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Private firms shy off buys, says survey

By Zhang Ran (China Daily)
Updated: 2009-03-17 07:43

Private businesses on the mainland showed the greatest change in attitude towards acquisitions and public offers, a survey by accountancy firm Grant Thornton International Business showed yesterday.

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Compared to last year, China showed the second biggest fall (of 26 percent) among businesses intending to make acquisitions. It showed the biggest fall (of 40 percent) among businesses planning public listings over the next three years, the survey of 36 economies revealed.

Mainland businesses were enthusiastic about deal-making last year, but have since revised their plans due to the changed economic climate. Only 41 percent of businesses were now looking for targets, as against 67 percent previously, the survey showed.

There were also important regional differences. Businesses in Beijing were much more open to acquisitions (53 percent) than those in Shanghai (36 percent) and Guangzhou (35 percent), according to the survey.

"For those privately-held businesses with the financial muscle to make acquisitions, the next 12 months would likely be a 'buyer's market' with the prospect of netting strategic acquisitions at attractive valuations," Alison Wong, partner of Specialist Advisory Services at Grant Thornton Hong Kong said.

"However, for businesses looking to expand through mergers and acquisitions, it has never been more important to make sound strategic decisions based on solid due diligence. They have to ensure that the right financing structure is in place to cope with any possible downsides that may occur in the short term due to the sluggish economy," Wong said.

For private firms in China, access to new geographic markets (49 percent) was the most important driver for acquisitions, followed by scale building (44 percent), and acquiring new technology and brands (34 percent), the survey pointed out.

Not surprisingly, the survey revealed that the turmoil in the financial markets has severely reduced the appetite of private businesses to raise capital through public listings.

The mainland showed the biggest fall in businesses expecting a public listing in the next three years. A year earlier, 60 percent of private businesses on the mainland were bullish about listing. This year, it had dropped to 20 percent.