2012 greater china outbound m&a spotlight...executive summary historical data roundup • over...

Chinese Services Group

The Resurgent Dragon Searching for value introubled times2012 Greater China outbound M&A spotlight

Contents

1 Introduction 2 Methodology 3 Executive summary 5 A year in review: Chinese outbound M&A activity 15 Looking forward – market perspectives 15 What could the Chinese outbound M&A market look like in a year? 41 An insight into Chinese manufacturing companies looking to buy overseas 46 Introducing the Chinese Services Group 47 Expanding around the globe… 48 Deloitte's CSG network 49 Contacts 50 Acknowledgements

Introduction

The global macroeconomic landscape has changed markedly since Deloitte China published the third edition of its Greater China outbound M&A spotlight in September 2011. Since then, the Arab Spring has continued to unravel, bringing with it continued war and destruction but also new hope and opportunity. During the past year, the Eurozone also came perilously close to collapse and many leadership positions across the continent have been bitterly contested over the intervening period. Legislative Assembly elections also took place in the second-most populous country in the world, India, with many media outlets also covering the economy's rapid fall from grace over the course of the year. Meanwhile, at the time of writing, political transitions are also scheduled to take place in the world's two largest economies – China and the US.

Despite it being a tumultuous time, both abroad and at home, Chinese corporate and financial investors alike have continued to invest overseas, with some 133 acquisitions, worth a total of US$52.2 billion being announced over the first nine months of 2012. This compares with the announcement of 145 transactions, worth US$44.9 billion over the same period in 2011, meaning that in terms of actual M&A investments overseas by value, the Q1-Q3 2012 period saw a record-breaking amount of M&A take place.

The bulk of these foreign investments continue to take place within the Energy & Resources industry, underscoring China's continued appetite for raw materials with which to feed its manufacturing base. Indeed, over the first nine months of 2012, Chinese Energy & Resources-focused bidders accounted for some US$35.2 billion worth of overseas transactions, a 44 percent increase from the previous year. In comparison, total outbound M&A deals by value rose by only 16 percent over the same timeframe.

And despite the fact that the Chinese economy is undergoing a recalibration as it looks to move away from its export-led growth model and towards one which is progressively based on domestic consumption, industry practitioners from across the world expect that Chinese overseas investments will continue to grow in stature – so much so in fact, that according to a survey Deloitte China conducted between August and September 2012, 90 percent of respondents believe that Chinese outbound M&A activity will increase over the coming 12 month period.

We hope, as ever, that you find our 4th edition of the Greater China Outbound M&A spotlight as illuminating as previous editions, and welcome your feedback.

Lawrence ChiaHead of Deloitte China M&A Services &Global Chinese Services Group Co-Chairman

The Resurgent Dragon Searching for value in troubled times 1

Methodology

Historical data

The historical data presented in this report is •derived from mergermarket, the independent M&A intelligence provider, and includes all mergermarket-recorded transactions for the period 1 January 2005 to 30 September 2012.

Transactions with deal values greater than •US$5 million are included. If the consideration is undisclosed, mergermarket includes deals on the basis of a reported or estimated value of over US$5 million. If the value is not disclosed, mergermarket records a transaction if the target's turnover is greater than US$10 million.

Only true merger and acquisition deals have •been collated. Transactions usually involve a controlling stake in a company being transferred between two different parties. Where the stake acquired is less than 30 percent (10 percent in Asia-Pacific), the deal has been included if its value is greater than US$100 million.

Transactions such as restructurings where •shareholders' interests in total remain the same have not been collated. mergermarket does not track property deals, Letters of intent, Memorandums of understandings, Head of agreement and Non-binding agreements.

All US$ symbols refer to US dollars unless •otherwise stated.

The report includes deals from the below •locations:

Chinese Mainland (China); -

Hong Kong; -

Taiwan; and -

Macau -

For the purposes of this report, an outbound •transaction is defined as a deal in which the bidder is predominantly located in the Chinese Mainland, Hong Kong, Macau or Taiwan and the target business is predominantly located in any other country or territory aside from the Chinese Mainland, Hong Kong, Macau or Taiwan.

Statistics for the first or second half or quarter •of any given year are marked in the forms Hx 20xx or Qx 20xx. For example, any mention of the term "2005-Q3 2012" in the report indicates that the period in question runs from 1 January 2005 to 30 September 2012. Similarly, any mention of the term "Q1-Q3 2012" indicates that the period in question runs from 1 January 2012 to 30 September 2012.

Survey methodology

Over August and September 2012, Deloitte •China conducted an online survey of 69 M&A practitioners with experience or knowledge of a Greater Chinese M&A transaction to garner their opinions on current investment themes facing Chinese investment overseas. Their answers were collected in confidence and reported in aggregate.

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Executive summary

Historical data roundup

Over the first three quarters of 2012, Greater •Chinese outbound M&A activity totaled some 133 deals, worth a cumulative US$52.2 billion. In comparison, over the Q1-Q3 2011 period, 145 transactions, totaling US$44.9 billion, were undertaken. As a result, deal volumes over the two periods fell by 8.2 percent while outbound investments by value rose by 16.2 percent to their highest level since 2005.

Outbound Energy & Resources deals continue •to dominate China's outbound M&A landscape, accounting for 29 percent of total volumes over the Q1-Q3 2012 period, as well as 68 percent of total deals by value over the same timeframe. Consumer Business & Transportation deals were the second-most numerous in terms of both deal volumes and values, accounting for a further 26 transactions, collectively worth US$6.8 billion. This equates to a 20 percent market share by deal volume and a 13 percent share by value.

The geographical region which witnessed the •majority of outbound investment over Q1-Q3 2012 was Western Europe, with 31 announced bids, worth a total of US$12.5 billion, coming to market over the period. Nonetheless, Chinese investors actually spent more acquiring assets in North America than Western Europe, primarily because of CNOOC's US$17.6 billion bid to acquire Canada's Nexen, a deal which was announced in July 2012.

Deal sizes increased by a small proportion in the •Q1-Q3 2012 period, with transactions valued between US$5m-US$300m accounting for 59 percent of all transactions (including deals where values were undisclosed) by volume. In 2011, this proportion stood at 58 percent.

Looking forward

The vast majority of respondents who •completed Deloitte China's online survey examining prospective Chinese outbound M&A activity suggest Chinese outbound M&A flows will increase over the coming twelve months, with two-thirds of them predicting that activity will increase by more than 10 percent.

Nonetheless, these deals aren't expected to be •particularly large. More than three-quarters (78 percent) of respondents believe that the bulk of outbound deals that will take place over the next twelve months are likely to be worth less than US$300m apiece.

More than half (55 percent) of respondents •believe that the bulk of potential Chinese outbound Energy & Resources transactions over the coming year will take place in South America. More than 40 percent indicate that Energy & Resources sector-related deals are also likely to take place in Africa (43 percent) and Asia (42 percent).

Likewise, more than one-quarter of respondents •believe that the majority of prospective outbound Consumer Business & Transportation transactions will take place in Asia (30 percent), North America (28 percent), or South America (26 percent).

When examining the domestic drivers most •likely to impact potential outbound M&A flows over the coming twelve months, respondents believe that the continued implementation of the 12th Five Year Plan will have the most positive impact on Chinese outbound M&A activity, while softening Chinese economic growth is unlikely to have much impact on potential outbound deal flow at all.


According to respondents, the main reason •why Chinese bidders are likely to acquire North American assets is to acquire technological best practices. Similarly, Chinese bidders will most likely buy European targets in order to purchase reputable brands and technological best practices. Finally, Chinese outbound acquisitions of Asian-based targets are expected to be undertaken in order to extend product lines overseas.

Furthermore, respondents believe that the •biggest obstacle facing potential Chinese bidders targeting North American businesses over the next year will be domestic regulations that discourage foreign ownership of local assets. Likewise, respondents expect Chinese buyers of European targets to face issues revolving around different management cultures while Chinese acquirers of Asian targets could come across reliability issues when dealing with counterparties.

Lastly, there seems to be a clear correlation •between the ultimate success of an outbound deal and the amount of due diligence carried out during that particular deal. Respondents who had worked on Chinese outbound acquisitions and who went on to note that they had carried out a comprehensive amount of due diligence were much more likely to go on to say that they thought the ultimate outcome of that transaction was successful than those who didn't conduct the same amount of due diligence during the transaction.

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Outbound Energy & Resources deals continue to dominate China's outbound M&A landscape

Volume

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Chart 1: Chinese outbound M&A investments

Quarterly Chinese outbound deal volumes seem to mirror wider macroeconomic trends, with the number of announced transactions falling from 32 deals in Q3 2007, just as the subprime mortgage crisis began to unfold, to just 13 acquisitions in Q1 2009. Likewise, as global economic conditions steadily improved following the collapse of Lehman Brothers, outbound deal flows rebounded quickly, reaching 28 deals the following quarter and continuing to grow in number over the remainder of the year, as well as through 2010 and 2011.

However, the onset of the Eurozone sovereign debt crisis in Q3 2011 saw a mild contraction in deal flow take place the following quarter, with just 43 outbound transactions worth a total of US$20.8 billion being announced. Over the subsequent first two quarters of 2012, Chinese outbound bidders undertook approximately the same number of deals (47 transactions in Q1 2012 and 46 deals in Q2 2012) but overall, outbound M&A by value fell over the first half of the year, presumably a result of the fact that many potential bidders adopted a wait-and-see approach to undertaking big-ticket transactions.

This apparent reticence to conduct large-cap deals has now arguably faded, with Q3 2012 figures clearly showing Chinese bidders' evident willingness to invest billions of dollars abroad. Indeed, the largest-ever Chinese outbound M&A bid – CNOOC's US$17.6 billion offer for Canada's Nexen – was announced in mid-July. In the same quarter, a Hong Kong-based consortium headed by Cheung Kong Holdings announced the US$3 billion acquisition of Wales and West Utilities, the UK-based gas distributor while, just two days prior, Sinopec publicized its US$1.5 billion bid to acquire a 49 percent stake in the UK-listed Talisman Energy.

A year in review:Chinese outbound M&A activity


Perhaps unsurprisingly, the Energy & Resources industry continues to dominate Chinese outbound M&A investments, accounting for 28 percent of the overall market by deal volume. Consumer Business & Transportation, Manufacturing & Technology, Media & Telecommunications sector transactions make up a further 50 percent of the total, findings that are consistent with the increasing influence of the country's rising middle class, as well as the government's desire to further develop its national infrastructure.

The desire to acquire foreign Energy & Resources assets has not waned over the first three quarters of 2012, with some 39 outbound transactions being announced over the period, accounting for 29 percent of all outbound deals by volume. Meanwhile, over the same timeframe, Consumer Business & Transportation outbound M&A activity fell by two percentage points to account for 19 percent of overall volumes, while Manufacturing and Technology, Media & Telecommunications sector transactions remained broadly similar to their long-term proportions.

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Energy & Resources Other

Agriculture

Consumer Business &Transportation

Automotive

Life Sciences & HealthcareManufacturing

Technology, Media andTelecommunications

Construction

Real EstateGlobal Financial ServicesIndustry

Chart 2: 2005-Q3 2012 Chinese outbound M&A investments by sector (volume)

While Energy & Resources deals accounted for 28 percent of all China outbound M&A investment by volume, they made up 66 percent of all China outbound M&A investments in terms of value, with a total of US$187.3 billion being spent on such deals between 2005 and Q3 2012. Over the Q1-Q3 2012 period alone, some US$35.3 billion was spent on overseas Energy & Resources acquisitions. In contrast, over the same period in 2011, outbound Energy & Resources investments by value totaled just US$24.5 billion.

Interestingly, over the whole timeframe in question, Global Financial Services Industry investments totaled some US$29.6 billion, yet the bulk of these investments, totaling US$23.7 billion, took place between 2005 and 2010. Since then, just US$5.9 billion has been spent acquiring overseas banks and financial institutions, the largest of these being the 2012 bid by the Hong Kong Stock Exchange to acquire the London Metal Exchange for US$2.1 billion.

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Life Sciences & Healthcare

Construction (<1%)

Global Financial ServicesIndustry

Manufacturing

Technology, Media andTelecommunications

Other

Automotive

Agriculture (<1%)Consumer Business &Transportation

Real Estate (<1%)

Chart 3: 2005-Q3 2012 Chinese outbound M&A investments by sector (value)

Over the Q1-Q3 2012 period alone, some US$35.3 billion was spent on overseas Energy & Resources acquisitions

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Another sector that is seeing an increasing number of outbound deals take place is the Consumer Business & Transportation industry

Energy & Resources Consumer Business & Transportation Manufacturing

Technology, Media & Telecommunications Global Financial Services Industry Other Automotive

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Chart 4: Chinese outbound M&A investments by sector (volume)

A number of trends emerge when looking at the percentage distribution of outbound M&A investments by volume over time. China's appetite for foreign Energy & Resources assets has remained strong over the period in question, with the sector accounting for a steadily-growing proportion of overall outbound transactions. Over 2005, just 10 outbound Energy & Resources deals were announced. In 2008, this number had grown to 34 and over the first nine months of 2012, 39 such transactions had come to market.

Another sector that is seeing an increasing number of outbound deals take place is the Consumer Business & Transportation industry. Over 2006 and 2007, just 20 such outbound deals took place, with volumes rising to 33 over the 2008-2009 period. However, over the two years of 2010 and 2011, this figure jumped, with some 64 outbound Consumer Business & Transportation deals being announced.

Meanwhile, over the seven years between 2005 and 2011, the average number of outbound Manufacturing sector deals that came to market every year was 19, while the mean number of Technology, Media & Telecommunications transactions was 17. Finally, over the whole seven-year period, an average of four Automotive sector deals would take place, although over 2010 and 2011, the annual mean would actually be closer to eight deals.


Over the 2005-Q3 2012 period, Chinese overseas acquisitions saw some 162 deals, comprising around 18 percent of the overall figure, target Western European assets. Meanwhile, Chinese acquirers undertook 159 purchases of targets based in the US and a further 132 within South East Asia. Lastly, 130 deals targeting assets based in Australasia were announced.

At the other end of the spectrum, Chinese outbound acquirers conducted just nine acquisitions of targets based in the Middle East, the largest one of these being the January 2011 acquisition of a 60 percent stake in Makhteshim Agan Industries, the Israeli producer of off-patent crop protection solutions, by China National Chemical Corporation for US$2.5 billion.

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AustralasiaNorth AsiaNorth AmericaSouth Asia

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Chart 5: 2005-Q3 2012 Chinese outbound M&A investments by geography (volume)

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Chart 6: 2005-Q3 2012 Chinese outbound M&A investments by geography (value)

Outbound M&A values by target geographical region are led by acquisitions of Western European targets, with such deals accounting for some US$71.1 billion of outbound investments, equating to around 25 percent of the total amount invested overseas between 2005 and Q3 2012. Meanwhile, the total amount spent on purchases of US targets amounted to US$29.7 billion, less than the US$46 billion invested in other North American countries – most notably Canada. In fact, of the US$44.8 billion that Chinese investors have spent purchasing Canadian assets since 2005, US$42.8 billion was spent buying Canadian Energy & Resources targets.

Meanwhile, Chinese M&A investments into Australasia totaled US$31.2 billion over the 2005-Q3 2012 period, while the total amount invested in South East Asia was US$22.5 billion over the same timeframe.

Of the US$44.8 billion that Chinese investors have spent purchasing Canadian assets since 2005, US$42.8 billion was spent buying Canadian Energy & Resources targets

8

Looking at the distribution of outbound M&A deal volumes by geographic region over time, it is clear to see that there has been a steady increase in the number of outbound deals targeting Western European assets. Indeed, in 2009, just twelve outbound deals, accounting for 8 percent of the total, took place. This number rose to 31 transactions, comprising close to one-quarter of the overall number, over the first three quarters of 2012.

What is also noticeable is that the proportion of Chinese outbound acquisitions of US targets has fallen correspondingly. In 2009, one-fifth of all overseas purchases by Chinese bidders were of US targets. Over the Q1-Q3 2012 period, this proportion had fallen to 11 percent.

The possible reasons behind this shift are numerous. The onset of the Eurozone sovereign debt crisis and subsequent depreciation of the Euro against the RMB has prompted a number of outbound deals as governments across Europe sell public assets to raise funds. This has led to a rash of Chinese outbound acquisitions of European targets, a prime case in point being the December 2011 announcement that China Three Gorges Corporation had won the bid to buy a 21.35 percent stake in Energias de Portugal, the Portuguese state-owned energy group, for US$3.5 billion as the Portuguese government looked to raise funds to repay its €78 billion financial rescue package.

On the other hand, comparatively stricter interpretations of regulatory processes have made it difficult for Chinese companies who are looking to invest in the US to get their bids approved – the October 2012 clash between Huawei, ZTE and a Congressional intelligence committee being a good example of the kind of issues that potential Chinese bidders face when looking to acquire in the US.

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Chart 7: Chinese outbound M&A investments by geography (volume)


When looking at target sectors by geographical region, it is interesting to note that Chinese bidders are especially attracted to European Automotive targets, with such deals accounting for 50 percent of the overall proportion of outbound Automotive sector M&A transactions conducted between 2005 and Q3 2012. Meanwhile, more than half (56 percent) of the total number of overseas Global Financial Services Industry acquisitions were conducted in Asia. Finally, more than 60 percent of outbound Agriculture and Real Estate sector transactions were of Asian targets.

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Chart 8: Chinese outbound M&A investments by geography & sector (volume), 2005-Q3 2012

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Perhaps unsurprisingly, Chinese outbound deals worth between US$5 million and US$50 million made up the bulk of total China outbound deals with a total of 356 deals being announced over the 2005-Q3 2012 period. The next largest deal class by size were transactions that were valued between US$51 million and US$150 million, of which there were 140 deals.

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Chart 9: 2005-Q3 2012 Chinese outbound M&A investments by deal size (volume)

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Chart 10: 2005-Q3 2012 Chinese outbound M&A investments by deal size (value)

Looking at Chinese outbound deal sizes by value, the collective amount invested in deals worth more than US$1 billion accounted for 66 percent of the total – some US$189.1 billion. The total amount invested in deals valued between US$501m and US$1 billion accounted for a further US$39.7 billion while the total amount of deals valued between US$301m and US$500 million equated to US$21.5 billion.


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Chart 11: Chinese outbound M&A investments by deal size (volume)

Over the period 2005-Q3 2012, Chinese outbound M&A investments have clearly increased in terms of deal size. The percentage share of deals valued between US$5 million and US$50 million fell from making up close to half of the wider market (45 percent) in 2008, to accounting for just 36 percent of all deals in Q1-Q3 2012. Meanwhile, the proportion of large-cap (US$500 million+) transactions rose, accounting for 17 percent of all deals over the 2011-Q3 2012 period. In contrast, between 2005 and 2010, they accounted for just 12 percent of all transactions.

Over the period 2005-Q3 2012, Chinese outbound M&A investments have clearly increased in terms of deal size

12

Top 20 outbound M&A deals over 2011 - Q3 2012

Quarter |Year

Target Company DTT Sector Target Territory

Bidder Company Bidder Territory

Seller Company Seller Territory

Deal Value (US$m)

Q3 2012 Nexen Inc Energy & Resources

Canada China National Offshore Oil Corporation Ltd.

Hong Kong 17,654

Q3 2011 Northumbrian Water Group Plc

Energy & Resources

United Kingdom

Cheung Kong Infrastructure Holdings Limited

Hong Kong 7,786

Q4 2011 Petrogal Brasil, Lda. (30 percent Stake)

Energy & Resources

Brazil China Petrochemical Corporation

China Galp Energia, SGPS, S.A.

Portugal 4,800

Q4 2011 Energias de Portugal S.A. (21.35 percent Stake)

Energy & Resources

Portugal China Three Gorges Corporation

China Government of Portugal

Portugal 3,510

Q4 2011 GDF SUEZ E&P Norge AS (30 percent Stake)

Energy & Resources

France China Investment Corporation

China 3,187

Q3 2012 Wales & West Utilities Limited

Energy & Resources

United Kingdom

Cheung Kong Infrastructure Holdings Limited; Power Assets Holdings Limited ; Li Ka Shing Foundation Limited; Cheung Kong (Holdings) Limited

Hong Kong Canada Pension Plan Investment Board; Macquarie Global Infrastructure Fund II; AMP Capital Investors Limited; Macquarie Luxembourg Gas S.A.R.L.; Codan Trust Company Limited

Australia 3,034

Q4 2011 Daylight Energy Ltd Energy & Resources

Canada China Petroleum & Chemical Corporation

China 2,760

Q2 2012 AMC Entertainment Inc.

Consumer Business & Transportation

USA Dalian Wanda Group Corporation Ltd.

China Marquee Holdings USA 2,600

Q1 2011 Makhteshim Agan Industries Limited (60 percent Stake)

Manufacturing Israel China National Chemical Corporation

China Koor Industries Ltd 2,508

Q1 2012 Devon Energy Corporation (33.3 percent stake in five US oil and gas projects)

Energy & Resources

USA Sinopec International Petroleum Exploration and Production Corporation

China Devon Energy Corporation

USA 2,500

Q3 2011 OPTI Canada Inc. Energy & Resources

Canada China National Offshore Oil Corporation Ltd.

China 2,432

Q1 2011 Elkem AS Manufacturing Norway China National Bluestar (Group) Co., Ltd.

China Orkla ASA Norway 2,349

Q2 2012 London Metal Exchange Limited

Global Financial Services Industry

United Kingdom

Hong Kong Exchanges and Clearing Limited

Hong Kong 2,131

Q4 2011 Gloucester Coal Ltd Energy & Resources

Australia Yanzhou Coal Mining Company Limited

China 2,004

Q3 2011 Companhia Brasileira de Mineracao e Metalurgia (CBMM) (15 percent Stake)

Energy & Resources

Brazil Shanghai Baosteel Group Corporation; CITIC Group; Shougang Group Corporation; Anshan Iron & Steel Group Corporation; Taiyuan Iron & Steel Group Company Ltd

China Brasil Warrant Administracao De Bens E Empresas S.A.

Brazil 1,950

Q2 2011 Australia Pacific LNG Pty Limited (15 percent Stake)

Energy & Resources

Australia Sinopec International Petroleum Exploration and Production Corporation

China Origin Energy Limited; ConocoPhillips Company

USA 1,765

Q1 2011 BorsodChem Zrt (58 percent Stake)

Manufacturing Hungary Wanhua Industrial Group Co., Ltd.

China VCP Vienna; Permira United Kingdom

1,701

Q3 2012 Talisman Energy (UK) Ltd. (49 percent Stake)

Energy & Resources

United Kingdom

Sinopec International Petroleum Exploration and Production Corporation

China Talisman Energy Inc Canada 1,500

Q1 2011 Tullow Oil Plc (Exploration Areas 1, 2 and 3A) (33.33 percent Stake)

Energy & Resources

Uganda China National Offshore Oil Corporation Ltd.

China Tullow Oil Plc United Kingdom

1,467

Q3 2011 Metorex Limited Energy & Resources

South Africa Jinchuan Group International Resources Co. Ltd

Hong Kong 1,393


Looking specifically at the top twenty outbound M&A deals that have been announced since the beginning of 2011, it is instantly noticeable that the majority of the largest outbound deals to take place were undertaken in the Energy & Resources sector. Indeed, of the top 20 deals, 15 deals involved takeovers of overseas Energy & Resources targets, followed by three deals in the Manufacturing sector, and one deal each in the Consumer Business & Transportation and Global Financial Services Industry sectors.

The largest deal during this period was CNOOC's aforementioned US$17.6 billion bid for Canadian energy company Nexen, a transaction which is in fact, the largest-recorded Chinese outbound transaction. Meanwhile, the second-largest deal was Cheung Kong Infrastructure Holdings Limited’s US$7.8 billion bid for the UK's Northumbrian Water Group, a deal that was announced in Q3 2011.

The prevalence of outbound Energy & Resources sector investments is not surprising given the rapid pace of economic development that has come to characterize the Chinese economy over recent years. The authorities' 2008 economic stimulus package, together with their desire to promote economic development in the country's vast hinterland, has meant that China's appetite for raw materials has only increased over time.

The fact that a number of these multi-billion dollar Energy & Resources industry acquisitions have taken place in emerging markets such as Brazil and Uganda reinforces the perception that Chinese Energy & Resources focused bidders are increasingly ready to engage in high-risk high-reward M&A transactions as they look to diversify their portfolio of upstream natural resources suppliers.

Another theme that materialized over the course of 2011 and the first three quarters of 2012 was the number of distressed M&A situations, the vast majority of them being based in either Europe or North America. The previously-mentioned acquisition of a stake in Portugal's Energias de Portugal by China Three Gorges Corporation, Wanda's US$2.6 billion acquisition of AMC and Wanhua's US$1.7 billion stake acquisition of Hungary's BorsodChem are just some of the large-cap deals that fall into this category. And the list grows longer when sub-US$1 billion deals, such as Shandong Heavy Industry's recent acquisition, along with Royal Bank of Scotland Group and Strategic Value Partners, of bankrupt Italian yacht manufacturer Ferretti for US$663m, are taken into account.

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Chart 12: In which geographical region are you based?

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Chart 13: Which of the following best characterises your business?

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Chart 14: In which industry does your business primarily operate in?

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Chart 15: How many employees does your business employ?

What could the Chinese outbound M&A market look like in a year?In order to shed light on how the Chinese outbound M&A universe might look in the near future, Deloitte China surveyed 69 M&A practitioners, all of whom have had experience or knowledge of a Greater Chinese M&A transaction, in order to collate their opinions on the present and future state of this particular market. Their answers were collected in confidence and reported in aggregate, with the findings presented below.

Pre-qualifiers

Looking forward – market perspectives


Deal expectations

Two-thirds of respondents believe that Chinese outbound M&A deals will increase by more than 10 percent over the next year

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Activity will have increased by more than 25%

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Chart 16: What do you expect will be the level of Chinese outbound M&A activity in 12 months' time from now?

A combined 66 percent of respondents believe that Chinese outbound M&A transactions will increase by more than 10 percent over the coming 12 months, highlighting to some extent, that despite a confused macroeconomic outlook, M&A commentators remain bullish on future Chinese outbound deal flows.

In fact, just 10 percent of respondents believe that outbound M&A flows will decrease over the coming twelve months, although 6 percent of them go on to suggest that outbound M&A levels will fall by more than one-quarter. One such respondent added that China's domestic economy was now weakening, ultimately meaning that Chinese enterprises will increasingly lack funds to buy overseas – a theme that surfaced throughout the survey.

Nonetheless, there seems to have been some disagreement on the actual extent of China's recent slowdown as well as the government's response to it. One respondent went so far as to indicate that even though outbound investments were likely to rise over the coming year, there was now a large discrepancy between the national and provincial governments' responses to China's recent economic slowdown, with provincial mandarins attempting to outdo each other in terms of infrastructure investment, even while national bodies look to calm a softening market – moves which serve to make the domestic economic environment even more murky for prospective outbound investors.

Perhaps unsurprisingly, advisory respondents were more positive on prospective levels of activity, with more than three-quarters of them believing that outbound M&A flows would increase by more than 10 percent over the next 12 months. In contrast, only 59 percent of corporate respondents agreed with this assessment.

More than half of respondents expect the bulk of prospective Chinese overseas deals to be worth less than US$150 million

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Chart 17: In which deal size range do you expect to see the bulk of Chinese overseas acquisitions to take place over the next 12 months?

16

Around 55 percent of respondents believe that the bulk of all Chinese outbound M&A transactions over the coming year will take place in the lower-mid-market space (<US$150 million), with just a combined 22 percent judging that the majority of upcoming outbound deals will be worth more than US$300 million.

A number of respondents added that the question on valuations is very much dependent on who is conducting the deal, with one commenting that "the enterprises with strong capabilities are not likely to be impacted badly by economic downturn – they will still keep making large investments". Another respondent added that "Chinese entrepreneurs should wait [for] better horizons", presumably meaning that prospective bidders should adopt a wait-and-see approach to investing in today's volatile macroeconomic climate.

More than 50 percent suggest that South America is likely to witness the majority of Chinese outbound Energy & Resources acquisitions

More than half (55 percent) of respondents believe that the bulk of upcoming Chinese Energy & Resources acquisitions will take place in South America over the next year, with a further 43 percent and 42 percent considering that most Energy & Resources deals will take place in Africa and Asia respectively. At the same time, roughly one-in-five respondents believe that the bulk of Energy & Resources-related outbound transactions will look to acquire North American and/or European assets.

According to mergermarket intelligence, one such Chinese firm that is seeking Energy & Resources acquisitions across emerging markets is understood to be looking for Oil and Gas targets in Africa, the Middle East and South East Asia, firstly because "the company expects market demand for gas to be growing faster than demand for oil in the future" but also because "countries with partial political risk can offer greater opportunities to private companies".

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Chart 18: Over the coming 12 months, in which regions do you expect to see a sizable number of Chinese outbound Energy & Resources M&A investments taking place?

NB: Respondents may have selected more then one answer in response to this question.


According to mergermarket, another Chinese wind-energy firm is looking to target South American wind energy assets primarily due to favorable wind policies that have been implemented across the continent, which, in turn, have been implemented due to rising power demand.

More than one-third of respondents believe that Financial Services deals are likely to take place in either Asia or North America

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Chart 19: Over the coming 12 months, in which regions do you expect to see a sizable number of Chinese outbound Financial Services M&A investments taking place?

More than one-third of respondents believe that a sizable number of Chinese outbound Financial Services M&A investments will take place in North America and/or Asia over the coming 12 months, while more than one-quarter also believe that Chinese banks and financial institutions will target European Financial Services assets. On the other hand, roughly one-in-ten suggest that Chinese bidders will buy Middle Eastern and/or African banking targets.


18

The recent announcement that China Development Bank is looking to spend up to US$15.8 billion acquiring a UK, German or French bank with "reasonable international presence" is indicative of a new hunger among Chinese Financial Services players to expand overseas. Indeed, just two months prior to this announcement made by the bank's chairman, CITIC Securities purchased Hong Kong based CLSA Markets from France’s Credit Agricole for US$1.25 billion, while in May 2012, China Construction Bank announced that it was looking to acquire the Brazilian assets of WestLB, the German bank for an undisclosed amount. Nonetheless, more recently, Mizuho Corporate Bank, a Japanese competitor, confirmed that it is also in contention for the asset, suggesting that competition for these types of targets is high.

Technology, Media & Telecommunications acquisitions likely to continue to target North American assets over 2013 despite regulatory obstacles

Close to half (45 percent) of respondents believe that potential outbound Technology, Media & Telecommounications purchases will focus on acquiring North American targets over the coming year, while a further 34 percent suggest that the bulk of such outbound transactions will take place within the Asia-Pacific region. Just 13 percent apiece believe that the majority of all outbound Technology, Media & Telecommounications deals will take place in either Africa or the Middle East.

This finding is broadly in line with historical trends over the 2005-Q3 2012 period, with some 41 percent of all outbound Technology, Media or Telecommunications transactions being purchases of North American targets. Similarly, Asian targets made up 38 percent of the total number of outbound deals in this regard.

Perhaps one of the most notable outbound Technology, Media & Telecommounications deals to have been announced over 2012 was Chinese sovereign wealth fund China Investment Corporation's (CIC)

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Chart 20: Over the coming 12 months, in which regions do you expect to see a sizable number of Chinese outbound Technology, Media & Telecommunications M&A investments taking place?



US$484m acquisition of a 7 percent stake in Eutelsat Communications, the French provider of satellite communications resources, from Abertis Infraestructuras, its Spanish parent, in a deal which was announced towards the end of June 2012. The transaction was undertaken as Abertis looks to focus on its core operations.

Asia, North America & South America the most likely regions where Chinese Consumer Business & Transportation M&A investments will take place over next 12 months say respondents

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Chart 21: Over the coming 12 months, in which regions do you expect to see a sizable number of Chinese outbound Consumer Business & Transportation M&A investments taking place?

No doubt buoyed by the rapidly growing economies of South East Asia and South America, as well as being enticed by a rise in the number of corporate Consumer Business & Transportation sector fire-sales that are taking place across North America, more than one-quarter of respondents believe that the bulk of Chinese outbound Consumer Business & Transportation-related deals will take place within these three regions over the coming year.

Chinese Consumer Business & Transportation acquisitions of North American assets have broadly been divided between mainland Chinese bidders hunting for distressed assets, such as Dalian Wanda's recent US$2.6 billion acquisition of loss-making US theater company AMC Entertainment and Contec Corp's acquisition of previously bankrupt Power Balance LLC, the US company that manufactures and markets sports accessories, as well as Hong Kong-based Consumer Business & Transportation-focused businesses (most notably Li & Fung, the world's largest consumer products supplier, and New World Services Holdings) buying up North American consumer brands (in the case of Li & Fung) or Transportation assets (in the case of New World Services). Indeed, between them, the two companies have accounted for more than one-quarter of all Chinese outbound Consumer Business & Transportation deals into the US over the 2005-Q3 2012 period.


20

Chinese Consumer Business & Transportation acquisitions of North American assets have broadly been divided between Chinese Mainland bidders hunting for distressed assets and Hong Kong-based Consumer Business & Transportation-focused businesses buying up North American consumer brands or transportation assets

South America & Asia listed as the most likely destinations for outbound Manufacturing sector acquisitions say respondents


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Chart 22: Over the coming 12 months, in which regions do you expect to see a sizable number of Chinese outbound Manufacturing M&A investments taking place?

More than one-third of respondents believe that acquisitive Chinese Manufacturing sector players are primarily going to target South American & Asian assets over the coming year, with a further one-quarter believing that Chinese buyers could also make the bulk of their overseas Manufacturing purchases in North America.

The finding is partially at odds with recent historical data which shows that the bulk of Chinese outbound Manufacturing sector activity has been of European targets. Indeed, over the first three quarters of 2012, exactly half of all Chinese outbound Manufacturing deals were buys of European assets – just under half of these again, being of German mittelstand businesses.


Nonetheless, Chinese Manufacturing sector interest in South America is certainly ramping up, with Randon, the Brazilian automotive parts maker, recently announcing that it has signed an initial agreement to form a joint venture with China Sinomach Heavy Industry in Brazil in order to manufacture and sell excavators.

Prior to this announcement, Embraer, the Brazilian aviation specialist, and Aviation Industry Corporation of China (AVIC), signed an agreement to build Embraer’s Legacy 600/650 executive jets in China, using the infrastructure, financial resources and workforce of their joint venture, Harbin Embraer Aircraft Industry.

Emerging markets predicted to see the majority of Chinese outbound Construction sector acquisitions over the next year


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Chart 23: Over the coming 12 months, in which regions do you expect to see a sizable number of Chinese outbound Construction M&A investments taking place?

32 percent of respondents believe that Chinese outbound Construction sector acquirers will stay close to home and will most likely purchase Asian Construction sector assets, while a further 23 percent apiece consider that assets located in Africa and/or South America will also be attractive to potential Chinese Construction sector acquirers looking overseas.

Chinese Construction industry players have already started to gain exposure to the African market recently, especially following the opening of the US$200 million African Union Headquarters in Addis Ababa earlier in 2012, which was designed and built by China State Construction Engineering. More recently, China's Import-Export Bank announced that it would lend US$600 million to the Nigerian government at a market-beating rate of 2.5 percent in order to facilitate the construction of a railway system that will serve the country's capital – and which will be built by China's Civil Engineering Construction Corporation.

22

Outbound Life Sciences & Healthcare opportunities to take place across North America, Asia, South America and Europe say respondents

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Chart 24: Over the coming 12 months, in which regions do you expect to see a sizable number of Chinese outbound Life Sciences & Healthcare M&A investments taking place?


More than one-in-five respondents believe that the bulk of outbound Life Sciences & Healthcare acquisitions will take place in either North America, Asia, South America or Europe over the coming 12 months, with only 8 percent and 6 percent respectively, highlighting either Africa or the Middle East as significant recipients of Chinese Life Sciences & Healthcare M&A investment in this regard.

China's attraction to North American and European Life Sciences & Healthcare assets is clearly one that revolves around the purchase of new pharmaceutical or healthcare product lines that either complement existing product offerings at home or allow the bidder to move into new product areas. According to mergermaket, China Resources Saike Pharmaceutical, the Beijing-based drug maker owned by state-controlled China Resources Pharmaceutical Group, is actively seeking buys overseas, especially of European specialists in cardiovascular, ophthalmic and urinary drugs as it is looking to widen its drug portfolio at home.

Similarly, Chinese interest in buying into high-growth regions such as Asia and South America presumably revolves around acquiring market share in geographies with high growth potential.

More than one-in-four respondents believe that the bulk of future outbound Life Sciences & Healthcare acquisitions could take place in North America


Outbound Real Estate sector acquisitions most likely to take place in North America respondents believe

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Chart 25: Over the coming 12 months, in which regions do you expect to see a sizable number of Chinese outbound Real Estate M&A investments taking place?


30 percent of respondents believe that over the coming 12 months, Chinese Real Estate sector players will chiefly look to invest in North America, closely followed by 23 percent who consider that the most important market will be within Asia. A further 21 percent suggest that Real Estate developers will largely examine European opportunities.

Interestingly, between 2011 and Q3 2012, the bulk of outbound Real Estate deals took place in either Asia or Europe (43 percent apiece), with the largest such deal being the US$103 million acquisition by Pickard Enterprises, a Chinese bidco, for a 30.6 percent stake in Singaporean-listed Real Estate entity Centraland, a deal which took place in August 2011.

24

Respondents believe that softening economic figures and inflationary pressures have the least positive domestic economic impact on prospective outbound deal flow

Continued implementation of the 12th Five-Year Plan Securing deal financing Regulatory frameworks

RMB internationalisation/dim sum bond offerings Softening economic growth/inflationary pressure

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Chart 26: Rate each of the following domestic factors on a scale of 0-10 (with 0 = very negative impact, 5 = neutral impact and 10 = very positive impact) in terms of their influence on the level of Chinese outbound investments over the next year

It is perhaps surprising that respondents, on average, were positive on the impact that all five domestic influences examined would have on outbound investment activity, with not one factor eliciting a low enough cumulative ranking to put it below the threshold.

Softening Chinese economic growth & inflationary pressures exert arguably the least pronounced impact on prospective outbound deal activity – an interesting finding given China's recent economic metrics. Of perhaps more importance is the rise of the RMB in global financial markets (RMB internationalization & dim sum bond offerings) as well as domestic regulatory frameworks, the former having been covered quite extensively in the press over the past twelve months (see below).

However, the domestic issues that seem to be driving potential outbound M&A activity the most are the relative ease of securing deal financing as well as the continued implementation of its 12th Five-Year Plan, which – among other aims – looks to radically overhaul and upgrade China's current Manufacturing industry via a number of methods, the acquisition of technological best practices and inorganic growth being just two of them.


The link between dim sum bonds and outbound M&APartially derived from China Law & Practice Magazine, 24 May 2012

On 24 April 2012, China’s National Development and Reform Commission (NDRC) published a Circular which publicized its approval for four state-owned firms to offer dim sum bonds on the Hong Kong market.

Three power companies and a mining company China Minmetals, Guangdong Nuclear Power, Huaneng Power and Datong Power – were together, allowed to offer some US$2.93 billion in RMB-denominated bonds in Hong Kong. Datong Power was the first to make the most of this particular opportunity, raising some US$159 million less than two months after receiving approval.

This particular fundraising exercise followed hot on the heels of Baosteel's US$1 billions RMB capital raise – the first Chinese non-financial sector dim sum bond offering – which took place in October 2011.

Before the release of the Circular, dim sum bonds were covered under Interim Measures released in 2007. Under the measures, approvals for non-financial institutions to issue dim sum bonds were granted on a discretionary basis. While the 2012 revisions initially seemed to be relatively minor, the Circular now appears to formalize the approval process and sets out the requisite regulatory framework.

The changes include removing a 30-day requirement for the issuer to return the proceeds from the capital raise to the PRC. However, under the new Circular, these proceeds must be used to invest in fixed asset investment projects in line with China’s macroeconomic policies.

Despite the issuance of the new Circular, it remains to be seen whether or not Chinese enterprises who raise capital via local (or Hong Kong) markets will use the proceeds to finance overseas acquisitions. While there have been numerous rumors to this affect, to date, no Chinese acquirers of foreign assets have publicized the fact that they have conducted an outbound M&A transaction utilizing such funds.

It remains to be seen whether or not Chinese enterprises who raise capital via local (or Hong Kong) markets will use the proceeds to finance overseas acquisitions

26

Respondents are broadly positive on the influence of global factors on prospective Chinese outbound investments over the coming year

Asian regional stability The Eurozone sovereign debt crisis Softening international financial markets

US leadership change US economic recovery

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Chart 27: Rate each of the following international factors on a scale of 0-10 (with 0 = very negative impact, 5 = neutral impact and 10 = very positive impact) in terms of their influence on the level of Chinese outbound investments over the next year

Again, it is surprising that cumulatively, respondents could not rank one single international factor as likely to have a negative influence on prospective Chinese outbound activity over the coming 12 months, although the pace of the US economic recovery came close to being a neutral influence on potential deal flow in this regard.

Perhaps more interestingly, while European respondents (and to a lesser extent, those based in the Americas) were either neutral or slightly negative on the impact that the Eurozone sovereign debt crisis would have in determining whether or not potential Chinese bidders would purchase abroad, Asia-Pacific-based respondents considered this driver to be the most attractive factor influencing possible buyers.

At the other end of the spectrum, it is noteworthy that respondents from all three geographical regions consistently believe that the Asia-Pacific region's relative economic stability is important in driving outbound Chinese investment – the variance in answers between the three different sets of respondents being much lower than in relation to other responses.


More than one-quarter of respondents think that prospective Chinese buyers will target North American assets in order to acquire new technological best practices

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Chart 28: Over the coming 12 months, what will be the primary objectives of Chinese acquirers when pursuing outbound M&A investments in North America?


More than one-quarter of respondents suggest that the reason why Chinese bidders might target North American assets over the coming year is to acquire technological know-how from the target – a finding that is in line with previous results. At the same time, one-in-five consider brand acquisition, and/or increasing overseas market share as the main reasons why Chinese bidders would purchase North American businesses.

Perhaps surprisingly, given CNOOC's recent bid to acquire Canada's Nexen, as well as Sinopec's US$2.5 billion acquisition of the US's Devon Energy earlier on in 2012, just 6 percent of respondents indicate that they believe Chinese buyers would look to secure resource assets via an M&A deal in the region.

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CNOOC's bid for NexenSources: Financial Times, Wall Street Journal, mergermarket

In one of the more recent deals involving China’s state-controlled oil producers targeting international energy companies, CNOOC announced that it was bidding to acquire Canada’s Nexen Inc for US$17.6 billion in late July 2012. Assuming control of Nexen’s oil fields will give China a presence in a number of oilfields, including ones off the Gulf of Mexico, the oil sands in Alberta, the North Sea and off the coast of Nigeria. The deal will also provide access to alternative energy sources such as LNG, as well as deep water oil reserves that CNOOC currently lacks exposure to.

China has increasingly been looking to the West to secure its energy supplies. As a result, there has been an uptick in Chinese investments in North America, with Sinopec recently acquiring a 33.3 percent stake in five US-based oil and gas projects from Devon Energy Corporation.

The Chinese government is also looking to supplement these acquisitions with buys in frontier regions such as South America and Africa. Indeed, according to mergermarket, earlier in 2012, Sinochem, the state-owned Chinese conglomerate, acquired TEPMA BV, the Colombian company engaged in oil and gas production, as well as pipelines system management, from Total S.A., its French owner, for around US$438 million.

However, as ever, doing a cross-border transaction remains far from easy. Despite offering a healthy premium to the target's share price, CNOOC's bid was reportedly subject to a large amount of skepticism and negative publicity amid rumors of insider trading and regulatory scrutiny from the Committee of Foreign Investment into the United States (CFIUS).

Delving into the insider trading rumors more closely, according to the Financial Times newspaper, US courts recently froze the brokerage accounts of Well Advantage, a privately-owned company, in Hong Kong and Singapore. Additionally, the US Securities and Exchange Commission sued Well Advantage for insider trading related to the CNOOC-Nexen deal. Well Advantage allegedly made US$13 million in profits by trading in Nexen shares a few days before the acquisition bid went public.

Another challenge that has long plagued Chinese businesses looking to enter the North American market is whether or not they will be able to successfully negotiate the regulatory hurdles in both Washington D.C. and Ottawa. CNOOC is no stranger to this particular phenomenon, having been unsuccessful in its 2005 bid to take over Unocal, a US petroleum business, primarily due to concerns over national security. This time round, to ease such fears, CNOOC has promised to retain current Nexen employees after the deal is completed and establish its North American headquarters in Calgary, Alberta.

However, it remains to be seen whether this will be enough to appease lawmakers such as Chuck Schumer, member of the Democratic Senate leadership, who recently asked CFIUS to not “miss this opportunity… to hold China to the commitments it has made to provide a level playing field for US companies seeking to access Chinese markets.”

Another challenge that has long plagued Chinese businesses looking to enter the North American market is whether or not they will be able to successfully negotiate the regulatory hurdles in both Washington D.C. and Ottawa


28 percent of respondents believe that acquiring reputable brands, as well as technological best practices, are the reasons why Chinese businesses will invest into Europe

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Chart 29: Over the coming 12 months, what will be the primary objectives of Chinese acquirers when pursuing outbound M&A investments in Europe?


It should come as no surprise that respondents highlight that the main reasons why possible Chinese buyers might acquire European assets over the coming 12 months would be to secure reputable brand names and/or acquire cutting-edge technology. Meanwhile, growing market share overseas is also another important factor to buy into Europe, according to a further 25 percent of respondents.

The who's who of now wholly or partially-owned European brand names that have come into Chinese control over 2011 and 2012-to-date include Salvatore Ferragamo, the eponymous mens' tailor, Robert Clergerie, the French company which produces up-market shoes, Sonia Rykiel, the French fashion house, Aquascutum, the British fashion group famous for its Club Check apparel, and finally, Gieves and Hawkes, the famous British bespoke tailor.

The who's who of now-wholly or partially-owned European brand names that have come into Chinese control over 2011 and 2012 includes Salvatore Ferragamo, Robert Clergerie, Sonia Rykiel, Aquascutum and Gieves and Hawkes

30

Chinese acquirers of an Asian target are more likely to be looking to make an overseas acquisition in order to extend product lines overseas, or to a lesser extent, be hunting for synergy extraction, market share growth or simply resource assets

Extending product lines into fast-developing economies is likely to be the main reason to move into the Asia-Pacific region say 28 percent of respondents.

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Chart 30: Over the coming 12 months, what will be the primary objectives of Chinese acquirers when pursuing outbound M&A investments in Asia?


Closer to home, possible Chinese acquirers of an Asian target are more likely to be looking to make an overseas acquisition in order to extend product lines overseas, or to a lesser extent, be hunting for synergy extraction, market share growth or simply resource assets. According to respondents, only a handful will be looking to acquiring technological best practices or brand-names when looking to buy within the Asia-Pacific region.


North American domestic legislation is the primary issue facing Chinese acquirers looking to buy into the region

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Chart 31: Over the coming 12 months, what will be the primary obstacles facing Chinese acquirers when pursuing outbound M&A investments in North America?


30 percent of respondents believe that the main obstacle facing prospective Chinese bidders looking to acquire North American targets will be domestic legislation that stifles foreign ownership. A further 25 percent and 22 percent of respondents respectively also go on to suggest that management culture clashes and discrepancies when it comes to buyer and seller price expectations could also adversely impact potential outbound opportunities into North America.

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Committee on Foreign Investment in the United States – 2011 Annual ReportSource: Mayer Brown legal update, 13 December 2011

The Committee on Foreign Investment in the United States (CFIUS) issued its Annual Report to Congress on 9 December 2011. The report reflects the US government’s intensified scrutiny of risks to US national security from foreign investment. CFIUS is an inter-agency US government body, chaired by the Department of the Treasury that reviews foreign acquisitions of US businesses for national security issues. The Annual Report details CFIUS’s review of transactions covered by the Foreign Investment and National Security Act of 2007.

According to the report, in 35 of the 93 transactions for which notices were filed in calendar year 2010, CFIUS extended the regular 30-day review to an investigation phase of up to an additional 45 days. This 38 percent rate of extended reviews is similar to the 2009 rate, but is roughly double the 2008 rate of 19 percent. As in the previous two years, there were no presidential decisions on transactions in 2010.

In 2010, CFIUS approved the withdrawal of 12 notices, including six after CFIUS began an investigation. Five of those withdrawn notices were abandoned by the transaction parties; another five of the notices were re-filed and CFIUS later concluded action (i.e., approved the transactions) in these cases. The remaining two withdrawn cases were re-filed in 2011.

Mitigation measures were imposed more frequently in 2010 than in previous years. Mitigation agreements require transaction parties to make divestments, make modifications to acquisition agreements, or take other steps to address national security concerns. Parties adopted mitigation measures in nine of the transactions noticed in 2010. By contrast, 2008 and 2009 combined saw seven mitigation agreements.

The primary sources of foreign investment in transactions subject to the Foreign Investment & National Security Act in 2010 were the United Kingdom, Japan, Israel, France, China, and Canada. The United Kingdom alone accounted for more than 27 percent of transactions. The leading sector for covered transactions in 2010 was manufacturing, followed closely by the combination of finance, information, and services.

In 35 of the 93 transactions for which notices were filed in calendar year 2010, CFIUS extended the regular 30-day review to an investigation phase of up to an additional 45 days


Differing management cultures, as well as gaps in bidder/vendor price expectations are the most likely factors to impinge on Chinese outbound bids for European targets over the next year

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7

Chart 32: Over the coming 12 months, what will be the primary obstacles facing Chinese acquirers when pursuing outbound M&A investments in Europe?


20 percent or more of respondents believe that the biggest obstacles facing potential Chinese buyers of European assets is either that targets are unwilling to sell at what the buyer thinks is a fair price, or that target and buyer management structures and cultures will ultimately be incompatible with one another. 16 percent of respondents also go on to note that financing constraints facing the buy side could also hamper potential outbound acquisition opportunities of European targets.

34

Respondents' largest issue with buying in the Asia-Pacific region revolves around a lack of trust

0

5

10

15

20

0

5

10

15

20

% of respondents


information

19


ownership

Targetbusinesses

unwilling to sell

Exchangecontrol and



laws

Differingmanagement

cultures


10 10 10 9

4 4

Chart 33: Over the coming 12 months, what will be the primary obstacles facing Chinese acquirers when pursuing outbound M&A investments in Asia-Pacific region?


19 percent of respondents believe that the reliability of a target company's financials is the biggest challenge facing Chinese firms looking to acquire across the Asia-Pacific region. Smaller proportions also suggest that opaque regulatory agencies, differing price expectations, an inability to freely convert foreign currency, and the inconsistent application of laws and regulations also hinder prospective outbound deal prospects across Asia.

Interestingly, respondents' lack of trust in the ability of Asian targets to conduct a transaction in a transparent manner could be the reason why Chinese outbound acquisitions of Asia-Pacific based assets take a long time to complete. Anecdotal evidence shows that between 2005 and the end of Q3 2012, the average number of days it took for a Chinese bidder to complete an outbound acquisition across the Asia-Pacific region was 122 days, or approximately four months. In North America, this figure was just 79 days, while in Europe it was 87 days.

Interestingly, respondents' lack of trust in the ability of Asian targets to conduct a transaction in a transparent manner could be the reason why Chinese outbound acquisitions of Asia-Pacific based assets take a long time to complete


Close to one-quarter of respondents have been involved in a Chinese outbound M&A investment in some way

23%

32%

45%

No Yes Unsure

Chart 34: Has your company ever been involved in/advised on a Chinese outbound M&A investment?

23 percent of the respondents interviewed for this survey commented that their business had previously been involved in, or they had advised on, a Chinese outbound M&A transaction.

50 percent of respondents have conducted deals in the <US$150m space

31%

19%

12%

19%

19%

<US$5m US$5m-150m

UnsureUS$301m-500m

US$151m-300m

Chart 35: What was the value of the transaction (in US$m)?

A total of half of these respondents had worked on outbound transactions worth up to US$150m, while another 31 percent had completed transactions worth between US$150m and US$500m.

More than half of respondents have worked on deals which resulted in a controlling-stake acquisition of the target

13%

56%

31%

No Yes Unsure

Chart 36: Did the investment result in a change in overall ownership of the asset in question?

More than half of respondents had undertaken a controlling stake acquisition in the target, a figure that stands in line with historical averages. Over Q1-Q3 2012, around 64 percent of all Chinese outbound deals were acquisitions of controlling stakes.

The majority of transactions were undertaken in order to secure resource assets

6%

13%

13%

12%

37%

19%

Secure resources assets

Extend product lines overseas

Acquire technological best practices

Grow market share abroad

Do not want to disclose

Unsure

Chart 37: What was the fundamental rationale behind the investment?

36

More than half of respondents indicated that the primary rationale behind their particular transaction was either to secure resource assets or acquire technological best practices.

Close to one-in-five respondents rank their own deal as not successful or worse while 44 percent suggest that the transaction was successful, or only marginally so

19%

19%

18%

44%

`Very or highly successful’

`Not that successful or not at all successful’

`Successful or marginally successful’

`Unsure’

Chart 38: In your opinion, how would you rate the outcome of the aforementioned M&A investment?

Only 18 percent of respondents thought that their deal could be considered as being very or highly successful, while 19 percent suggested that the deal they worked on was not that successful, or not successful at all.

At most, only one-quarter of respondents performed a high level of due diligence during the course of the transaction

6%19%

6%

19%

19%

31%

Maximum amount of due diligence

Reasonable amount of due diligence

High amount of due diligence

Low amount of due diligence

No amount of due diligence

Unsure

Chart 39: What level of financial due diligence was conducted on the target?

19%13%

13%

25% 31%





Unsure

Chart 40: What level of tax due diligence was conducted on the target?


12%19%

13%

18%

38%





Unsure

Chart 41: What level of commercial & operational due diligence was conducted on the target?

13%18%

13%

31%

25%





Unsure

Chart 42: What level of merger integration due diligence was conducted on the target?

Financial due diligence exercises were carried out to either a high or maximum degree in just 25 percent of cases say respondents, while the figures for tax, commercial & operational and merger integration due diligence exercises were even lower – just 12 and 13 percent in that order did so when it came to the latter two due diligence types. Furthermore, when it came to tax, commercial & operational and merger integration due diligence processes, more than 10 percent of respondents noted that no due diligence was conducted at all.

When it came to tax, commercial & operational and merger integration due diligence processes, more than 10 percent of respondents noted that no due diligence was conducted at all

38

Does a correlation exist between deal success and the amount of due diligence conducted?

1.0

1.5

2.0

2.5

3.0

3.5

1.0

1.5

2.0

2.5

3.0

3.5

Average level of due diligence conducted during the transaction(0 = no due diligence, 5 = maximum amount of due diligence)

Very or highly successful Successful or marginally successful

Outcome of transaction

Not that successful ornot at all successful

2.88

3.17

1.67

22

Chart 43: What is the correlation between respondents who believed in deal success and the amount of due diligence conducted during that transaction?

Analyzing respondents' answers, it would seem that there is some measure of correlation between the ultimate outcome of an outbound transaction and the amount of due diligence conducted during the deal process. If the average amount of due diligence undertaken on a specific transaction is measured on a scale of one to five (with five representing the maximum amount of due diligence undertaken across all due diligence fields and one representing no due diligence being conducted across all due diligence fields), and then compared against perceived deal success, it is interesting to note that those respondents who remarked that the outcome of their particular transaction was very or highly successful scored 2.88 out of a possible five in terms of the thoroughness of their due diligence exercises. Similarly, those respondents who believed that their transaction was successful or marginally successful suggested that a similar amount of due diligence was carried out. However, it is very clear to see that those respondents who noted that their deals were not successful undertook the least due diligence work of all.

It would seem that there is some measure of correlation between the ultimate outcome of an outbound transaction and the amount of due diligence conducted during the deal process


The majority of respondents believe that conducting due diligence is worthwhile

19% 62%

19%

Yes No Unsure

Chart 44: Ultimately, do you believe that conducting due diligence was worthwhile?

The bulk of respondents – including the bulk of those who went on to remark that their transactions were not particularly successful– agree that conducting a thorough due diligence process is ultimately worthwhile.

40 percent of respondents tracked synergies that were laid-out during the integration planning process

33%

40%

27%

Yes No Unsure

Chart 45: Post-sale, were synergies that were previously identified during the integration planning process and included in the initial valuation tracked and monitored?

Again not surprisingly, of those respondents who did track synergies throughout the deal process, all of them believed that the outcome of that particular transaction was successful, with 50 percent going on to say that they thought that particular transaction was either highly or very successful.

Conversely, of the one-third of respondents who didn't track such synergies from the outset, 50 percent of them went on to suggest that their deals were not successful.

Minority of respondents were unable to successfully resolve issues initially identified during due diligence within the timeframe specified

19%

31%

50%

0%-50% 51%-100% Unsure

Chart 46: Post deal, what percentage of issues that were identified during the due diligence process were successfully resolved within the timescale set up?

Reinforcing the perception that implementing solutions to issues that arose during a due diligence exercise within a timely manner is a difficult task, just 19 percent of respondents managed to resolve more than half of the problems identified by a due diligence exercise within a set timeline. Furthermore, just 13 percent commented that they had dealt with more than three-quarters of such issues in a timely manner.

40

Looking forward – market perspectives

An insight into Chinese manufacturing companies looking to buy overseas

In recent years, China's Manufacturing sector has experienced remarkable growth, buoyed by a bullish macroeconomic climate in the years before the Global Financial Crisis, as well as the implementation of a multi-billion dollar economic stimulus package following the collapse of Lehman Brothers. However, more recently, the future for such manufacturers has grown cloudier as the impact of the stimulus package fades and economic growth across China becomes less assured.

Given this, Deloitte China talked to five Chinese companies about their vision for the future, whether or not this vision included buying abroad, and their thoughts on owning and operating a business overseas. The five companies are described below:

Company A • is a leading manufacturer of construction machinery, agricultural equipment, and vehicles with annual revenues of more than US$1.5bn. At present, its global sales and services network is present in more than 100 countries.

Company B • is a large-scale manufacturer in China’s construction machinery industry. Its annual operating income is more than US$10 billion and the company markets its products across into 150 countries.

Company C • is a leading Chinese machine tool manufacturer. It employs more than 1,000 staff and its global sales and distribution network has expanded into more than 40 countries.

Company D • is a manufacturer of refrigeration equipment with more than 3,000 employees and with annual sales of around US$1 billion.

Company E • is a strategic onshore private equity platform, which currently manages funds worth more than RMB20 billion. It controls stakes in a number of Chinese manufacturing companies.

Deloitte China: What are the macroeconomic issues that are currently facing your particular industry?

"The machinery manufacturing industry has grown rapidly over the past few years, but the onset of the Eurozone sovereign debt crisis has meant that the first half of 2012 has been a frustrating period for us all" Company A's spokesperson began. China's 2008 economic stimulus package, which was implemented as a direct result of the Global Financial Crisis, resulted in massive investment taking place across China's infrastructure sector. "This obviously had a hugely positive impact on the machinery manufacturing industry, which saw annual growth levels rise rapidly as a result" he continued.

Nonetheless, he does not think that the Chinese government will implement another economic stimulus package anytime soon, "which will mean that future growth for the industry will almost certainly fall. Nonetheless we don't expect this drop-off to be too pronounced" he hopes.

However, a corollary of this is that many manufacturers are now operating at overcapacity. "We've actually suspended production as a result of overcapacity. For example, the firm has only sold 170,000 of the 500,000 excavator units it has produced. In addition, traditionally, the most profitable period for construction machinery sales is typically between February to May but unfortunately, sales were not in line with forecasts this year" he explained.

"There are comparatively more restrictions investing into the Japanese machine tool market than elsewhere. At the same time, there are cultural considerations to take into account when investing into Japan."


Finally, he mentions that the introduction of new payment packages, such as zero down-payments, which are now being increasingly asked for by customers, has meant that revenues have fallen recently. "Over 2012, these three issues have together, put many industry players under financial pressure" he added.

The issue of overcapacity resonates with the spokesperson of Company C, who went on to note that manufacturers within the advanced machine tool sector were also operating at overcapacity. He quickly moved on to indicate that competition from overseas is an issue too, saying that "our European, US, Japanese and Korean counterparts are all increasingly looking to increase their market share in China. As a result, domestic machine tool corporates have to progressively move into the more competitive low-end market in order to survive and this ultimately results in lower revenues all around."

The spokesperson from Company B, a construction industry player, disagrees with this sentiment, instead noting that "the domestic market is huge – Chinese demand still accounts for an overwhelming proportion of Chinese companies' sales volumes and I don't think that this will change anytime soon." In addition, he suggests that as 2013 draws nearer, Chinese construction machinery products will be increasingly bought by foreign customers, backing this up by remarking that nowadays, China is the number two construction machinery market globally, having risen from fourth place six years previously.

Deloitte China: Why would your business undertake an outbound acquisition?

Company A's spokesperson began by noting that growing their bottom line via overseas expansion is the primary reason for conducting outbound acquisitions, adding that the company expects to eventually derive around 30 percent of their total sales volumes from foreign markets. "Sometimes, in order to successfully achieve these goals, inorganic growth is required" he said.

The acquisition of technological know-how is also an important driver of Company A's outbound growth strategy. Echoing a sentiment aired previously, the company's spokesperson went on to explain that many domestic construction machinery component manufacturers are still primarily operating in the middle and low-end of the market, which is chiefly characterized by intense price competition. At the same time, many producers in this particular market have to depend on the import of certain core components from overseas which they cannot replicate locally. "Obviously, any domestic manufacturer who can avoid having to import expensive but crucial components from overseas will quickly be able to dominate this particular market – and one method of quickly doing so is by acquiring the technological ability to produce these components in China" he surmised.

Company A's spokesperson also noted that another reason to buy overseas is in order to quickly establish distribution networks and channels that might otherwise require an excessive amount of time to set up. "Expanding distribution channels in target markets abroad is another driver for conducting outbound M&A deals but doing so is not especially vital because such channels can be more easily established via organic means" he commented.

Meanwhile, Company D echoes these thoughts on acquiring overseas in order to access technology, their spokesperson adding that "the company began to develop its own technological processes in 1996 but we only started large-scale production in 2007 and 2008 and final marketing for this product only began in 2012. As a consequence of such long lead-in times, we believe that now is a good time to acquire or introduce new technology into our company from abroad as the overall process is much quicker."

This desire to acquire overseas in order to gain access to technology is also strong with Company B, whose spokesperson, when asked, states boldly that acquiring technology is the firm's top consideration when looking to acquire overseas. He goes on to add that the firm's ability to manufacture components cheaply and efficiently still lags behind its foreign competitors.

42

Deloitte China: If you were to buy overseas, where would the most attractive overseas markets be?

Company A's spokesperson was quick to note that from a market expansion perspective, the firm is primarily targeting emerging markets and developing countries although it intends to retain its current sales operations in the U.S. and Europe. However, in terms of conducting outbound acquisitions to obtain technological best practices, the company "is eyeing European opportunities, as many potential targets possess the technological know-how for us to overcome our current foreign supply bottlenecks."

Company B's spokesperson also highlighted Europe as the company's current geographical focus for potential outbound investment, adding that "European manufacturers have retained their focus on quality while – in our view – their US counterparts are now too interested in financial engineering to be worthwhile targets for us to consider."

Meanwhile, Company C's spokesperson pointed out some of the issues facing overseas investment into certain geographical regions: "There are comparatively more restrictions investing into the Japanese machine tool market than elsewhere. At the same time, there are cultural considerations to take into account when investing into Japan. Likewise, US policies and legal frameworks don't offer indigenous Manufacturing sector businesses much encouragement or support and given the current weak macroeconomic outlook, it would be foolhardy to invest there. Finally, other overseas industries, such as those found in Russia, employ less efficient methods of production than local Chinese competitors, obviously meaning that investment there is unlikely to take place."

Echoing Company A's view that strategic overseas expansion might not mirror the need to expand market share, the spokesperson from Company D mentioned that the firm would like to expand into fast-growing emerging markets such as India, Brazil and the Philippines, yet would also like to acquire European targets, primarily in order to utilize their technological abilities. This view was also reinforced by Company E's spokesperson.

Deloitte China: What obstacles do you think could impact potential Chinese bidders looking to buy overseas?

"To the best of my knowledge, around 80 percent of foreign investments into China have ultimately been successful – yet at the same time, around 80 percent of Chinese M&A acquisitions overseas have been – in the end – failures" began Company B's spokesperson. This viewpoint might be a result of the fact that as a state-owned enterprise, Company B faces stringent foreign anti-monopoly laws when looking to buy overseas – an important consideration to take into account for any Chinese business that is looking to globalize.

Integrity was also another issue which afflicted Company C, with their spokesperson noting that "previously, we were in negotiations to acquire an overseas target but during those negotiations, found out that their employees were on strike. We confronted the target company's senior management about this but they denied the fact, instead saying that their employees were all on vacation. Needless to say, deal negotiations collapsed soon after."

Company E offers an interesting and perhaps unique insight into some of the difficulties that Chinese bidders face when buying overseas assets: "Chinese buyers – especially Manufacturing sector players – face a fundamental mismatch when buying overseas insofar as their targets are generally scaled enterprises employing best-practice technologies while they themselves are still striving to meet internationally-recognized standards of production. As a result, when deals do occur, successful post-merger integration processes take an inordinately long time to implement, reducing the overall synergistic efficiency of the transaction as a whole. At the same time, cross-border technological transfer remains a sensitive subject and one that does not necessarily occur as planned" he explained.

Around 80 percent of foreign investments into China have ultimately been successful – yet at the same time, around 80 percent of Chinese M&A acquisitions overseas have been – in the end – failures.


Deloitte China: What advice would you give to a prospective Chinese company looking to make an overseas acquisition?

Company A's spokesperson gave two pieces of advice for prospective Chinese manufacturers when evaluating overseas M&A opportunities: "Firstly, take time to learn about the local business environment of the target. Foreign business attitudes differ widely across, what on the surface, might seem to be a culturally homogenous industry. For example, European Manufacturing industry players are likely to be family-owned and open for acquisition, while their Japanese counterparts could very well be more conservative and therefore, comparatively less willing to sell to Chinese companies. Meanwhile, American Manufacturing enterprises are large in scale and are probably not appropriate targets for Chinese businesses" he said.

Secondly, he mentions that bidders should also know their own business before undertaking an overseas transaction. "It not advisable to conduct an overseas acquisition, which is inherently risky, simply in order to imitate others" he warned.

Company C spokesperson's advice focused on the amount of work required before even conducting an overseas transaction. "Any Chinese bidder must from a strategic perspective, ask whether

From a strategic perspective, does conducting an outbound M&A acquisition align with the firm's long-term strategy? If the buyer is seeking technological know-how as a result of a deal, could this new technology be properly integrated within their own operations? Comprehensive pre-deal evaluation is key to achieving success in any cross-border transaction and if the figures don't add up, transacting overseas can be immensely destructive in terms of value".

conducting an outbound M&A acquisition aligns with the firm's long-term strategy? If the buyer is seeking technological know-how as a result of a deal, could this new technology be properly integrated within their own operations? Comprehensive pre-deal evaluation is key to achieving success in any cross-border transaction and if the figures don't add up, transacting overseas can be immensely destructive in terms of value" he concluded.

Finally, Company D and E both highlight the need to look beyond mere financial metrics when deciding whether or not to conduct a deal. "Financial investors will evaluate any M&A transaction primarily through key performance indicators while strategic investors will examine the outcome of a deal in terms of opportunity cost. Given this, good communication and coordination with the target's management and shareholders is crucial to success if the buyer is a corporate entity, as value can be drained from the target if the target's shareholders and management are not completely in support of the transaction" Company E's spokesperson finished.

44


About theChinese Services Group


Deloitte is the only professional services firm to have such an expansive and dedicated cross-border network across functions and industries with the ability to react in real time to clients' needs - globally!

Lawrence ChiaGlobal CSG Co-ChairmanBeijing, China

Introducing the Chinese Services Group

The CSG serves as the unifying force to market, facilitate and deliver Deloitte professional services to both multi-national corporations investing into China and Chinese companies expanding overseas. Operating as a platform to leverage China expertise, bridge the cultural gap, and to ensure client service excellence, the Global CSG, in coordination with the China firm, complements a multi-member firm, multi-industry, multi-functional and multi-disciplinary approach.

Deloitte China + the Chinese Services Group = your China dimension

If you are considering taking your business to China, Deloitte’s Chinese Services Group can take the mystery out of how to successfully establish and grow your business. Our local presence in your country can give you a resource that understands you, your current business environment, and the new challenges that China poses.

Mark RobinsonGlobal CSG Co-ChairmanToronto, Canada

46

Japan

Russia

South Korea

Taiwan

Philippines

Guam

Mauritius

KenyaSingapore

Indonesia

Malaysia

Thailand

Nigeria

Angola

IndiaUAE

New Zealand

Australia

South Africa

Kazakhstan Mongolia

Italy

Luxembourg

Sweden

Norway

Iceland

United Kingdom

IrelandGreece

Denmark Austria

Finland

Belgium

Germany

Poland

Hungary

Cyprus

TurkeySwitzerlandSpain

France

Portugal

Netherlands

Argentina

Chile

Ecuador

United States

Colombia

Canada

Mexico

Brazil

Israel

CSG coverage

MaltaCaribbean Cluster

Vietnam

The CSG network has coverage in over 120 locations around the world spanning six continents!

Expanding around the globe…

How can the CSG add value?With China's continuance as one of the most critical investment priorities globally, the CSG can add value through various channels:

Inbound investment

Leverage China as a "door opener" & assume a high profile •on a subject, providing local expertise cutting across geographies & sectors.

Raise Deloittes' eminence in the market on issues of key •concern to our clients.

Outbound investment

Facilitate access to industry experts and key decision makers •throughout China.

Serve as a channel to communicate time-sensitive regulations •and updates on China for your business.


Deloitte's CSG network

AustriaHerbert Kovar+431 53 700 [email protected]

BelgiumCoen Ysebaert+32 9 393 [email protected]

Central EuropeGabor Gion+36 1 428 [email protected]

CISOleg Berezin+749 5 787 0600 [email protected]

CyprusChristis M. Christoforou+357 22 360 [email protected]

DenmarkMichael Toxværd Hansen+45 3610 [email protected]

FinlandEija Kuittinen+358 2075 [email protected]

FranceAnne Taupin+33 1 5561 [email protected]

GermanyDirk Haellmayr+49 69 75695 [email protected]

GreeceGeorge Cambanis+30 210 678 [email protected]

IcelandAgust Olafsson+354 580 [email protected]

IrelandLorraine Griffin+353 1 417 [email protected]

IsraelAmity Weber+972 3 608 [email protected]

ItalyDomenico Russo+39 02 8332 [email protected]

LuxembourgDirk Dewitte+352 45145 [email protected]

MaltaNick Captur+356 2343 [email protected]

NetherlandsRoger Brands+31 8828 [email protected]

NorwayKjetil Nevstad+47 23 27 92 [email protected]

PortugalLuis Miguel Belo+351 21 0427 611 [email protected]

SpainFernando Pasamon+34 915 [email protected]

SwedenTorbjorn Hagenius+46 75 246 [email protected]

SwitzerlandRalf Schlaepfer+41 44 421 [email protected]

TurkeyAnthony Wilson+90 212 366 [email protected]

United KingdomRalph Adams+44 131 535 [email protected]

CSG Leadership

For more information, please contact:

BeijingLawrence Chia Co-Chairman+86 10 8520 [email protected]

TorontoMark RobinsonCo-Chairman+1 416 601 [email protected]

BeijingJohnny ZhangCSG Director+86 10 8512 [email protected]

CSG Asia PacificAustraliaKeith Jones+61 8 9365 [email protected]

GuamDaniel Fitzgerald+1 371 646 3884dafitzgerald@deloitte. com

IndiaAtul Dhawan+91 124 679 [email protected]

IndonesiaClaudia Lauw+62 21 2992 3100 [email protected]

JapanHitoshi Matsumoto+81 09 09 688 [email protected]

MalaysiaTheng Hooi Tan+603 7723 [email protected]

New ZealandJenny Liu+64 9 303 [email protected]

PhilippinesDiane Yap+63 02 581 [email protected]

SingaporeErnest Kan+65 6530 [email protected]

South KoreaSung Sik Ahn+82 2 6676 [email protected]

TaiwanPeter Fan+866 2 2545 [email protected]

ThailandSubhasakdi Krishnamra+66 2676 5700 [email protected]

VietnamVo Thai Hoa+84 83 910 0751 [email protected]

AngolaRui Santos Silva+244 222 [email protected]

Eastern AfricaNikhil Hira+254 0 20 4230 [email protected]

ArgentinaEduardo De Bonis+54 11 5129 [email protected]

BoliviaSaul Encinas+51 11 5129 [email protected]

BrazilRicardo de Carvalho+55 11 5186 [email protected]

Canada (Eastern)Tan Ong+1 514 393 [email protected]

CSG Africa & The Middle EastFrancophone AfricaAlain Penanguer+33 1 5561 [email protected]

MauritiusJean-Noel Wong+230 403 [email protected]

South & Southern AfricaMark Casey+27 011 806 [email protected]

The Middle EastJames Babb+971 50 295 [email protected]

West & Central AfricaEvans Tomety+234 0 837 3100 [email protected]

CSG Europe

CSG North & South AmericaCanada (Western)Beverley Pao+1 604 640 [email protected]

Caribbean ClusterJohn Johnston+1 441 299 [email protected]

ChileAlvaro Mecklenburg+56 2 729 [email protected]

ColombiaRicardo Rubio+57 1 546 [email protected]

EcuadorJorge Brito+5392 [email protected]

El Salvador, Costa Rica,Nicaragua, HondurasFederico Chavarria+506 2246 [email protected]

MexicoDavid Chen+52 656 688 [email protected]

PanamaDomingo Latorraca+507 303 [email protected]

PeruHector Gutierrez+51 1 211 [email protected]

United StatesChristopher Cooper+408 704 [email protected]

UruguayPablo Rosselli+59 82 916 [email protected]

VenezuelaJoaquin Lopez+58 212 206 [email protected]

48

Contacts

The Global CSG Team

Lawrence ChiaCo-ChairmanBeijing, ChinaTel: +86 10 8520 7758Email:[email protected]

Johnny ZhangCSG Director Beijing, ChinaTel: +86 10 8512 7061Email:[email protected]

Chenney ChenCore Team MemberShanghai, ChinaTel: +86 21 6141 2775 Email:[email protected]

Molly YangCore Team Member Beijing, ChinaTel: +86 10 8520 7286Email:[email protected]

Wendy LiCore Team Member Beijing, ChinaTel: +86 10 8512 5480 Email:[email protected]

Mark RobinsonCo-ChairmanToronto, CanadaTel: +1 416 601 6065Email:[email protected]

Charlotte LiCore Team MemberShanghai, ChinaTel: +86 21 6141 2682 Email:[email protected]

Mason GaoCore Team MemberShanghai, ChinaTel: +86 21 6141 2681 Email:[email protected]

Rachel SongCore Team Member Beijing, ChinaTel: +86 10 8520 7057Email:[email protected]

Douglas RobinsonCore Team Member Hong KongTel: +852 2238 7631Email:[email protected]


Acknowledgements

50

Researched and written by:

Douglas RobinsonM&A Research ManagerM&A Services TeamChinese Services GroupTel: +852 2238 7631Email: [email protected]

Mason GaoSenior SpecialistChinese Services GroupTel: +86 21 6141 2681Email: [email protected]

Kathleen Tse Senior AssociateM&A Services TeamTel: +852 22387532 Email: [email protected]

Data supplied by:mergermarket

Notes


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About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/cn/en/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence.

About Deloitte in Greater ChinaWe are one of the leading professional services providers with 21 offices in Beijing, Hong Kong, Shanghai, Taipei, Chongqing, Dalian, Guangzhou, Hangzhou, Harbin, Hsinchu, Jinan, Kaohsiung, Macau, Nanjing, Shenzhen, Suzhou, Taichung, Tainan, Tianjin, Wuhan and Xiamen in Greater China. We have nearly 13,500 people working on a collaborative basis to serve clients, subject to local applicable laws.

About Deloitte ChinaIn the Chinese Mainland, Hong Kong and Macau, services are provided by Deloitte Touche Tohmatsu, its affiliates, including Deloitte Touche Tohmatsu Certified Public Accountants LLP, and their respective subsidiaries and affiliates. Deloitte Touche Tohmatsu is a member firm of Deloitte Touche Tohmatsu Limited (DTTL).

As early as 1917, we opened an office in Shanghai. Backed by our global network, we deliver a full range of audit, tax, consulting and financial advisory services to national, multinational and growth enterprise clients in China.

We have considerable experience in China and have been a significant contributor to the development of China's accounting standards, taxation system and local professional accountants. We provide services to around one-third of all companies listed on the Stock Exchange of Hong Kong.

This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively the "Deloitte Network") is by means of this publication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication.

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