Inaugural MW IT Index® (China Edition)
China IT Services and BPO Outlook Strong
The inaugural MW IT Index® (China Edition), which tracks the enterprise value of 28 companies in IT Services and Business Process Outsourcing (BPO) in China, Hong Kong and Taiwan, and compares them to valuations of similar companies in India and the United States, has been released by martinwolf M&A Advisors.
Based on proprietary analysis, the MW IT Index remains the only index of its kind in the IT Services industry. The China Edition joins the U.S. Edition, which is used by martinwolf, IT sector businesses and international media to analyze the state of the industry. Both the U.S. and China Editions start on December 31, 2007 with a value of 1000.
Transitioning to growth phase
The Chinese IT Services industry is still in its early phase, but is transitioning to a growth phase. Because the industry is still being established, enterprise values are growing - recent research measured its growth at 25 percent, compared with growth in the mid-teens in India.
Most volatile of the three major markets
China is the most volatile of the three major markets. Domestic financial scandals and slowing GDP growth have resulted in lower valuations for the Chinese market, and when compared with the United States and India, China is consequently the most volatile - a trend we expect to continue during the next year.
Valuations higher than U.S., Lower than India
Chinese valuations remain above those of the United States, but do not reach those of India. We see the strongest competition for Chinese companies in this space coming from India, but the United States remains an attractive market in which to find valuable companies at a good price. This is exemplified by a growing trend of Chinese companies purchasing U.S. assets (and vice versa).
Cross-border M&A is path to higher value
Cross-border M&A is the path to maximum value - but not without challenge. As we have seen in India, cross-border M&A is an effective strategy for companies looking to maximize their value. Consequently, we see a consolidation wave that continues. We believe this trend will repeat itself in the emerging Chinese market -- but companies must be aware of the challenges inherent in these types of transactions.
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For more information about our firm, contact Matthew Putzulu at email@example.com, or see www.martinwolf.com.