BUYING CHINA
A mixed year for Chinese M&A.
By Don Durfee

M&A in China continued to steam ahead in 2007, but in a decidedly different direction. Fewer deals came from foreign strategic buyers—indeed for the first 11 months of the year, such acquisitions dropped from US$22.8 billion to US$16.6 billion, according to a new report from PricewaterhouseCoopers. The likely reason: the credit crunch that caused global dealmaking to fall off in the second half of the year.

Domestic buyers were completely unfazed, however. Helped along by plenty of liquidity, government support for M&A, and consolidating industries, local deal volume shot up from US$33.1 billion in 2006 to US$50.6 billion last year.

Surprisingly, private equity buyouts continue to be strong, as well. According to the report’s authors, private equity deals in China tend to be smaller and use less leverage than elsewhere. And when they do borrow, they can tap local and regional banks. Because most local institutions aren’t well plugged into the global capital markets, most have been unharmed by the sub-prime fiasco and are ready to lend.