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China Fights Backlash Against  $207b Global M&A Drive
China Fights Backlash Against  $207b Global M&A Drive

China Fights Backlash Against $207b Global M&A Drive

China Fights Backlash Against $207b Global M&A Drive

When a Chinese home-appliance company announced a plan in May to become the largest shareholder in one of Germany’s most advanced robot manufacturers, the backlash was immediate.
German politicians and European officials denounced Midea Group Co.’s offer for Frankfurt-listed Kuka AG, whose robotic arms assemble Airbus jets and Audi sedans. In a rare public appeal for alternative acquirers, Germany’s economy minister argued that Kuka’s automation technology needed to stay out of Chinese hands, Bloomberg reported.
And yet in two months, Midea pulled it off. Thanks to a combination of political courtship, guarantees on jobs and security, and support from influential customers like Daimler AG Chief Executive Officer Dieter Zetsche, Midea overcame knee-jerk opposition to the deal. By July the appliance maker had secured an 86% stake, valuing Kuka at €4.6 billion ($5 billion).
The experience showed how some Chinese firms are learning to soothe misgivings about the country’s record $207 billion overseas buying spree. While Sinophobia isn’t yet a thing of the past and practices among Chinese buyers vary widely, merger-and-acquisition professionals say a new generation of savvy dealmakers is starting to emerge from the world’s second-largest economy.
“Many Chinese companies have become much more adept at navigating international deals in the last few years, and at soothing the concerns stakeholders might have,” said Nicola Mayo, a partner at London law firm Linklaters LLP who specializes in China-Europe transactions. “In many of the larger Chinese companies, you’re dealing with managers who were educated abroad or have worked in international firms. They understand the concerns about China and know they need to move carefully.”
That growing fluency is making Chinese businesses a more powerful force in the M&A world than ever before, particularly in Europe, which has accounted for nearly half of China’s overseas takeovers this year. While that’s a potential boon for slow-growth western economies in need of fresh sources of capital, it also means stiffer competition for European and US acquirers at a time when global equity prices are already near record highs.
For the Kuka deal, Midea pledged to maintain existing plants and jobs until at least 2023—far longer than the norm for similar deals—and promised to keep customer data walled off from the Chinese parent company. It deployed vice president Andy Gu, a social scientist by training with a doctorate from Cornell University, to make those assurances face-to-face with the German economy minister’s senior staff, according to people with knowledge of the matter.

 

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