M&A Analysis and Research Report on Real Estate Industry

Abstract:

1. The Motives of M&A in real estate industry

At present, there are lots of small companies in this decentralized market in limited capital scale. Even the China National Real Estate Development Group Corporation as the guru in this sector has property of RMB 60 billion, which features great distance from industrialized nations. Therefore, We believed that it’s a way out for big real estate company taking over small one to optimise and integrate market resources. With M&A, the cost will be brought down and leading position will be formed.

2. M&A trend in China ‘s real estate industry

Based on industrial character and status quo in real estate industry, We made number of analyses as followed:

A. Integration between big company and small one. Some small real estate developers can not work as normal due to credit capability for their short of capital though enjoyed piece of land coupled with intensified efforts from national macro-economic policy to deal with hoarding land phenomenon. Under this circumstance for those developers who have land as hand but less capital to keep their land is to put it into market. At the same time, the restriction of loan and credit has made small firm relinquish or transfer their projects. We believed that this situation made the small company to partnered with big one for common development.

B. Acquisition. Many big real estate companies are accepted within the community for their strong capital back-up, wide array of channel for finance-seeking and well-established managerial techniques. For their own development, big real estate companies will grab the opportunity to take over the small companies and their projects as to expanding their scale. It’s the best way to break the bottleneck for growth.

C. Regional consolidation. We believed that it’s inevitable for group operation prevalent in regional integration. Joint capital and comprehensive operating mechanism is supposed to manage to obtain land for real estate development through open tender and auction when the way to get small pieces of land is narrow. Joint capital and group operation prove effective for small real estate companies. Acquisition based on strategic cooperation to get land will on the rise.

D. M&A by Foreign. The foreign real estate companies that are featured with enough capital, favorable finance-seeking channel, good quality of house and service and well-established managerial savvies will take over China ‘s counterparts that are left behind in all aspects. M&A will help foreign participate into China ‘s real estate industry pretty quick.

E. Policy take-over. The market-oriented take-over will be the main- stream though China National Real Estate Development Group Corporation was born with the efforts of State policy. The M&A among state-owned companies will step forward with unbearable pressure from State-owned asset, cash circulation in land, inventory and sale, process development funds and developing code. Reshuffle within real estate industry, M&A and centralization will be geared up.

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