Chinese investment in UK: growth continues in H1 2021

Chinese investors continue to make a significant contribution to the UK economy in the first half of 2021. Simon Bevan and Ian Zhu look at the deals and trends you need to know about.

The number of Chinese investments in the UK during H1 2021 reached pre-COVID-19 levels, showing a healthy rebound in deal activity with a 44% increase year-on-year. Deal value for the period has plummeted by 68% to £1441 million, but this is due to one exceptionally high-value deal in H1 2020: Chinese Resources Group’s £4.2 billion acquisition of UK recycling business Viridor — the biggest deal of the year.

A close look at Chinese M&A trends in the UK

In H1 2021, funding and development capital deals accounted for 61% of total deal volume (H1 2020: 56%) and 86% of total deal value. Like H1 2020, there were no minority stake deals in H1 2021, and the appetite for majority stake acquisitions increased to nine (H1 2020:7). Chinese technology conglomerate, Tencent Holdings, invested in three UK-based companies in H1 2021, covering diverse sectors: robotic surgery, drug development and self-driving vehicle software.

_{Figure 1: China-UK M&A and funding (excluding real-estate) H1 2017-2021. Sources: Zephyr, Orbis, Mergermarket, Refinitiv, Nexis.}

Notable Chinese-UK deals in H1 2021

Tencent invests in CMR Surgical Ltd

The largest investment in H1 2021, at £432 million, involved Chinese technology conglomerate Tencent, along with other investors: its fourth-round series D funding in Cambridge-based MedTech company CMR Surgical Ltd.

Fosun fund in Gyroscope Therapeutics Limited

Gyroscope Therapeutics Limited, a clinical-stage gene therapy company focused on treating diseases of the eye, announced that it has received £107.8 million in an equity round of funding led by Shanghai Fosun Pharmaceutical (group) Co., Ltd and other non-Chinese investors.

Ping An Insurance backs 10x Future Technologies Ltd

As an existing investor, Ping An Insurance have backed London-based fintech 10x Future Technologies LTD in a USD $187 million Series C round co-led by funds managed by BlackRock and Canada Pension Plan Investment Board.

Ping An Global Voyager Fund, a subsidiary of Ping An, led the GBP34 million Series A funding round for 10x Future Technologies back in May 2017.

WuXi AppTec acquires Oxford Genetics Ltd (OXGENE)

WuXi AppTec completes acquisition of OXGENE for at an enterprise value to be around £108 million, which makes OXGENE a wholly owned subsidiary of WuXi AppTec, and enables it to further strengthen its customers' end-to-end service in developing cutting-edge cell and gene therapies for those in need worldwide.

M&A Investment by industry: 2017-2021

In H1 2021, Chinese investment in the UK was focused on far fewer industries than in previous years, with 83% of the deals being exclusively made in TMT and life sciences.

_{Figure 2: H1 2017–2021 investments by industry. Sources: Zephyr, Orbis, Mergermarket, Refinitiv, Nexis}

Trends in 2021

In H1 2021, there were 11 Chinese investments in the TMT sector and eight deals in life sciences.

_{Figure 3: H1 2021 investments by industry. Sources: Zephyr, Orbis, Mergermarket, Refinitiv, Nexis.}

TMT sector trends

Deal volume in TMT increased by a staggering 267%: from three deals in H1 2020 to 11 in H1 2021. Six of these investments were made in fintech, which equals the total number of investments in that sector over the last four years, demonstrating a revitalised Chinese investment appetite for UK fintech. Driven by the momentum of demand for fintech worldwide, investment in this area will undoubtedly continue in the future, consolidating the UK’s standing as a leading high-end technology and global financial hub.

Life sciences trends

Life sciences accounted for 84% of total deal value, at £1214 million, with the number of life sciences deals doubling from H1 2020. Life sciences has two sub-sectors: pharmaceutical & biotech, and medtech. Although 75% of life sciences deal volume fell in the former sector, the high deal value in life sciences remained high, shown by the medtech deal at £423 million involving Tencent’s funding in CMR Surgical Ltd.

In the last decade, the healthcare sector has become the strongest area for Chinese investment regardless of the economic landscape. Coronavirus further confirmed the importance of investment in healthcare for society and the international economy.;

If you would like to start a conversation about any aspect of Chinese investment in the UK, please contact Simon Bevan or Ian Zhu.