Since China reopened the borders at the end of 2022 after COVID, M&A in China is on the rise. According to the research data from GREATER CHINA BUSINESS, over 200 cross-border investment and M&A transactions have been completed in this region from July 2022 to the end of June 2024.

Several notable acquisitions and equity investment deals signal rebounding ‘Inbound Deals’ , such as McDonald’s acquisition of Carlyle’s ownership in McDonald’s China, AstraZeneca’s acquisition of Gracell Biotechnologies, and Volkswagen’s investment in XPENG Motors. Meanwhile, Joint Venture is an important strategic option for MNCs’ business development in China. Joint ventures help foreign companies maintain their competitiveness in this region. Over 100 Sino-foreign Joint Venture established over the past two years. In addition, MNC’s divestitures and carve-outs of their business in China is also a new phenomenon. Divestiture activity increased in China these years, and this trend will continue. Many companies divest their businesses to refocus on strategic priorities, raise liquidity or quit underperforming businesses.

China based M&A professionals shared their insights and observations on recent cross-border investment trends.

Based on InterChina’s annual China Benchmark and Forecast, a new trend in investment in China reveals a strategic shift by multinationals, as they adapt to new dynamics driven by consolidation and consumer shifts. Companies are now embracing a “3 Dimensional China” approach, which focuses on three key areas: deeper localization, positioning China as a global innovation hub, and recognizing the rising global influence of Chinese firms. As China continues to solidify its role in the global economy, companies need to scale operations to meet the demand for “China speed and cost,” while fully embracing local practices and innovation. The growing global presence of Chinese firms creates both competition and partnership opportunities, making it essential for multinationals to align their strategies to succeed in this evolving, high-growth environment.

Eduardo Morcillo
Managing Partner, InterChina

Over the course of the last few years China’s status has shifted from the number 1 investment destination for multi-national companies (“MNCs”) to one characterized by uncertainty, negative sentiment, and exits, fueled by sluggish growth post-Covid, rising geopolitical tensions, regulatory uncertainties, and intense competition from local players. Some MNCs are opting to reduce their China exposure via divesture or carve-out and also lead to creation of a “China Plus One” strategy. The current economic malaise has also negatively impacted Private Equity in China, following 2 decades of robust deployment. LP’s desire to reduce their China exposure has led many at the recent Singapore Super Return Conference to declare that “DPI is the new IRR”. With almost frozen IPO, compounded by a few failed auction processes driven by low convictional amongst PE buyers, many PEs have to turned to other options including use of continuation fund or exits to secondary funds at a discount.

Stella Yuan
Managing Partner, Alvarez & Marsal

I would like to use ‘diversity’ to describe the trend of M&A deals involving China. We see not only inbound but increasing number of outbound M&A deals driven by Chinese companies to penetrate overseas markets. Diversity is seen also from the source of deals. We recently represented a Chinese company to close a deal with a Chilean buyer. In addition to EU and the US, we see more cross-border transactions involving South America, Africa and Middle East jurisdictions. Most importantly, the drives of M&A deals have been changing along with the dynamic roles of China in the global economy. Nowadays Chinese buyers in M&A deals are looking for market shares, cost-efficient raw materials and trained workers like what Western investors did 10-20 years ago when they looked at Chinese targets. There are more ‘exchanges’ of technologies while China used to ‘import’ technologies only in the past.

Jerold Zheng
Partner, Merits & Tree Law Offices

According to SS&C Intralinks Q4 2024 Deal Flow Predictor, APAC outperformed the market in Q2 2024 on a QoQ basis where the region achieved over 20 percent growth in new deal activity. However, balancing that against a strong Q2 2023, the region was flat on a QoQY basis. The markets remained relatively stable and ended the quarter with an upward trajectory. Mainland China, Hong Kong and India are all well on the upside of our overperform prediction, indicating growth in those countries that the data suggests will be sustained.

GREATER CHINA BUSINESS conducted a survey in 2024 to learn the current views from multinational companies and private equity firms on cross-border investment, mergers & acquisitions, joint ventures, and divestitures in the current business environment. This survey provide a glimpse into the latest trends of doing deals in China.

The report is based on a survey of 637 global and regional CEOs, presidents, CFOs, legal counsels, corporate strategy and M&A leaders, finance and tax leaders, business unit heads, HR leaders, Joint Venture management, former staffs, consultants, and interviews with key person from several leading companies across a variety of industries.

This article was originally published by Asia Pacific Business.