Phil Leung: China Outbound M&A



As China’s economy has slowed, the country’s outbound M&A activity has soared. Phil Leung, a partner with Bain's Mergers & Acquisitions practice, discusses how more selective, sophisticated M&A strategy can drive economic growth.

Read the Bain Brief: For Chinese Companies—Learning the Rules for Outbound M&A

Read the transcript below.

PHIL LEUNG: China outbound M&A has soared this year. Up to October 2016, it has doubled to $210 billion. This is impressive, especially given that domestic and inbound China M&A has declined by 35% this year to date.

A few things are worth noting among this new wave of China outbound M&A. One is, Chinese acquirers are being more thoughtful, cautious and sophisticated in their approach to deals. They overinvest more in investment thesis, proving the investment thesis with due diligence, with data, with hard facts. Two is, they are partnering up with other strategic as well as financial investors; sometimes private equity funds.

Sometimes other corporates go after potential targets. And finally, their approach to post-merger value creation or integration is a lot more selective and thoughtful, focusing on areas that really matter and at times allow the acquired company's management team to do their own business. Given the new normal in China with the slowdown of the economy, we expect M&A to be a key growth driver going forward, especially outbound M&A. We expect to see more mountain climbers among Chinese companies, that means what we refer to as companies that do deals frequently [and that] increase in value over time.

Read the Bain Brief: For Chinese Companies—Learning the Rules for Outbound M&A