The M&A market in the Macau Special Administrative Region (the Macau SAR) has experienced significant challenges in the second half of 2022, due to preventative measures imposed by the government in relation to the COVID-19 pandemic. Macau’s border was relatively restrictive during most of 2022. Macau has kept up the pace with the People’s Republic of China on ending quarantine measures and now the gateways to its cosmopolitan neighbour Hong Kong, and the rest of the world, are open.
Making progress while ensuring stability has been the main theme of the Macau SAR government. With GDP falling by 24.5% in real terms year-on-year in the first half of 2022, Macau continuously strived for economic diversification, and in addition looked to the Guangdong-Macao Intensive Co-operation Zone in Hengqin. Simply put, Macau identified four main sectors as top priority in the effort to diversify its economy: health industry, modern financial services industry, high technology industry, and exhibitions and conventions industry.
As the mainstay of Macau economy, the tourism and leisure industry saw the completion of the new public tender for gaming concessions. It is the intention of the Macau SAR government to promote long-term healthy, orderly and sustainable development of its gaming industry, explore new tourist sources worldwide, and gradually enriching non-gaming elements. Gaming operators (concessionaires) remain the biggest employers in the region and have continuously shown availability to assist local SMEs and diversification of the economy, in particular venturing into conventions and exhibitions, entertainment performances, sports events, culture and art, medical services and health maintenance, themed amusement facilities, etc.
Macau had 5.7 million tourists in 2022, which is 26% less than the all-time record of 2021, with around 57 million visitors crossing the region’s air, sea and land borders.
Other interesting movements have been witnessed in terms of M&A, especially due to consolidation, and M&A at the foreign holding companies level, namely the financial industry.
There are no statistics available concerning the M&A market. Nonetheless, even with the impact of COVID-19, there were 4,111 companies incorporated in Macau in 2022, a year-on-year decrease of 1,323 companies; the total registered capital was HKD14.93 billion, an increase of ten times, mainly due to the establishment of financial companies with larger capitalisation during the year. During the year, 718 companies were dissolved, with a capital of HKD550 million withdrawn.
Macau has also seen its financial institutions reinforcing and expanding their M&A teams to develop opportunities in other markets, such as the Portuguese-speaking countries, as well as Central and South Asia.
Central government is likely to encourage Chinese companies to continue increasing their presence in the Macau SAR by purchasing or reinforcing shareholding positions in the shareholding structures of Macau-incorporated companies. Banking, energy, telecommunications and public transportation have been sectors in which Mainland Chinese investors have either entered or increased their shareholding position. This trend may be seen as a means to explore opportunities in the Portuguese-speaking markets through the Macau platform.
The Greater Bay Area plans, as well as the Master Plan for the Development of the Guangdong-Macao Intensive Co-operation Zone in Hengqin, are seen as two factors to take into consideration when envisaging the future of M&A transactions in the coming years. Included in the Greater Bay Area Plan of the central government of the People’s Republic of China, Hengqin is only 34 nautical miles from Hong Kong and a mere 187 metres from Macau, and has seen more than 5,000 Macau companies establishing a form of representation in recent years. Considering the tiny area of Macau, Hegnqin shall see Macau M&A moves in the years to come, as it has in place measures concerning the acquisition of land, industrial construction and infrastructure, and access by Macau businesses and employees to tax incentives. It has also established financial co-operation with local Macau banks and insurers that have opened, or are planning to open, with headquarters to facilitate economic development.
Hengqin aims to develop tourism, leisure, healthcare, commercial and financial services, culture, science, education and hi-tech industries. Macau shall take advantage of this national initiative to leverage its economy.
Ending the year with the arrival of a financial asset trading platform, it is likely that Macau will see a surge in its financial sector in the coming years.
Macau is heavily dependent on tourism and gaming. In 2022, GDP contracted 26.8% year-on-year in real terms, mainly because of the disruption to travel due to the restrictions imposed by the local government to fight the pandemic. This had serious consequences for the gaming industry, which saw the casino gross gaming revenue (GGR) contracting 51.4% compared with 2021.
The Macau government has launched the international public tender to award new concessions for the operation of games of fortune and chance and other casino games. It is possible that the intermediaries of this sector may see a trend of consolidation, which may boost potential mergers and acquisitions in this space.
Finance and banking, insurance, IT and other technology industries with e-commerce and cashless service providers, traditional Chinese medicine (one of the key sectors), health technology and cultural industries are likely to be the most active concerning M&A transactions in 2023. The Macau government continues to consider the diversification of the economy as one of the most important points for the development of the region.
Macau in the Greater Bay Area
The Guangdong–Hong Kong–Macau Greater Bay Area (GBA) is a national initiative highlighted in the Chinese government’s 13th Five-Year Plan, aiming to build a globally competitive mega-region and, by 2035, to build a productivity cluster, serving as a key facilitator of the Belt and Road Initiative.
The GBA comprises 11 Pearl River Delta cities, including the two Special Administrative Regions. Its development is a priority for the Chinese government in its plan to transition China from a manufacturer of low-end goods to high-end technology and to gradually integrate until 2047 and 2049 the two special administrative regions of Hong Kong and Macau, respectively.
Coupling with the Master Plan for the Development of the Intensive Co-operation Zone of Hengqin, a new stage of economic development under the new system of “mutual discussions, joint construction, joint administration and shared benefits” may occur.
Promises have been made to leverage Macau’s unique advantages arising from being a free port with international access to the world and Hengqin’s advantages in space and talents and to facilitate a more efficient and convenient flow of people, goods, funds and information between Macau and Hengqin. Currently, the “Double 15%” tax incentive policy and Macao’s personal income tax incentive policy have been implemented in Hengqin.
All of the above initiatives may attract new business and a new type of investment to Macau and Hengqin, which in turn may result in significant new opportunities for local and foreign investors.
Macau as a platform for Portuguese-speaking countries to access China
The role of Macau as a platform between China and Portuguese-speaking countries – which represent a population of more than 200 million people, Portuguese being the most spoken language within the southern hemisphere – was defined by the central government almost two decades ago. The local government understands that building an international hub for trade between China and Portuguese-speaking countries will contribute to Macau’s good performance for trade activities between the two trade blocks.
The goal is to develop a modern financial industry and a service platform for trade co-operation between China and Portuguese-speaking countries, all at the service of the Greater Bay Area initiative, promoting, innovating, and developing technologies in the financial sector. The government aims to construct a financial, tangible and intangible infrastructure, and to improve the legal regime for the financial sector.
It is expected that these goals will enhance the appetite of Chinese and international players, especially those with interests in the Portuguese-speaking space, to establish entities in Macau or to acquire Macau financial and financial services entities. This shall be accompanied by certain reforms in the financial legislation, which will need to be amended and/or put in place.
Financially oriented society
The Macau government has defined the “cashless society” as one of the goals for the next five years. The Monetary Authority of Macau (AMCM) has already put in place an integrated payment platform that will allow the region to have an all-inclusive tool to make payments. According to AMCM, “Banks and other financial institutions have embarked on works regarding the integration of payment platforms between each other, and also between merchants”.
The COVID-19 situation has given a definitive boost to the cashless society, in line with the success experienced for some years in Mainland China. International, regional and local players already have a significant presence in the region, and it is expected that in the near future this area of business will become an anchor for IT-innovative entities and other industries.
Further, the Macau government has been active in paving the groundwork for a more robust and diversified finance industry. It has granted licences to operations in the areas of financial asset trading and investment fund management. Also, the Trust Law has been enacted and is now in force, and a securities law is currently work-in-progress.
New e-government law entered into force in September 2020, permitting public bodies to undertake various actions and formalities electronically. Together with the legal regime for electronic documents and signatures in Macau, which has been in force since 2005, Law 2/2020 provides the tools for modern and paperless administrative proceedings.
It is now possible to execute an entire proceeding and prepare the corresponding final decision electronically, without any paper-based processes or documents. This includes doing the following:
This new law is seen as a landmark development milestone tool for implementing e-government, and thereby assisting Macau in becoming a “smart city”, which will foster the economic development of Macau and its integration in the Greater Bay Area. Building on that, the Macau government continuously improves the Macau One Account, providing more than 150 e-services and functions for the convenience of all users.