Financing Mergers & Acquisitions in China Today

Interview of Roy Zhang of King & Wood's Banking Department by Zhang Tianhui and He Ran of King & Wood's Publications Group

Financing is a critical consideration in M&A transactions. For a long period of time, financing large scale strategic M&As of listed companies in China has been a bottleneck. As such, it is important for companies to study successful M&A experiences from abroad and develop additional venues and tools for financing and venues for such transactions.

 Q: What are the features of M&A financing transactions engaged by domestic banks?

Since Chinese commercial banks have excessive capital liquidity, they are inclined to take sizeable projects such as those sponsored by large state-owned enterprises or central or local governments. In deciding whether to issue a loan, these Chinese commercial banks tend to focus on the credit standing of the sponsors instead of credit or financials of the projects themselves.