The New Wave of Mergers and Acquisitions in China: Insights from Dr. Colin Lee and Peng Qinwen

In the shifting tides of the global economy, Chinese companies are showing unprecedented growth potential in mergers and acquisitions (M&A). The recent meeting between Dr. Li Zhijian (FOFA) and Peng Qinwen, M&A partner at BDO China in Shenzhen, sheds light on the trends and challenges facing Chinese corporate M&A in the coming years, especially against the backdrop of an increasingly complex global environment.

Market Transformation: From Growth to Integration

As China's economy develops, traditional growth models—like rapid appreciation in stocks and real estate—are gradually fading. Companies face overproduction, rising costs, and increased market competition, making M&A a key strategy for transformation. The shift from IPOs to M&A reflects the urgent need for businesses to find growth in a new environment.

Challenges for company secretaries in the M&A process are significant. In the tech industry, companies need high-level capabilities in investment, financing, management, and exit strategies. However, experts in M&A remain scarce, pushing companies to invest more in specialized talent to gain competitive advantages.

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The Rise of Digital M&A Platforms

Technological advancements are revolutionizing the M&A process. Digital M&A platforms automate 80% of tasks, allowing professional deal teams to focus on crucial negotiations and strategy. The use of big data and AI enables rapid analysis and forecasting of market dynamics, making rational decision-making more efficient and accurate.

This transformation allows more companies, even startups and SMEs with limited funds, to engage in high-value M&A. Previously reliant on private banks and securities companies, mid and low-end M&A transactions now hold billion-dollar potential, injecting new vitality into the market.

The application of big data and AI ensures efficient decision-making, empowering even novices to easily participate in M&A.

Strategies for Chinese Companies in International M&A

With accelerated internationalization, Chinese private enterprises are driven by political contexts and the need for expansion to pursue growth through M&A. In the tech sector, companies often establish funds and SPVs in Hong Kong, targeting overseas markets. This strategy not only adapts to current market conditions but also leverages Hong Kong’s relatively low shell company costs for greater flexibility in acquisitions.

For example, setting up IT servers in Australia and collaborating with local M&A teams enables Chinese entrepreneurs to engage in M&A across the Australian Chinese community.

Japanese M&A Case: Opportunities and Challenges

Recently, Japan’s 7-ELEVEN parent company, Seven & i Holdings, received an acquisition proposal from Canadian retailer Alimentation Couche-Tard (ACT). If successful, this would be the largest foreign acquisition of a Japanese company in history. ACT, a retail giant operating in over 30 countries, provides a strong foundation for this acquisition with its robust business model and diverse operations.

This M&A case highlights not only the appeal of the Japanese market to foreign investors but also the potential for Chinese companies in overseas M&A. Many Japanese patents and core technologies have significant applications in the Chinese market, offering vast growth opportunities for Chinese firms.

Additionally, the success of Shunsaku Sagami's M&A intermediary company, M&A Research Institute, which excelled after going public in Tokyo through its tech platform, underscores the importance of technology in M&A and inspires more companies to explore digital pathways.

The Future of the M&A Market

The surge in Chinese corporate M&A reflects not only market demand but also a necessary response to a complex economic environment. Facing a global wave of major mergers and acquisitions, companies must explore international markets boldly and leverage digital technology to enhance M&A efficiency. The future M&A market is full of challenges but also offers limitless opportunities. Companies that adapt flexibly will stand out in this competitive arena.

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