Asian buyers offer strong M&A opportunities for British businesses
3 min read
30 October 2015
The global M&A market is continuing to boom, with new data suggesting that 59 per cent of companies worldwide were planning an acquisition within the next 12 months. One region that stands out is Asia – both Chinese and Japanese corporates demonstrated an increasing focus on outbound M&A investment, spending $62.2bn and $54.1bn respectively in the first half of 2015.
This year has undoubtedly been a challenging one for China, with the recent stock market crash this summer and now growth looking set to slip to a 25-year-low in 2015 to under seven per cent. However, the good news is that the economic slowdown does not appear to have had an adverse impact on deal sentiment with outbound flows up 49 per cent in the first nine months of 2015.
This is particularly good news for UK entrepreneurs and business owners, with Chinese companies spending approximately $83bn acquiring British businesses over the last ten years, equating to around 15 per cent of the country’s total outbound investment over the period.
Whilst Japan’s focus has been more specifically targeted towards the US, UK firms have also experienced an upturn in deal sentiment, as demonstrated by Tokyo-based Mitsui Sumitomo’s £3.5bn offer for UK insurance giant Amlin in September.
In terms of the sectors gaining the most attention TMT continues to come high up the wish list for many Chinese and Japanese buyers, with the recent takeover of telecoms giant O2 by Hutchison Whampoa being just one example. For many companies, going in search of M&A opportunities provides an avenue for accessing new technologies and also turbo charging growth as opposed to pursuing more time-consuming and speculative R&D and growing organically.
Read about doing business with China:
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- New export country series: Dealing with the obstacles of trading with China
- China still has designs on teaming British businesses despite economic wobble
The consumer and retail sector has also been catching the eye of cash-rich Asian buyers. In 2014, we saw Hony Capital acquire high street chain Pizza Express and Sanpower acquired renowned British departments store House of Fraser soon to be followed (if media reports are correct) by the acquisition of Hamleys. At Cavendish we are witnessing this trend spreading to the mid-market, recently advising bespoke pram maker Silver Cross on its sale to Chinese conglomerate Fosun. This deal highlights the fact that beyond the mega-deals, Asian buyers are seeing the value in strong UK brands with established customer bases in providing opportunities for both domestic and international growth.
For British businesses, the opportunities to benefit from Asian buyers, specifically from China and Japan, are ripe. Not only are these regions providing significant buyer interest but they offer acquired companies great access to new markets. As an entrepreneur or business owner, there are a number of factors you need to consider when looking to grab the attention of Asian buyers.
These include the need to be sensitive to cultural differences and knowing how best to position the business to maximise its attractiveness.
Peter Gray is partner at Cavendish Corporate Finance.