GLOBAL mergers and acquisitions (M&As) activity dropped 14 percent in the first quarter to US$669 billion as market volatility put a break on deal-making but that did not discourage Chinese companies from seeking Western targets.

    China’s appetite for overseas acquisitions has propelled Asia to the forefront of global deal-making for the first time, with investment bankers hoping Chinese buyers will continue to support an otherwise slowing M&A market.

    China outbound cross-border M&A totaled US$101.1 billion in the first quarter, nearly surpassing the full year record of US$109.5 billion set last year, according to preliminary Thomson Reuters data.

    Overall, however, increased market volatility made it more difficult for company boards and their chief executives to pull the trigger on big transformative deals, in contrast to the record levels of activity seen last year.

    “The rationale to drive bottom line growth through consolidating transactions persists,” said Gregg Lemkau, global co-head of M&A at Goldman Sachs Group Inc. “What clearly slowed things down in the first quarter is the volatility and the negative sentiment in the equity markets generally.”

    Deal activity in the United States fell by more than a quarter while Europe scored its best quarter in five years, up by 11 percent from last year. But European M&As could suffer until Britain votes in June on whether to remain in the European Union.

    Chinese companies, on the other hand, are expected to continue their shopping spree as the world’s second-biggest economy slows after blistering growth in the past decade, pushing executives to diversify their geographic footprint ahead of any further currency devaluation.

    “The Chinese phenomenon is remarkable,” said Dietrich Becker, London-based investment banker with Perella Weinberg Partners. “I haven’t seen a single sale process recently where there is no Chinese interest.”

    China National Chemical Corp. struck the largest deal so far this year with its US$43 billion acquisition of Swiss seeds and pesticides group Syngenta. The deal, however, is poised to face intense scrutiny in the United States ahead of November’s presidential election.

    China’s non-State companies, from Anbang Insurance Group to Haier Electronics Group, have shown their deal-making muscle by pursuing offshore opportunities. Not all have been successful, with Anbang unexpectedly walking away this week from a US$14 billion bid for Starwood Hotels & Resorts Worldwide Inc.

    “It’s shaping up to be a busy year for China outbound M&As, and I don’t think the trend is changing anytime soon,” said Brian Gu, co-head of Asia-Pacific M&A at JPMorgan Chase & Co. “You will see new names coming up, especially from the private sector while in the past we only had some serial acquirers,” he added.

    Asia’s share of global M&As reached 27.1 percent in the first quarter, just ahead of Europe, from a historic average of about 20 percent. Goldman Sachs topped the global league table, followed by JP Morgan and Credit Suisse Group AG.

    As more and more Chinese suitors seek large global deals, their credibility is on the rise. As well as real estate and financial services, Chinese companies are on the lookout for consumer brands, energy resources and high-end manufacturing.

    “In the past people have questioned their motivation and their ability to do deals, but when you see a company like ChemChina acquiring Syngenta, you realize that they are very savvy, very agile and very strategic in the way they approach deals,” said Severin Brizay, head of European M&A at UBS Group AG.

    (SD-Agencies)