Chinese outbound M&A has boomed in recent years, with deals surpassing $59 billion in 2015. The document analyzes trends in Chinese M&A, finding that deals are increasingly focused on strategic sectors aligned with China's 5-year economic plans like Industry 4.0, healthcare, automotive, and renewable energy. European countries with strong manufacturing like Germany, UK, and Italy have seen increasing M&A from Chinese investors, with deals in these strategic sectors expected to continue growing.

1. SETA CAPITAL｜识途资本
June 2016 | Confidential
Oversea M&A of China
Characteristics and Trends
Tommaso Lazzari, Tanya Wen, Bruce Li

2. • 2015 was a record breaking year for Chinese outbound M&A activities with 382 transactions valuing USD 59
billion. The first 5 months in 2016 have already seen more deals announced than 2015 with a total value of USD
98 billion.
• The prosperity of a sector is in strong relationship with the country’s strategy and government’s development
plan, as detailed in China’s 5-Year Plan; Policy plays an important role not only affecting the economy but also
affect the M&A target preference
• Most sought after sectors are: Industry 4.0 including Robot & Industrial Automation, Healthcare
clinics/medicine/medical equipment, Automotive Companies (especially new energy cars), high tech energy
(e.g. renewable energy storage), environmental and environmental protection
• The number of China outbound M&A deals in Europe has overtaken the ones in North America in recent years.
The most active markets in Europe include UK, Germany, Italy, France and the Netherlands.
• Countries with strong performance in export and manufacturing activities, in both consumer market and
production market, are more likely to be targeted.
Chinese outbound M&A activities have boomed in recent years. However the
characteristics and trends are changing. Our analysis sheds light on the direction of these
M&A activities going forward.
2
Introduction

3. China Outbound M&A Overview
2015 was a record breaking year for the number of Chinese outbound M&A deals and the
trend looks to increase even more in 2016
• Prior to 2013, China outbound M&A were dominated by state owned enterprises investing in large natural
resources and infrastructure projects. In the last two years, more and more private sector businesses are
making acquisitions overseas for strategic reasons.
0
50
100
150
200
250
300
350
400
450
2011 2012 2013 2014 2015 2016 Jan-
May*
China Outbound M&A Volume (No. of Deals)
0
20
40
60
80
100
120
2011 2012 2013 2014 2015 2016 Jan-
May*
China Outbound M&A Value ($ Billion)
* Announced deals and deal values
Source: Dealogic
3

4. Most Requested Sectors
(2016)
Mentioned in
11th 5-Year Plan
(2005-2010)
Mentioned in
12th 5-Year Plan
(2011-2015)
Mentioned in
13th 5-Year Plan
(2016-2020)
Environmental Yes Yes Yes
New Energy Yes Yes Yes
Automotive Yes No Yes
Medical and Healthcare* No Yes Yes
Robot (Industrial 4.0) No No Yes
Automation (Industrial 4.0) No No Yes
Real Estate No No No
Food and Beverage Yes No Yes
• All the current most required sectors are mentioned in the latest China’s 5-Year Plan, while Real Estate
industry was mentioned only for the domestic market. And compared with previous year’s hot sectors, we
find the new sectors are highly inspired by the policy
• Intelligent Industrial (industrial 4.0) are new concept and it is also mentioned in a certain way in the latest
5-Year Plan
All the current most requested sectors are mentioned in the latest Chinese 5-Year Plan
except real estate
4
Current Buyer Demand & China’s 5 Year Plan

5. Mid market deals in the range of €50-€400m are the most active space of Chinese
outbound M&A
5
• Middle sized market
is the most active,
from €50m to
€400m, has the most
number of deals.
• Activities in the
middle market are
predominantly led by
strategic and
financial buyers
31
18
32
17
7
3
0 20 40
Computer software
Manufacturing (other)
Consumer: Other
Computer: Semiconductors
Media
Computer services
< €50m
16
14
13
7
3
1
19
15
0 5 10 15 20
Consumer: Retail
Services (other)
Agriculture
Medical
Industrial automation
Defence
Construction
Industrial: Electronics
€ 50m-150m
102
23
16
49
72
14
21
9
7
0 100 200
Mining
Chemicals and materials
Transportation
Automotive
Industrial products and…
Real Estate
Leisure
Medical: Pharmaceuticals
Biotechnology
€ 150m-400m
3
109
3
8
5
6
17
0 50 100 150
Telecommunications:…
Energy
Computer: Hardware
Telecommunications:…
Internet / ecommerce
Utilities (other)
Consumer: Foods
Over € 400m
Average Deal Size by Sector

6. Economic Factors Attracting Chinese Capital
Notes: 1) CPI: Consumer Price Index; PPI: Producer Price Index; GDP: Gross Domestic Product; 2)M&A number is the number of M&A deals completed two
years after the base year(2014). Central bank rate, CPI yoy growth, PPI yoy growth, GDP growth, Export and Import Amount, Unemployment rate, and Public
expenditure are the figures of the base year(2014)
Higher levels of Export and Manufacturing are main factors attracting outbound M&A
from Chinese investors in advanced economies including Germany and Italy
• We developed a regression model to test the key factors affecting a target country’s ability to attract investment
capital from Chinese investors based on actual historical outbound Chinese M&A data
• Inflation, Export and Producer Price are significantly positively related to investment capital from China:
• Inflation or rising asset prices generally signifies attractive investment destination
• Higher export implies competitive advantages in technology, resources, reputation, policies and etc. In
fact, our model also shows that import is a negative factor for attracting Chinese investment capital
• Most attractive targets for Chinese companies are in manufacturing industries in developed economies
• GDP growth, Central Bank rate, Public sector expenditure are insignificant factors
These factors explain why advanced European economies including Germany and Italy are popular
destinations for outbound M&A activities from China
6
M&A number
= 𝐶 + 𝑎1 𝐶𝑒𝑛𝑡𝑟𝑎𝑙 𝐵𝑎𝑛𝑘 𝑅𝑎𝑡𝑒 + 𝑎2 𝐶𝑃𝐼 𝑌𝑂𝑌 + 𝑎3 log 𝐸𝑥𝑝𝑜𝑟𝑡 + 𝑎4 log 𝐼𝑚𝑝𝑜𝑟𝑡 + 𝑎5 𝐺𝐷𝑃𝑌𝑂𝑌 + 𝑎6 𝑃𝑃𝐼 𝑌𝑂𝑌 +
𝑎7 𝑈𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 + 𝑎8(𝑃𝑢𝑏𝑙𝑖𝑐 𝐸𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒)

7. Analysis of China Outbound M&A Activities
Geographic Perspective
7

8. Major China Outbound M&A Destinations
The number of China outbound M&A deals in Europe has overtaken the ones in North
America in recent years
• Both Europe and North America have seen a fast increase in number of outbound deals from China,
reflecting a trend away from natural resource driven outbound acquisition trend from China previously
• Most active markets in Europe include UK, Germany, Italy, France and the Netherlands.
0
10
20
30
40
50
60
70
2009 2010 2011 2012 2013 2014
China Outbound M&A in North America
(No. of Deals)
0
10
20
30
40
50
60
70
2009 2010 2011 2012 2013 2014
China Outbound M&A in Europe
(No. of Deals)
8

9. M&A Deals Number In European Countries
Chinese Capitals are flowing more and more into Europe
• Average deal value reflects the level of deal size
• UK and Germany were among the top 5 target countries in terms of number of deals in all 3 years, which
means there are more large deals in these 2 countries
• Deal size in developed countries are not always larger than that of developing countries. Developing
countries ranked top here are always of ample nature resource
• Other than energy related countries, European countries also attract more deals in recent years.
9
0 10 20 30 40 50
2011
2012
2013
Germany
UK
France
Italy
Netherlands
Others

10. Analysis of China Outbound M&A Activities
Sector Perspective
10

11. Energy, Industrial and Automotive Sectors had the largest deal numbers.
0
10
20
30
2008 2009 2010 2011 2012 2013
Energy
0
10
20
30
2008 2009 2010 2011 2012 2013
Mining
0
10
20
30
2008 2009 2010 2011 2012 2013
Industrial Products and
Services
0
10
20
30
2008 2009 2010 2011 2012 2013
Automotive
• Energy, Mining
Industrial and
Automotive
sectors have
largest number of
deals from 2008 to
2013
• The increasing
trend in Industrial
Products and
Services, and
Automotive
sectors is clear
and consistent
• Deal numbers of
Energy and
Mining tend to
fluctuate over the
years
0
10000
20000
30000
2008 2009 2010 2011 2012 2013
Energy
0
10000
20000
2008 2009 2010 2011 2012 2013
Mining
0
2000
4000
6000
8000
2008 2009 2010 2011 2012 2013
Industrial Products and
Services
0
2000
4000
6000
8000
2008 2009 2010 2011 2012 2013
Automotive
• Top 4 sectors are the
same as that chosen
by deal numbers
• Total deal value of
Mining sector and
Industrial products
and services sector
are decreasing, and
the total deals value
in Automotive
industry boomed in
2010, but stayed flat
in other years
Million in USD
11
Top Sectors by Deal Number and Value

12. • Based on our current buyer requests
which we collected interviewing over 300
people among investors and
entrepreneurs from China, we identified
the top four sectors as
• Manufacturing
• Medical and Healthcare
• AutomobileAircraftShips
• EnergyNew EnergyMineral
Others,
32%
Over 60% of buyer requests from China concentrates in four key sectors, manufacturing,
healthcare, automotive/aerospace and energy/new energy
Automobile,
Aircraft, Ships
12%
Energy,
New Energy,
Mineral
12%
Infrastructure,
Utilities
7%
12
Medical,
Healthcare
16%
Manufacturing,
21%
Current Buyer Requests From China

13. Industry 4.0 is the largest demand within manufacturing, and in turn Robot & Industrial
Automation is the most demanded area within Industry 4.0
Industry 4.0,
69%
Devices &
Machinery,
17%
Others, 14%
• Industry 4.0 is a highly sought after area,
due to the need of industrial upgrade
strategy of China.
• Robot & Industrial Automation is the most
important technology of Industry 4.0.
• Devices & Machinery are relative
traditional sectors with some overlap with
Industry 4.0 if integrated into a smart
industrial system
• Industry 4.0 is also emphasized in the
recent 5 Year Plan of the Chinese
government, a series of social and
economic development initiatives closely
followed by both state owned and private
enterprises.
13
• Robot & Industrial
Automation
• General-Industry 4.0
• Medical & Bio
Automation
• Control Software
• Packaging
• Military
• Material
Buyer Demand by Sector - Manufacturing

14. Healthcare industry is fast rising in China and there is significant demand for related
services, drugs and equipment
Healthcare
Services,
26%
Pharma;
22%
Medical
Equipment
; 22%
Others,
30%
• With the improvement of living standard
and the development of health
consciousness, Chinese firms and
investors are paying much more attention
to this field.
• In the 5 year plan, China also set
Healthcare as a key objective.
14
• Packaging
• Military
• Material
• Clinics
• Dentist clinics
• Plastics Clinics
• Nursing centers
• Etc.
Buyer Demand by Sector -Healthcare

15. New energy automotive is becoming increasingly in demand in recent years
Aircraft
6%
• Due to the extremely rapid growing
automobile market in China, this sector
has been and will be hot for a long time
• Within the Automobile sector, a fast
growing trend has been observed in New
energy automobile, this refers to
components for Electric Vehicles such as
batteries, power control systems and
sensors.
Multi-Applications
6%
15
Automobile;
38%
Buyer Demand by Sector – Automobile

16. High tech energy requests consist of more than half of all the energy and resources
requests from Chinese buyers
High Tech
Energy, 53%
Clean Energy,
29%
Traditional
Energy, 18%
• High tech energy attracts most of
investor’s attention
• High tech and clean energy together
occupy nearly 80% deals in this sector
• This trend is reasonable considering the
volatile oil market in the previous
decades when China set energy as new
development focus in 5 year plan.
16
• Hydropower,
• Li-battery
• Etc.
• Wind
• Water
electricity
• Oil
• Gas
• Coal
• Etc.
Buyer Demand by Sector - Energy & Resources

17. Environment
al &
Environment
al Protection,
70%
Social
Infrastructur
e; 10%
Delivery &
Express, 10%
• Environmental related utilities are most
requested for in this sector
• Environmental issues have been
discussed for decades
• Government’s attitude decides if it
become a fast-growing market
• The Chinese government has attached
greater importance to the worsening
environmental problems
Environmental related utilities are most in demand investment area in this sector
Construction Consulting,
10%
17
Buyer Demand by Sector - Infrastructure

18. • We expect the trend of Chinese outbound M&A activities in Europe to continue gather pace in the next few years.
• European countries with strong manufacturing and export oriented industries, including Italy, Germany and the
UK, are most likely to attract investment capital from China.
• Based on our analysis of the current buyer requests from Chinese companies planning overseas M&A activities, it
is interesting to note that the target sectors are highly consistent with China’s 5-Year Plan, which shows that the
private sector investment direction are highly in line with the Chinese government’s overall development plan.
• Specifically our study found the most requested sectors are
o Industry 4.0 including Robot & Industrial Automation,
o Healthcare clinics/medicine/medical equipment,
o Automotive Companies (especially new energy cars),
o High tech energy (e.g. renewable energy storage),
o Environmental and environmental protection
M&A from Chinese investors in key sectors inline with China’s 5-Year Plan will continue to
grow in major developed economies in Europe
18
Conclusions

19. • China Merger March 2016
• Bloomberg: Great Leap Upward: Behind China's $100 Billion Shopping Spree
• Mergermarket: China Outbound M&A Outlook, May 4th 2016
• Dealogic: US Withdrawn M&A Volume at Record Annual High
• Dealogic: Global M&A Review First Quarter 2016
• Seta Capital M&A Survey
• China’s 13th Five Year Plan – Official Policy Document
• China’s 12th Five Year Plan – Official Policy Document
• China’s 11th Five Year Plan – Official Policy Document
19
References

20. SETA CAPITAL S.R.L.S.
Via Santa Maria Podone, 3
20123, Milan, Italy
VAT No.: 08820030966
info@seta-capital.com
www.seta-capital.com
TANYA WEN
Managing Partner
Email: twen@seta-capital.com
Mob Italy: +39 388 8765341
Mob China: +86 152 2119 6726
TOMMASO LAZZARI
Managing Partner
Email: tlazzari@seta-capital.com
Mob: +39 347 1507302
Contact Information
20