shandong province m&a review and outlook 2014-2016 - pwcfrom future disposal of acquired...
TRANSCRIPT
PwC
Foreword — explanation of data shown in this presentation (1/2)
• The data presented in this report is provided by Zero2IPO, and Wind Information, with PwC analysis unless otherwise stated.
• Zero2IPO and Wind Information only disclose deals that have been officially announced to the public which may be still in progress at the time of writing.
• The number of deal transactions refers to the information announced to the public, monetary value of each transaction may not be disclosed in this presentation due to confidentiality.
• The monetary value of deals disclosed in this presentation only include public available information (referred to “disclosed value”) .
• The term “Domestic” refers to Mainland China.
• The terms “Foreign” or “Outbound” refer to deals in which companies from Mainland China acquire companies based in Hong Kong, Macau or other foreign countries or regions.
• The terms “Inbound” refer to deals in which companies from foreign countries or regions acquire companies based in Mainland China.
• “Private equity fund transactions ” refer to equity transactions carried out by financial investors or transactions executed by a private equity fund with no monetary value disclosed. Such transactions are mostly managed by private equity management companies, but may include transactions executed by financial institutions or corporations which are fundamentally with private equity investment nature.
Shandong Province M&A Review and Outlook • 2014-20162
May 2017
PwC
Foreword — explanation of data shown in this presentation (2/2)
• “Strategic investors” refer to corporation investors who incorporates acquired companies into its existing business operation after acquisition completed (compared with “financial investors”) .
• “Financial investors” refer to investors perform M&A transactions with the aim of making profit from future disposal of acquired assets/equities; including but not limited to private equity funds and venture capital funds.
• Deal value is translated based on relevant exchange rates from December 31, 2014 to December 31, 2016.
Shandong Province M&A Review and Outlook • 2014-20163
May 2017
PwC
Overview of M&A activities in Shandong Province
Shandong Province M&A Review and Outlook • 2014-20164
May 2017
PwC
The M&A market in Shandong Province has grown at a fast pace from 2014 to 2016. As of 2016, the number of transactions amounted to 311, with a total deal value of RMB 284.1 billion. In total, 92% of deals had a value above RMB 500 million, representing 19% of the total number of transactions over the period.
46,171
132,792
261,016
15,128 22,720 23,050
33
71 60
138 161
251
-
50
100
150
200
250
300
-
50,000
100,000
150,000
200,000
250,000
2014 2015 2016
Num
ber o
f dea
ls
Dea
l am
ount
: RM
B in
mill
ion
Deals of more than 500M Deals of less than 500M
Deals of more than 500M in volume Deals of less than 500M in volume
Shandong Province M&A Review and Outlook • 2014-20165
May 2017
Of total deal amount in China%: 2.62% 3.49% 5.35%
Deals in Shandong Province from 2014 to 2016 (Shand ong investors & Shandong investees)
Source: Zero2IPO, Wind Information, and PwC analysis
PwC
The value of merger and acquisition deals has continued to grow at a fast pace. As of December 2016, the number of outbound acquisitions by corporations in Shandong was 7times higher than in 2015. One factor is that increasing numbers of corporations in Shandong are looking to access overseas markets. Further, new policies encouraging SOE mixed-ownership reform, group restructuring and upgrades in industrial structures have led to more investors in manufacturing, energy & resources, agriculture & food industries. These increases have contributed to the rise of deal value in Shandong Province.
18,975
57,557
111,618
27,196
75,235
149,398
7
28 29 26
43
31
-
5
10
15
20
25
30
35
40
45
-
30,000
60,000
90,000
120,000
150,000
2014 2015 2016
Num
ber o
f dea
ls
Dea
l am
ount
: RM
B in
mill
ion
Investors from Shandong Investees of Shandong
Investors from Shandong in volume Investees of Shandong in volume
6May 2017Shandong Province M&A Review and Outlook • 2014-2016
Deals in Shandong Province from 2014 to 2016 (Shand ong investors & Shandong investees) (More than 500M )
Source: Zero2IPO, Wind Information, and PwC analysis
PwC
From 2014 to 2016, the number of large scale transactions has increased steadily, following enhancements to M&A in Shandong province for cross border and trans-provincial deal transactions, as well as improvement in capital flow. The total M&A transaction volume reached a historical high, 7 times higher than the deal value the year prior, and 2.3 times higher than the deal number .
13,590
32,599 34,093 32,582
100,194
226,923
11 14 9
22
57
51
-
10
20
30
40
50
60
-
50,000
100,000
150,000
200,000
250,000
2014 2015 2016
Num
ber o
f dea
ls
Dea
l am
ount
: RM
B in
mill
ion
Deals within Shandong Cross province/border deals
Deals within Shandong in volume Cross province/border deals in volume
7May 2017Shandong Province M&A Review and Outlook • 2014-2016
Deals in Shandong Province from 2014 to 2016 (Shand ong investors & Shandong investees) (More than 500M ) (By area)
Source: Zero2IPO, Wind Information, and PwC analysis
PwC
M&A deals: Shandong enterprises as investors
Shandong Province M&A Review and Outlook • 2014-20168
May 2017
PwC
From 2014 to 2016, private strategic investors in Shandong Province maintained an active position. In 2016, the key players for overseas acquisitions were Qingdao Haier, Qingdao Wanda Culture and XiWang food. Notably, the scale of M&A by SOEs in Shandong Province increased significantly last year. The majority of SOE deals spanned both domestic and overseas acquisitions by Weichai Power, Yanzhou Coal and ChenmingPaper, seeking to optimise the industrial structure and promote industrial diversification.
7,974
51,540
86,540
800
11,001
6,017
24,278
6
26
22
- -1 1
2
6
-
5
10
15
20
25
30
-
30,000
60,000
90,000
120,000
2014 2015 2016
Num
ber o
f dea
ls
Dea
l am
ount
: RM
B in
mill
ion
Private PE SOE Private in volume PE in volume SOE in volume
9May 2017Shandong Province M&A Review and Outlook • 2014-2016
Deals of Shandong Investors from 2014 to 2016 (By i nvestor’s type)
Total deal volume: 7 28 29
Source: Zero2IPO, Wind Information, and PwC analysis
PwC
1
2
3
10
8
2
3 3
10
5
4
6
-
2
4
6
8
10
Num
ber o
f dea
ls
2014 2015 2016
In 2014, domestic investments by Shandong enterprises mainly focused on manufacturing and energy & mining. Deals in TMT, finance and manufacturing grew rapidly in 2015, representing 77% of the total number of deals. In 2016, the number of deals in manufacturing and energy & mining gradually slowed down. However, deals in TMT and finance remained active.
520
2,920
4,534
12,222
10,233 9,398
5,475
7,984
12,368
5,230
8,090
4,749
-
2,000
4,000
6,000
8,000
10,000
12,000
Dea
l am
ount
: RM
B in
mill
ion
2014 2015 2016
10May 2017Shandong Province M&A Review and Outlook • 2014-2016
Source: Zero2IPO, Wind Information, and PwC analysis
Deals of Shandong investors by investee industry (D omestic) (Deal amount)
Deals of Shandong investors by investee industry (D omestic) (Deal volume)
PwC
The scale of investment by Shandong enterprises in overseas markets was relatively large, with an average deal size of RMB 15 billion. The targeted industries for investments gradually shifted from energy & mining to TMT, manufacturing, agriculture & food and medical health; For example, Qingdao Wanda cultural acquired Legendary Pictures, Qingdao Haier acquired GE Appliances and Weichai Power invested in DHS.
Source: Zero2IPO, Wind Information, and PwC analysis
11,001 11,395
850
38,847 37,460
4,875
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Dea
l am
ount
: RM
B in
mill
ion
2014 2015 2016
1 1 1
2
1 1
-
1
2
Num
ber o
f dea
ls
2014 2015 2016
11May 2017Shandong Province M&A Review and Outlook • 2014-2016
Deals of Shandong investors by investee industry (O utbound) (Deal amount)
Deals of Shandong investors by investee industry (O utbound) (Deal volume)
PwC
From 2014 to 2015, Shandong enterprises mainly pursued domestic targets. Key areas for targets included Beijing, as well as locations in Eastern and Southern China. However, in 2016, overseas investments accounted for 73% of the total deal value, becoming a new growth engine for Shandong enterprise investments.
1,500 600
2,935 2,939
11,001 12,093
17,154
5,478
10,588 12,245
10,574 12,961
4,620 2,281
81,182
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Beijing EasternChina
SouthernChina
Others inChina
Overseas
Dea
l am
ount
: RM
B in
mill
ion
2014 2015 2016
1 1 1
3
1
7
8
5
6
2
8
11
3 3
4
-
2
4
6
8
10
12
Beijing Eastern China SouthernChina
Others inChina
Overseas
Num
ber o
f dea
ls
2014 2015 2016
12May 2017Shandong Province M&A Review and Outlook • 2014-2016
Source: Zero2IPO, Wind Information, and PwC analysis
Deals of Shandong investors by investee area (Deal amount) Deals of Shandong investors by investee area (Deal volume)
PwC
M&A deals: Shandong enterprises as investees
13May 2017Shandong Province M&A Review and Outlook • 2014-2016
PwC
There has been a continuous increase in M&A capital invested in Shandong enterprises in recent years. The total investment amount has reached RMB 149.4 billion in 2016, which was 4.5 times higher than in 2014; Total number of deals set a new historical record, with 43 transactions in 2015, a 65% increase from the prior year. More than 75% of these deals were investments in private enterprises. The amount of investments in SOEs also significantly increased in 2016, including the acquisition of ST Jichai by CNPC.
18,162
53,605 53,006
9,034
19,980
96,392 1,650
19
37
25
7 5 6
-1
- -
5
10
15
20
25
30
35
40
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
2014 2015 2016
Num
ber o
f dea
ls
Dea
l am
ount
: RM
B in
mill
ion
Private SOE Foreign Private in volume SOE in volume Foreign in volume
14May 2017Shandong Province M&A Review and Outlook • 2014-2016
Source: Zero2IPO, Wind Information, and PwC analysis
Total deal volume: 26 43 31
Deals of Shandong investee from 2014 to 2016 (By in vestee type)
PwC
Investments in Shandong enterprises have been mainly focused on energy & mining, manufacturing, real-estate and healthcare industries. Investments in energy & mining and manufacturing industries represent over 50% of the total investments. Investment value reached a historical peak in 2016, led by deals in the manufacturing industry. Notable examples include CNPC capital’s acquisition of ST Jichai for RMB 75.5 billion, and Shan Steel Group’s acquisition of Baldor gas for RMB16.1 billion.
Shandong Province M&A Review and Outlook • 2014-201615
May 2017
13,765
4,759 2,448 800 1,007
4,417
24,143
15,469
6,195 3,420 6,722
19,286 12,311
108,642
6,959 10,259
1,917
9,310
-
20,000
40,000
60,000
80,000
100,000
120,000
Dea
l am
ount
: RM
B in
mill
ion
2014 2015 2016
10
6
3
1 1
5
8
14
4
1
5
11
8 7
3
5
2
6
-
2
4
6
8
10
12
14
16
Num
ber o
f dea
ls
2014 2015 2016
Source: Zero2IPO, Wind Information, and PwC analysis
Deals of Shandong investee by investee industry (De al amount) Deals of Shandong investee by investee industry (De al volume)
PwC
Investments in Shandong enterprises have been predominantly located in the Shandong Peninsula Blue Economic Zone and central Shandong region, which together accounted for 95% of the total investment value and over 80% of total deal number in 2016.
15,921
4,035 1,992 5,248
26,775
40,067
8,394
21,823
119,667
4,182 3,726
-
20,000
40,000
60,000
80,000
100,000
120,000
ShandongPeninsula
CentralShandong
SouthernShandong
NorthernShandong
Dea
l am
ount
: RM
B in
mill
ion
2014 2015 2016
18
3 3 2
20
17
6
9
16
3 3
-
5
10
15
20
25
ShandongPeninsula
CentralShandong
SouthernShandong
NorthernShandong
Num
ber o
f dea
ls
2014 2015 2016
16May 2017Shandong Province M&A Review and Outlook • 2014-2016
Source: Zero2IPO, Wind Information, and PwC analysis
Deals of Shandong investee by investee area (Deal amount)
Deals of Shandong investee by investee area (Deal volume)
PwC
Outlook for 2017
• We are still cautiously positive about the future mergers & acquisitions market in Shandong Province from both quantitative and qualitative perspectives.
• Following changes and rebalancing in global political and economical structures, there are increasing uncertainties both internationally and domestically. The rate of outbound acquisitions by PRC corporations gradually slowed down in the first quarter in 2017. However, we expect that outbound acquisitions with strategic implications will still be encouraged.
• M&A transactions in Shandong are on course to continue to develop and integrate with existing resources, ultimately compensating for deficiencies in the local industry chain. SOE mixed-ownership restructuring and corporation restructuring are expected to become a popular focus for the future.
• TMT, education, tourism, medical and health industries are expected to enter a new growth cycle, while manufacturing are anticipated to continue playing a vital role in the local economy.
Shandong Province M&A Review and Outlook • 2014-201618
May 2017
PwC
Our Suggestions
• Following the robust expansion of current business, corporations in Shandong Province can consider utlising existing M&A experience, and focusing on capital management to stimulate the economy, which will ultimately improve the pace of business development.
• Under the current circumstances, we recommend corporations set out a clear M&A objective and strategy. The M&A objective and strategy will play a crucial role in making optimal assessments for each transaction. Additionally, the focus of M&A feasibility assessments should go beyond financial, legal, valuation and tax perspectives, to also cover comprehensive plan integration as well as making a backup plan to account for potential risks that can arise when executing deals.
• When it comes to PRC corporations acquiring technology assets from overseas markets, external IP acquisition and internal IP generation should be treated as equally important. Sustainable development can only be achieved by improving R&D capabilities, which will enable corporations to achieve even more in the future.
• Greater international reach will be achieved through outbound acquisitions. Corporations should also continue to develop the domestic market and build up to becoming multinational by establishing an international presence with an appropriate share structure and attracting talented employees with a global view.
Shandong Province M&A Review and Outlook • 2014-201620
May 2017
PwC
Data compilation methodology and disclaimer
Shandong Province M&A Review and Outlook • 2014-201621
May 2017
• Change in controlling interest as a result of acquisition of listed/non-listed entities
• Equity investment in listed/non-listed entities (minimum 5% equity interest)
• Business combination
• Leverage buyout, management buyout and management disposal
• Business privatisation
• Tender offer
• Splitoff of a wholly-owned subsidiary when 100% sold via IPO
• Divestment of company, division or trading assets resulting in change of control at parent level
• Reverse takeovers
• Re-capitalisation
• Joint venture buyout
• Joint venture
• Receivership or bankruptcy sales/auctions
• Tracking stock
• Balance sheet restructuring or internal restructuring
• Property/real estate for individual properties
• Rumoured transactions
• Options granted to acquire an additional with less than 100% controlling interest
• Purchase of trademarks
• Land acquisition
• Equity placement in funds
• Mutual fund stake purchase
• Share buyback and share retirement of a non-privatization transition
• Investments in greenfield operations
• Delisting process of a listed company
Included Deals Excluded Deals
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
© 2017 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. CN-20170510-4-C2