Industry Trend Analysis - Increased M&A Likely As Chinese Competition Rises - 01 MAY 2017
BMI View: As Chinese infrastructure firms expand globally, there is the potential for increased M&A activity as established, incumbent firms aim to improve competi tiveness and Chinese companies seek acquisitions and partnerships as a path to entering more markets.
We expect that infrastructure companies around the world will see increased incentives to consolidate in the next five years as they face competition from increasingly globally-oriented Chinese firms. An uptick in global mergers and acquisitions (M&A) within the infrastructure sector will also be driven by Chinese companies seeking to form local partnerships and acquire strategic assets and technologies to expand their footprints in both developed and emerging markets - an objective that aligns with China's Belt & Road initiative ( see ' Belt & Road Further Facilitates Infrastructure Company Expansion ', March 9).
M&A activity will be most concentrated among equipment and machinery companies, which are under threat from low-cost Chinese competitors but also possess technologies that make them potential acquisition targets. Rumours of a possible tie-up between the railway units of Canada's Bombardier and Germany's Siemens, reported by the media in early April, is a pertinent example of this trend - the companies are aiming to compete more effectively against China's CRRC, which has significantly expanded its global presence in recent years.
|China Going Global|
|Infrastructure-Related M&A - Annual Completed Deal Volume, USDmn|
|Infrastructure-related sectors include construction and engineering services, construction and mining equipment, and operations of transport and utility assets. Source: Bloomberg|