Capital deployment by mainland China- and Hong Kong-based private equity investors into the US and Europe, including the UK, has swelled this year even with tighter US and European government scrutiny of Chinese inbound investments.
The aggregate transaction values reached $11.05 billion in the year through early August, a significant increase compared with full year 2023, which recorded just $5.92 billion, according to data from S&P Global Market Intelligence.
The number of deals is on track to at least match last year's 245 total, with 196 transactions announced so far in 2024.
Scrutiny of Chinese investments grows
The increasing investment comes amid heightened geopolitical tensions and regulatory scrutiny.
The US Department of Defense expanded its list of entities with alleged ties to mainland China's military, primarily targeting technology firms and manufacturers. The recent inclusion of IDG Capital to this list underscores the escalating concerns over national security and regulatory scrutiny surrounding Chinese investments in Western markets, Nikkei Asia reported. IDG Capital has denied any ties to mainland China's military.
The European Union intends to tighten restrictions on inbound investments, including "when a foreign investor seeks to acquire direct or indirect control of EU businesses that provide key inputs to critical technologies, infrastructure or have access to sensitive information," according to a January statement from the European Commission.
The dual approach from the US and Europe highlights a growing regulatory landscape affecting Chinese investments in Western markets.
In the first half of 2024, Chinese investment in the US and Europe, including the UK, spiked, with deals totaling $7.41 billion, up 112% compared with the same period in 2023.
The surge in investment value can largely be attributed to Hong Kong-based EQT Private Capital Asia, a division of Sweden-based EQT AB (publ), which alone contributed approximately $5.8 billion across the first two quarters of 2024.
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In 2024, the technology, media and telecommunications (TMT) sector dominated private equity capital in the region, accounting for nearly 70% of the total with $7.69 billion across 101 deals, according to Market Intelligence data.
The healthcare sector followed, accounting for more than 18% with $2.06 billion. Without the substantial EQT-led deals in TMT, the healthcare sector would be the top recipient of Chinese investment.
Largest deals in 2024
The largest deals announced so far in 2024 are led by EQT Private Capital Asia, which landed the top two transactions of the year.
The Hong Kong-based private equity firm, through an affiliate of Baring Private Equity Asia Fund VIII, agreed to acquire US-based digital services consultancy Perficient Inc. for approximately $3.03 billion. The deal is expected to close by the end of 2024.
Following closely, EQT, along with Rosa Investments Pte. Ltd. and CPP Investment Board Private Holdings (4) Inc. agreed to acquire UK-based video game services company Keywords Studios PLC for almost $2.76 billion. The deal is likely to close in the fourth quarter.
