Here comes the money

Most experts are tipping 2010 will be a big year for merger and acquisition activity, and after a very quiet year in 2009, that’s hardly a surprise.

It’s already clear who is leading the charge in this M&A surge – China.

Last week, we saw Chinese food company Bright Star launch a $1.5 million proposal to buy the sugar and renewable energy business of CSR.

There are also a host of Chinese takeover and investment deals in play in the resources sector.

But it’s not just the big end of town that is in the sights of Chinese investors – today we have seen an Australian IT services firm called Powerlan receive a takeover bid from a group backed by Chinese IT firm AsiaInfo.

The bid, which comes after a sharp decline in the value of the company’s shares, is being led by a former Powerlan CEO, which suggests there is plenty of history to the latest move.

But the fact that a Chinese firm is prepared to get involved in this deal should highlight that even Australia’s smaller companies are on the radar of investors in the world’s fastest growing economy. And the Chinese investors are now interested in much more than just our resources sector.

Is this a one-off deal or the start of a bigger trend? That remains to be seen, but the expansionary stance taken by so many Chinese companies would indicate the latter.

This could be a great opportunity for Australian SMEs, who are struggling to secure funding from banks and other traditional capital sources (such as private equity and venture capital firms, who are butting up against the same funding issues).

Bringing in savvy, cashed-up investors from overseas could be the perfect solution for Australian SMEs who need cash to chase high-growth.

It could also provide a perfect exit route for Australian entrepreneurs.

The links between the Australian and Chinese economies have been growing stronger for decades now, although it’s largely been limited to the big end of town and particularly our mining sector.

But as China’s economy grows, so does its appetite for investment and our companies are clearly prime targets.