CROSS-BORDER M&A FROM AND INTO ASIA - pemacom - Private Equity and M&A Community

CROSS-BORDER M&A FROM AND INTO ASIA

Tian Cai, Senior Investment Director of the Fosun Group; Inna Gehrt, Partner at Mandarin Capital Partners; Andreas Holtschneider, Partner at Cathay Capital; and Sung Yoon Woo, Chief Executive Officer and Co-Founder of Credian Partners; together with panel head Paul Kim, partner at McDermott Will & Emery discussed recent developments in Cross Border M&A from and into Asia.

The panellists outlined their analysis of the current situation regarding four key questions. First they evaluated the emergence of new attractive sectors for cross-border investment from and into Asia. Then, they discussed the influence of the new regulatory measures adopted by the United States and Germany, as well as their effect on the consideration of Asian investors. After, the panellists turned to some of the key factors of success concerning cross-border M&A from and into Asia.

Outgoing Cross Border M&A from China has not strongly been affected by the new regulatory measures adopted in the United States and in Germany. Nonetheless, Asian Foreign Investments have to face new constraints under the Foreign Investment Risk Review Modernization Act (FIRR-MA) and reforms to the German Foreign Trade Regulation.

These new regulations have not only led to painful delays in the closing procedures of cross-border deals, but also have created uncertainty as to what transaction might be subject to the new forms of control. This is caused mainly by ambiguity surrounding the definition of the protected “key infrastructures,” rendering the extent of the control difficult to foresee. This has resulted in decreasing trust towards Asian investors. It becomes more and more frequent, that Asian investors have to deposit a certain percentage of the purchase price as security in advance or even have to pay premiums.

Concerning the current hot sectors, the panellists agreed that the interests of Asian investors still circle around the “Classics” such as the automotive and health care sector on the one hand, and the garbage or park-garage sector on the other hand. However, there has also been an increasing interest in the service-oriented sectors and in the transfer of know-how in regard to these sectors.

Inbound M&A into China has also seen some changes and developments. More and more investors realize the incredible potential in the Chinese consumer market. China is less and less perceived as the production factory of the world, as Inna Gehrt, Partner at Mandarin Capital Partners, observed. As a result, more and more investors are investing in the Chinese lifestyle and luxury sectors as well as other sectors focused on the Chinese consumers. The panellists insisted, however, that it is crucial for this type of investment to have some form of local infrastructure in China in order to enforce the contracts concluded in China.

The Korean market is opening up as well, as the current liberal administration is inciting the big Korean companies to focus on their core investments, which leaves more room for other investors.

Chaired by
Paul Kim,
McDermott Will & Emery

From left to right: Tian Cai, Fosun Group; Andreas Holtschneider, Cathay Capital; Inna Gehrt, Mandarin Capital Partners; Sung Yoon Woo, Credian Partners; Paul Kim, McDermott Will & Emery

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