Chinese Cross-Border M&A Resurgence: From Hesitation to Global Acceleration

The pandemic years marked a decisive inflection point for China’s economic planners and enterprises. While lockdowns and geopolitical uncertainties dampened activity in 2020 and part of 2021, by late 2023 and into 2024, a clear upward trajectory was evident. Policy support, capital market reforms, and the impact of capital market reform on China M&A have been important, alongside a strategic imperative to seek growth outside highly competitive domestic markets. As a result, the market is booming - awash with Chinese companies pursuing global expansion, eager to leverage M&A as a growth lever and as a diversification strategy overseas.

Cross-Border M&A: From Hesitation to Acceleration

From 2017 to 2019, stricter regulatory environments and poor integration outcomes cooled previously rapid growth in outbound Chinese M&A. This moderation was compounded in 2020 and 2021 by pandemic-related caution, with deal numbers and values both declining. Yet, 2024 saw an unmistakable turnaround, with the second half showing an uptick in activity. Several dynamics underpin this shift:

• Domestic Overcapacity: Chinese industries face intense internal competition and limited domestic room for growth. Outbound M&A allows firms to access new, higher-value markets and diversify portfolios

• Supply Chain Strategy: With clients around the world demanding less exposure to “100% made-in-China” goods, companies began assembling products locally overseas, reducing risk and preserving competitiveness

• Risk Diversification: Family-owned and entrepreneurial firms in China are actively seeking to spread their assets and minimize political and operational risk by investing and setting up platforms across multiple jurisdictions, as a diversification strategy against geopolitical risk

• Client and Channel Demands: International buyers want local partners and supply chains; Chinese firms are meeting this demand by acquiring or partnering with companies abroad, particularly in Europe and North America, reinforcing Chinese cross-border M&A trends

Learning from Japan’s Playbook: A Precedent for Global Localization

Three decades ago, Japan followed a path similar to the one China is taking today. In response to shifting global trade dynamics and mounting pressure from trading partners, Japanese companies in the late 1980s and 1990s undertook a major internationalization of their production and supply chains.

The Japanese experience of building overseas manufacturing capacity laid crucial groundwork for sustained growth and global relevance, and today offers a telling parallel to Chinese outbound M&A for global competitiveness, post-pandemic supply chain realignment and Chinese cross-border M&A trends.

The European Connection

Europe stands out as a central hub for Chinese M&A activity in the post-pandemic period. The market’s size and diversity, combined with an abundance of advanced technology and customer channels desired by Chinese acquirers, play a key role. Recent IMAP China mandates and mandates from European partners reflect this orientation, with technology transfer in cross-border M&A and client channel access forming the critical rationale for deals. In this sense, Chinese investment in Europe is both a strategic technology play and a route to local market access.

Turning Challenges into Competitive Advantages

Despite the momentum, Chinese buyers face substantial barriers, many of which differ from Western or Japanese competitors:

• Regulatory Approvals: China requires Overseas Direct Investment (ODI) approvals for outbound M&A - a process that, unlike some Western markets, typically requires at least a month to complete, introducing delay and uncertainty. This ODI approval process in China sits alongside specific China ODI filing requirements that buyers must navigate carefully

• Valuation Gaps: Domestic sellers in China often have expectations based on past IPO booms (at 14-15x PE ratios), but the current market offers substantially lower valuations (7-8x PE)

• Post-Merger Integration: Many Chinese acquirers are relatively new to international M&A and can face challenges of post-merger integration in China and abroad, especially when navigating unfamiliar regulatory and cultural landscapes.

• Financing Complexities: Deals often require creation of special purpose vehicles (SPVs) for legal and capital efficiency, with financing challenges that may necessitate overseas leverage or capital-raising, affecting deal structuring for cross-border transactions in China

Despite these hurdles, the appetite for international opportunity is robust. Outbound-focused advisers - especially those experienced in cross-border mid-market deals - are poised to add significant value by bridging cultural, strategic, and operational divides, through tailored buy-side M&A advisory services in China.

Outbound Opportunities: What Local Partners Want

The surge in cross-border deal activity is not just a response to internal Chinese pressures, but also a direct answer to the changing expectations of global partners.

• Local Operations: Clients worldwide, especially in strategic industries, increasingly require some degree of local manufacturing, assembly, or supply - influenced by both regulatory and reputational factors in the post-pandemic era

• Cooperative Partnerships: Rather than greenfield investments, Chinese acquirers are often seeking brownfield deals (acquiring or partnering with established suppliers) to achieve rapid market entry and operational momentum

• Sector Focus: Current M&A priorities include Intelligent Manufacturing, Automotive, New Energy, Healthcare, and Consumer sectors - reflecting both China’s domestic development priorities and international demand for innovation. This includes advanced manufacturing M&A in China

Case Studies: Successes in Cross-Border M&A

IMAP China’s portfolio - spanning more than USD10 billion in cumulative transaction value - illustrates the diversity and strategic focus of recent deals. Notable examples include:

• The acquisition of the German company Alpha Plan GmbH by China GMT

• The acquisition of the Polish construction machinery company HSW by Guangxi Liugong

• Austria’s cable manufacturer neue1T Company acquisition by Jiangsu Changzhou Xingyu Shares

• Germany’s Unna Aluminum acquisition by Liaoning Zhongwang Group

• U.S. automotive safety system supplier Key Safety Systems acquisition by Ningbo Joyson Electronic Corp

• Further transactions across the UK, Germany, and U.S. in Medical Devices, Pharmaceuticals, and Manufacturing

The Broader Economic Impact

The reemergence of the Chinese M&A market carries implications far beyond deal tables:

• Global Value Chains: Chinese international investment now shapes supply chains from Europe to Latin America, and from Southeast Asia to North America. Flexibility and resource integration are increasingly central to competitive advantage, and Chinese cross-border M&A trends are a key lever for redesigning networks

• Industrial Upgrading and Technology Transfer: Outbound M&A is often used to accelerate industrial upgrading in China - providing monitored access to advanced know-how and critical resources

• Diversification and Resilience: In a world of sudden supply chain shocks and trade realignments, cross-border acquisitions equip Chinese companies with the means to diversify revenue, access new clients, and manage risk through a diversification strategy overseas

Looking Forward: A Market in Motion

The Chinese M&A market has proven its elasticity and strategic resolve amid global turbulence. Supported by firm policy tailwinds, economic recovery, and the ambition of Chinese companies to secure a seat at the global table, the story is far from over. Continued policy support for Chinese overseas expansion will remain central to sustaining momentum in Chinese cross-border M&A trends.

As Chinese buyers resume their search for value worldwide and local partners seek reliable, capital-backed entrants, IMAP China’s cross-border expertise and global reach will be central to connecting opportunities, overcoming barriers, and shaping the next decade in international dealmaking.

IMAP China: The Gateway to International Opportunity

IMAP China is distinguished by its position, expertise, and global network, making it a natural gateway for companies looking to either access China or for Chinese enterprises seeking to globalize. Some highlights:

• Experienced Cross-Border Team: IMAP China’s leadership and deal teams bring decades of experience in managing Sino-European and Sino-American deals, as well as expertise across key sectors including Automotive, Intelligent Manufacturing, New Energy, Healthcare, and Consumer sectors

• Local and Global Coverage: IMAP has presence in 50+ countries and its long-term partnerships with local experts and institutional channels ensure it can source, vet, and execute at both ends of the deal spectrum. Deal sourcing challenges in China require strong on-the-ground networks

• Continuous Deal Flow: IMAP’s global sell-side mandates and its position as a trusted adviser to Chinese buyers reinforce each other in a virtuous cycle, providing continuous, high-value deal flow for Chinese outbound M&A for global competitiveness

• Problem-Solving Mindset: IMAP China adopts a menu of solutions approach, from market screening and deal sourcing (“menu A”) to post-merger integration support through joint resourcing or private equity partnerships (“menu B”), though current focus is firmly on menu A for cross-border buy-side clients

Click HERE to watch Jacky's recent interview with Claire Smedley from the IMAP Corporate Office discussing the resurgence of cross-border M&A in China.