According to Dealogic, 102 outbound Chinese transactions have been announced to date worth USD 81.6 billion up from USD 11.2 billion for the same period last year…
Some of them have been truly momentous:
- Haier’s intention to acquire the GE Appliance business, a business which is steeped in American corporate history.
- ChemChina’s bid for Syngenta, the sheer size of which is eye popping at USD 48 billion.
- HNA Group’s bid for Ingram Micro, not so large but significant in terms of the learning it demonstrates from a Chinese perspective.
- Chongqing Casin Enterprise bid’s for the Chicago Stock Exchange. As an aside, bidding for public ‘infrastructure’ type assets always tends to create headlines…despite the relatively small nature of the asset.
The concept of Asian businesses acquiring Western ones is not new. Many of you will remember the arrival of Japanese corporates in Europe and the US in the 1980s and 1990s…and a similar, often protectionist reaction to the perceived loss of control of various prized assets. Similar to the Chicago Stock Exchange bid, the Japanese acquisition of the Rockefeller Center in 1989 was a bid which generated a public reaction and perhaps marked the height of Japanese ambition. I’m not expecting the same for China by the way.
So what’s different and unusual about the new acquirers?
- Speed. Unlike the Japanese corporate buyers, the ability for Chinese buyers to put together complex transactions, raise the capital, develop the strategy (which may still be quite limited), make a bid which stands up to regulatory scrutiny and the rules governing public listed entities and perhaps most importantly, appear credible is extraordinary.
- Lack of dependence on ‘advisers’. With such of wave of M&A activity, the investment bankers / lawyers and accountants in the traditional centres of London and New York might have expected to be benefiting in terms of fees from what are still perceived as ‘unsophisticated’ buyers. In fact, the level of advisory activity is reasonable rather than stellar and the beneficiaries are those closest to the buyer…which should not be a surprise.
- No focus on cost synergies / ‘efficiencies’ / ‘right sizing’ or any other euphemism for head count reduction. There are clearly some ambitions with regard to products into China, top line growth and access to new markets, technology and IP.
- No change in leadership. With very few exceptions, the existing leadership structure remains in place. M&A China style appears to be a non-contact sport.
What can the acquired businesses expect from their new owners? It is early days, each company will have it’s own characteristics and I’m keen to hear your comments on this, but I would expect some of the following:
- An informal governance structure which exists to make decisions quickly. Generate a new idea or a new product? Find a way of improving operational efficiency? Communicate through the right channels and you’ll get a decision. Finding the ‘magic hand’ is one of the challenges in any initiative going forward.
- An instinctive closeness to the customer. Feedback is highly prized and forms a critical part of strategy development.
- More listening, less talking! At the heart of every interaction is a respect for the individual and their personal competence and experience. Chinese buyers who enter the European or US market are painfully aware of what they don’t know and will see this first and foremost as an opportunity to learn.