China, Japan overseas M&A push to extend in 2019

  • China’s economic growth slowdown to drive dealmaking abroad
  • Japanese companies may continue to seek large foreign deals

Companies in China and Japan will continue their pursuit of overseas acquisitions this year amid the economic growth slowdown and geopolitical uncertainty, according to JPMorgan Chase & Co.

Ready availability of capital will enable Chinese buyers to have strong purchasing power, JPMorgan said in its 2019 global M&A outlook report. Chinese companies will be “reasonably active” in seeking strategic acquisitions outside their home market to gain access to technology, well-known brands, distribution networks and natural resources, according to JPMorgan.

Chinese outbound deals fell 25 percent last year to $127 billion, down from the record $239 billion foreign acquisition wave in 2016, data compiled by Bloomberg show. In December, an investor group led by Anta Sports Products Ltd. agreed to spend $5.2 billion for Wilson tennis racket maker Amer Sports Oyj. Slowing growth in China is pushing companies to identify attractive opportunities abroad, JPMorgan said.

Deals in China may also get a boost in 2019 as the country loosens foreign investment restrictions in more industries including automobiles and financial services. Some domestic companies will also push ahead with asset sales as they deleverage amid Beijing’s push to control financial-sector risk, the report said.

In Japan, firms will continue to pursue large acquisitions overseas as well as some asset disposals to boost growth, according to the report. The biggest acquisition worldwide last year was Takeda Pharmaceutical Co.’s $62 billion takeover of Shire Plc.

M&A activity globally will remain strong in 2019, the report said. Shareholder activism, as well as the rising heft of alternative capital sources like sovereign wealth funds and family offices, will drive some of those transactions, it said.