This quarter cross-border M&A deals dropped considerably from the corresponding quarter last year. There were only ten cross-border deals closed this quarter. Five of these deals disclosed approximately US$253.14M, dropped by 75.6% this quarter. In addition, the average value this quarter recorded only US$50.63M, a 51.2% decrease in comparison to the corresponding quarter last year. Zero2IPO Research Center concludes the following reasons for this phenomenon:
First, state-owned enterprises played a crucial role in cross-border M&As in recent years. The M&A deals launched by state-owned large-scale enterprises were generally of greater size and primarily targeted the natural resources sector. This quarter state-owned large-scale enterprises did not launch such M&A deals with over 20.0% stakes acquired, forcing the cross- border value to decline substantially this quarter. Additionally, domestic private-owned enterprises played an active role in cross-border M&A deals this quarter. Most notably, the acquisition of US-based AppTec Laboratory Services Inc by WuXi PharmaTech and the acquisition of VAL-LEVERDE by Aokang Group.
Second, the side effects of the US subprime mortgage crisis have yet to vanish, and continue to influence the efficiency of financing channels. Meanwhile, China's tight policies regarding relevant sectors restrict foreign capital-launched M&As and tend to favor domestic enterprises.
Third, there are a number of large-scale cross-border M&A deals still in the works that are expected to take shape within the next few quarters.
This quarter foreign capital leads the way acquiring the majority of domestic enterprises and assets. Among the ten cross-border deals, eight were initiated by foreign enterprises.
The Zero2IPO Research Center focuses heavily on the TMT, Energy and Bio/healthcare sectors. Of these three sectors TMT was the most active with eighteen deals closed. Thirteen of these deals disclosed an approximate value of US$961.18M and averaged US$73.94M. Notably, large-size state-owned telecom operators dominated in TMT M&A deals this quarter. In addition, Bio/healthcare remained relatively active with five deals closed, four of which disclosed a value of US$165.94M and averaged US$41.49M. WuXi PharmaTech's acquisition of US-based AppTec Laboratory Services Inc. marked the first-ever deal launched by a domestic CRO enterprise towards a foreign counterpart in the same sector. In the Energy sector six deals were finalized with US$799.58M disclosed. The average value reached US$133.26M, topping that of other sectors.
VC/PE-related M&As Drop in Deal Number and Value
Five of the VC/PE-related M&As Zero2IPO analyzed closed this quarter -- a 50.0% decrease in comparison to the corresponding period last year. Of these five, four closed in Broad IT and Services sectors evenly, but they were of smaller size. In contrast, the only transaction in Traditional sector was of a larger size.
An equity transaction is included into our M&A research scope if it is between two enterprises and both of them are non-financial investors, with at least one party invested by a VC/PE. For transactions between two parties where at least one party is VC/PE are categorized into VC/PE research field.
