited 28-Feb-21 China Youzan Limited (85.1% stake) Technology Hong Kong Consortium for China Youzan Hong Kong 4,371 21-Jun-21 51job Inc (68.74% stake) Business services China Consortium for 51job China 4,075 22-Mar-21 Shanghai Moonton Technology Co Technology China Beijing Byte Dance Technology China 4,000 Ltd Co Ltd 10-Feb-21 Kerry Logistics Network Limited Transport Hong Kong SF Holding Co Ltd China 3,509 (51.81% stake) 23-Jan-21 Tus Environmental Science and Energy, mining & China Henan City Development China 3,488 Technology Development Co Ltd utilities Environment CO Ltd mergermarket.com Mergermarket Regional Trend Report China & Hong Kong 6 Criteria Contacts All data is based on transactions over USD 5m and is based on Sponsorship Sales Manager Chris Coe the Mergermarket’s M&A deals database.