Changing of the guard on the M&A market
The time when Western firms made spectacular M&A investments in Asian markets is over. According to the latest edition of Ernst & Young’s Capital Insights, for nearly two years there has been increased interest on the part of companies from emerging markets, first and foremost China, in acquisitions on more developed markets. Their expansion is aimed at the United States, but also to an increasing degree Europe, which is attractive to Chinese companies due to the weak euro and the financial difficulties of European companies.
According to a report from the Polish Institute of International Affairs entitled Prospects for the Development of Economic Relations Between Poland and the People’s Republic of China, the key driver of global expansion by Chinese firms is the desire to obtain access to energy sources, minerals, and new markets. These are the sectors identified as priorities in the “Go Global” strategy announced by the Chinese government in 2001, which is based on state aid for Chinese companies investing abroad. It is no secret that the purpose for opening foreign branches of Chinese banks is to finance Chinese investments. The Bank of China and the Industrial and Commercial Bank of China have been operating in Poland since 2012.
Mergers and acquisitions primarily offer Chinese companies an opportunity to enter mature markets using the brand and technologies developed by the previous owners, to overcome trade barriers, and to obtain access to new sales channels. In the longer term, M&A also enables the brands to be introduced in China.
London looks to Beijing
M&A is also an opportunity for companies seeking to raise funds for further investments. According to Ernst & Young’s Global Capital Confidence Barometer from October 2012, about 19% of companies from the financial, technology and industrial sectors were interested in divesting assets within the next six months. According to the report, the efforts by the British government to attract Asian investments— primarily from China—were particularly noticeable.
Aleksandra Włodarczyk, Wardyński & Partners