Hunting High-tech Companies
It has been found that Korean high tech companies topped the target list of M&As that have been made by Chinese companies over the past five years. High tech companies were followed by media, entertainment, financial, material, and health care companies.
According to a report titled “Red Capitalism with Global Hunt for Companies” by the POSCO Research Institute on March 20, China's M&A deals more than quadrupled from 24 during the 2003-2007 period to 100 in the 2013-2017 period.
The number of deals leaped up, but the amount per deal plummeted from US$ 142 million to US$ 46 million during the same period. The POSCO Research Institute drew such figures by checking 5,335 M&A cases where Chinese companies (including those of Hong Kong and Macao) acquired non-Chinese companies or some equities in them in the Tomson Reuters M&A Database.
According to the analysis, Chinese companies’ takeover of Korean high tech companies accounted for 22%, the highest during the 2013-2017 period. High tech companies were followed by media and entertainment companies (19%), financial companies (9%), material companies (8%) and healthcare companies (6%).
"This is because Chinese companies invested heavily in Korean IT and small but strong Korean companies by valuing Korea's information technology (IT) level a great deal," the institute said.
Shanda, a Chinese game company, acquired Korean game developer Actoz Soft in 2004 and another Korean game publisher Identity Games in 2010. YG Entertainment attracted US$85 million from Chinese Internet company Tencent and others with Chinese consumers' big interest in the Korean entertainment and broadcasting industry thanks to the Korean Cultural Wave.
In the past five years, the takeover of chemical companies accounted for half of eight of the M&A deals in the material industry (four cases).
On the other hand, the total number of M&A deals including those to take over Korean companies by Chinese companies surged from 778 in the 2003-2007 period, to 1,454 in the 2008 to 2012 period and to 1979 in the 2013-2017 period. By region, the proportion of M&As where Chinese companies took over Asian companies dropped from 59% in the 2003-2007 period to 37% in the 2013-2017 period while the proportion of M&As where Chiense companies acquired European companies climbed from 15% to 33% during the same period. In particular, as China's consumption has become more sophisticated, M&A deals to take over companies in the healthcare, media, entertainment, and consumer goods industries shot up in the 2013-2017 period.
It was analyzed that Chinese companies will try to aggressively cut M&A deals in order to secure advanced technology as the second Xi Jinping government gained strong momentum in pushing forward with the Chinese Manufacturing 2025 Policy after further cementing its power base through the 19th party convention. Chinese companies are focused on overseas market development, resources, premium brands and advanced technologies under government support.