The ongoing economic integration of the Guangdong-Hong Kong-Macao Greater Bay Area has boosted the buying and selling of businesses in the region, according to disclosures from Hong Kong-listed companies last year.
Forty-three percent of the businesses acquired and sold by Hong Kong-listed companies in 2019 were in the Hong Kong and Macao special administrative regions and Guangdong province. This figure is a 10 percent increase over the previous year, accounting and consultancy firm Grant Thornton said on Friday.
Benefiting from the favorable government policies, the cities in the Bay Area could become more attractive hunting grounds for business transactions of Hong Kong-listed companies
Barry Tong,
Grant Thornton’s joint Asia-Pacific head of transaction advisory services
“Benefiting from the favorable government policies, the cities in the Bay Area could become more attractive hunting grounds for business transactions of Hong Kong-listed companies,” said Barry Tong, Grant Thornton’s joint Asia-Pacific head of transaction advisory services.
Grant Thornton said it expects more government incentives to be introduced to further foster the economic development of the Bay Area and potentially bring more merger-and-acquisition opportunities to the region.
However, the number of total corporate transactions declined by about 10 percent in 2019 to 273 compared with the previous year of 304 transactions, an annual research on transaction activities of Hong Kong-listed companies conducted by Grant Thornton showed.
The research found that property and construction, and the consumer discretionary industries dominated the corporate transaction activities.
Business sales outnumbered acquisitions in 2019 against a backdrop of social unrest and a sluggish economy, Tong said.
Because the COVID-19 pandemic and travel restrictions led to conservative corporate action, the number of business transactions initiated by local companies in the first quarter this year was down 6 percent compared with the same quarter in 2019.
Tong said companies were either canceling ongoing deals or liquidating assets to remain solvent. There was a 14 percent drop in acquisition sales and purchase agreements (SPAs) and a 3 percent increase in disposal SPAs year-on-year in the first quarter.
Despite governments’ intervening and providing funding to ease the pressing needs of the public, investment sentiment remained weak. Tong expects the business transactions of Hong Kong-listed companies to continue trending downward in the second and third quarters, with the number of sales rising and acquisitions dropping.
The report also revealed that controlling interest transactions is common as over 70 percent of Hong Kong listed companies consider acquiring or disposing of 50 percent or more of the equity interest.
Among the transaction settlements, cash-only is the most popular method for Hong Kong-listed companies in the past year, which showed that buyers were urged to complete their transactions with less time, effort and cost compared to other settlement methods, Tong said.
