Lo­cal firms use M&A route in Ger­man move

China Daily (USA) - - BUSINESS - By YU RAN in Shang­hai yu­ran@chi­nadaily.com.cn

More Chi­nese com­pa­nies are us­ing merg­ers and ac­qui­si­tions of Ger­man ven­tures to grow their mar­kets in Europe, while the Ger­man groups for their part are at­tracted by the prospect of mak­ing moves into the boom­ing Chi­nese mar­ket.

As one of the groups seek­ing to ex­pand its over­seas busi­ness through the takeover route, Shimge, the Zhe­jiang-based listed com­pany, bought two for­eign pump firms Wita Wil­helm TaakeGm­bHinGer­many and Hel-Wita Sp. z o.o. in Poland in Septem­ber for 13.5 mil­lion eu­ros ($14.7 mil­lion), and is sniff­ing around for takeover tar­gets in theUS.

“It’s quite dif­fi­cult for us to ex­pand busi­ness in for­eign mar­kets, es­pe­cially in Europe, where there is a con­cen­tra­tion of ma­jor and ma­ture in­dus­trial lead­ers. We ac­quired those lo­cal com­pa­nies for their ad­vanced tech­nol­ogy, ex­pe­ri­enced staff mem­bers and ex­ist­ing mar­ket,” said Zhang Yongqing, the strate­gic ad­vi­sor of Shimge Pump In­dus­try Group Co Ltd.

Mean­while, Good­baby Group, China’s big­gest man­u­fac­turer and re­tailer of baby­care prod­ucts, has al­ready gone down a sim­i­lar road with its in­ter­na­tion­alM& As­trat­egy.

In 2014, the com­pany, based in Suzhou, Jiangsu prov­ince, made its first ac­qui­si­tion of Cy­bex GmbH. The takeover of the Ger­man brand of pre­mium car seats meant a wider ex­po­sure in Europe and its en­try to the high-end car-seat mar­ket­place.

“We are keen to of­fer high­qual­ity and up­dated prod­ucts, with cut­ting-edge de­sign and tech­nol­ogy for con­sumers, by ac­quir­ing ad­vanced and cre­ative brands to speed up the in­no­va­tion,” said Liu Tongyou, the com­pany’s vice-pres­i­dent and chief financial of­fi­cer at the Ger­man-China Fo­rum for In­vest­ment and M&A 2016 in Kun­shan, Jiangsu prov­ince.

In the same year Good­baby Group bought US group Even­flo Co Inc. The large man­u­fac­turer of in­fant con­sumer prod­ucts, in­clud­ing car seats and feed­ing bot­tles, was ac­quired for $143 mil­lion and rep­re­sented a move for­ward in theUS mid-class mar­ket.

Cur­rently about 70 per­cent of Good­baby’s busi­ness has been switched to in­ter­na­tional mar­kets in­clud­ing Ja­pan, North Amer­ica and Europe, while the re­main­ing 30 per­cent is from China.

Lifted by the cen­tral gov­ern­ment’s

More Chi­nese com­pa­nies are will­ing to pur­chase small and medi­um­sized Ger­man fam­ily busi­nesses for their ex­pe­ri­ence and tech­nol­ogy .” CMS

Zhang Ning,

se­nior as­so­ciate of

strat­egy, more Chi­nese com­pa­nies have stayed with their strat­egy of in­vest­ing and pur­chas­ing over­seas com­pa­nies. Sta­tis­tics from the Min­istry of Com­merce show that Chi­nese com­pa­nies com­pleted a to­tal of 521 ac­qui­si­tions worth $67.4 billion this year in 67 coun­tries and re­gions cov­er­ing 18 in­dus­tries. The amount has al­ready sur­passed last year’s to­tal of $54.4 billion.

In par­tic­u­lar, M&A deals done by Chi­nese com­pa­nies in Ger­many keep surg­ing. A to­tal of 37 ac­qui­si­tions of Ger­man com­pa­nies were com­pleted in the first half of this year, against the to­tal amount for 2015 of 39. One of the high­lights was the Midea’s 4.5 billion euro pur­chase of in­dus­trial ro­bot maker Kuka.

“More Chi­nese com­pa­nies are will­ing to pur­chase small and medium-sized Ger­man fam­ily busi­nesses for their ex­pe­ri­ence and tech­nol­ogy while Ger­man com­pa­nies also need in­vest­ments to pull them out of the eco­nomic slow­down,” said Zhang Ning, se­nior as­so­ciate of CMS, a global law firm cov­er­ing ser­vices in 34 coun­tries.

How­ever, there are failed ex­am­ples. Sta­tis­tics from con­sul­tan­cyPwCshowthat over 50 per­cent of over­seas ac­qui­si­tions failed. The re­port­fromtheMin­istry of Com­merce also found out that only 13 per­cent of the over­seas projects were mak­ing prof­its.

“It is es­sen­tial for com­pa­nies to carry out a de­tailed ex­am­i­na­tion of the firms into their back­ground, financial con­di­tio­nand tax is­sues with the sup­port from ex­pe­ri­enced law firms to avoid pur­chas­ing a fail­ing project,” said Zhang, who ev­ery week meets dozens of Chi­nese clients wanting to ac­quire Ger­man­com­pa­nies.

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