Executive Briefings

China to Spend $1.5Tr Buying Companies Abroad

Even as regulators at home and abroad block deals, Chinese acquirers will spend $1.5tr buying companies abroad in the next decade, 70 percent more than the previous 10 years, Linklaters LLP said in a recent report.

China to Spend $1.5Tr Buying Companies Abroad

Government policies encouraging Chinese companies to invest in manufacturing capabilities, particularly for advanced technology, and international trade will help maintain deal flow, the law firm, which specializes in advising on mergers and acquisitions, said in the report. Chinese buyers have spent about $880bn on assets in other countries in the last 10 years, according to the data.

The success of China’s bidders will depend on their ability to overcome foreign countries’ concerns about national security and interest, which contributed to the failure of as much as $75bn in announced outbound deals last year, Linklaters said in the report. China may also have to bow to international pressure to liberalize its markets, it said.

“While the pace of outbound deals has declined in 2017, China’s long-term aspirations” mean that overseas “investment and acquisitions from China will continue to be a significant force over the long term,” Linklaters said.

Regulators have generally blocked Chinese businesses’ bids for companies in industries seen as critical to their economies or national security, such as infrastructure and technology. Aixtron SE, the German semiconductor equipment maker, saw its planned sale to a Chinese-backed company collapse in December after the U.S. government opposed the deal. Push-back from the same group, the Committee on Foreign Investment in the U.S., led to the termination of Chinese firm GO Scale Capital’s $2.8bn bid for Royal Philips NV’s lighting unit, Lumileds.

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Government policies encouraging Chinese companies to invest in manufacturing capabilities, particularly for advanced technology, and international trade will help maintain deal flow, the law firm, which specializes in advising on mergers and acquisitions, said in the report. Chinese buyers have spent about $880bn on assets in other countries in the last 10 years, according to the data.

The success of China’s bidders will depend on their ability to overcome foreign countries’ concerns about national security and interest, which contributed to the failure of as much as $75bn in announced outbound deals last year, Linklaters said in the report. China may also have to bow to international pressure to liberalize its markets, it said.

“While the pace of outbound deals has declined in 2017, China’s long-term aspirations” mean that overseas “investment and acquisitions from China will continue to be a significant force over the long term,” Linklaters said.

Regulators have generally blocked Chinese businesses’ bids for companies in industries seen as critical to their economies or national security, such as infrastructure and technology. Aixtron SE, the German semiconductor equipment maker, saw its planned sale to a Chinese-backed company collapse in December after the U.S. government opposed the deal. Push-back from the same group, the Committee on Foreign Investment in the U.S., led to the termination of Chinese firm GO Scale Capital’s $2.8bn bid for Royal Philips NV’s lighting unit, Lumileds.

Read Full Article

China to Spend $1.5Tr Buying Companies Abroad