Behind many of the decisions of Chinese acquirers overseas lie the idiosyncratic needs of some
415m millennials. So distinctive are the tastes of the generation born in the final two decades
of the last century that China's emerging multinationals are scouring the world to answer
their desires.
As Goldman Sachs, an investment bank, put it in a 2015 report: "Chinese millennials are probably
the single most important demographic on the planet today."
Not only is this individualistic, tech-savvy and internationally minded cohort reshaping the
contours of China's domestic consumer markets, it is also leaving an increasingly deep
imprint on global M&A trends.
"Young consumers are increasingly willing to pay for quality," said Lu Wenjie, China equity
strategist at UBS, an investment bank. "They seem more sophisticated than their parents and
can tell the difference between overseas brands that are good quality and those that aren't."
The craving of millennials for quality - as well as for fun and healthy lifestyles - are
evident in China's largest outbound deals so far this year.
The acquisitions by Haier and Midea, two Chinese household appliance firms, of the white goods
divisions of GE and Toshiba respectively were driven by an imperative to upgrade their technology
for an increasingly discerning domestic consumer.
Wanda's $3.5bn acquisition of Legendary Entertainment, a US movie company, was motivated largely
by millennials' love affair with cinema. ChemChina's intention to purchase Syngenta, a Swiss
seed and chemical firm, was prompted by an appetite for quality food.
Even the approaches this month by a Chinese buyer to AC Milan, the Italian football club, are
reinforced by the popularity among millennials for overseas sport, which they often livestream on
to their mobile phones inside China.
Such preferences are driving shifts in the pattern of outbound Chinese M&A activity, according to
a new report by UBS.
The number of outbound M&A deals completed in 2015 in the technology and tourism sectors -
both of which are buoyed by millennial demand - rose 4.5 times since 2012 to a total of 18
last year.
Tourism deals also jumped, from zero in 2012 to 10 last year (see chart), partly because millennials
are becoming insatiable global travellers. Total spending by outbound Chinese travellers in 2025
is likely to reach $255.4bn, more than that by UK, German and French travellers put together
in the same year, according to a study by Oxford Economics, a consultancy, and Visa,
the payments company.
Conversely, the number of deals in "old economy" sectors such as energy and metals - which are
associated with the investment-driven model of growth that China is trying to transition away from
- have dwindled significantly since 2012 both in absolute terms and as a share of transactions.
Outbound acquisitions in the real estate sector rose strongly between 2012 and 2015, though this is
not primarily a phenomenon driven by millennials' demand.
Overall, UBS expects the compound annual growth rate (CAGR) in Chinese outbound direct investment to
hit 18 per cent over the 2015-18 period, up from a 14 per cent CAGR between 2008 and 2014. Total
outbound direct investment was $118bn last year.
As the M&A activity speeds up, so the pattern of purchases is set to shift. "We view the
changes... as closely linked to the structural shifts now playing out in China's economy,"
according to the UBS report.