China is on track to have the biggest M&A year on record in 2016. The country is changing fast and opportunities don’t just lie with the big, state-owned players any more.
There is plenty of interest in the UK’s mid-market from privately owned businesses, looking to invest in companies with brands or products that give them competitive advantage in their home market, as well as a foothold in developed Western markets
The bottom line is that speed of evolution in China is creating a “win win” opportunity for European mid-market businesses to access new sources of investment and new markets at the same time.
Transitioning from Old China to New China
The Chinese economy is shifting gears. It wants to grow sustainably into the future following decades of incredible growth, so it’s a pivotal time. Exports and infrastructure that used to provide assured profits are no longer doing so.
The focus has moved to developing the domestic economy with higher value-added businesses like those in the technology, media and telecommunications (TMT), healthcare and service industries.
What Chinese investors find particularly attractive are profitable, established businesses with stable management in consumer-focused sectors.
In many cases the Chinese investor will be making a strategic change, maybe from infrastructure to consumer markets, so typically will leave the existing management in place, to continue leading success in Europe.
Remember, China is still growing much faster than Europe, so their top priority is the go-to-market plan for China. No matter how fast a business grows in Europe, the big prize will be from the 1.2bn brand new consumers in China.
This creates a dual-pole approach, the “win win”, with Chinese investors wanting the business to thrive in its home markets of the UK and Europe, as well as the potentially huge revenue growth from taking the Western business products and brands into the Chinese market.
Of course it is less familiar, maybe more complex to develop a Chinese partnership than it is one with a European or US investor, but arguably the rewards in post-merger autonomy and growth just cannot be equalled.
So what are the challenges to business?
China might be the world’s second biggest economy, but it can be challenging to engage. There are three main hurdles to overcome: the Great Firewall, the great culture wall and the great language wall!
China has its own digital ecosystem, forget Google, it stops at the firewall. Say hello to Baidu instead. Chinese consumers are hugely digitally connected, ecommerce is incredibly well developed, more so even than the west. WeChat is like a much more advanced version of WhatsApp. There maybe a digital wall but behind it is the biggest digital economy in the world
China is one of the most complex and sophisticated cultures in existence. Through understanding the differences, it becomes much easier to understand the similarities, and that is that business in Europe and China have exactly the same objectives and motivations. So how can you bridge the gap?
Continue reading on the next page for how to connect with China, what you get out of doing so and why looking towards the Far East isn’t a brave or risky decision, but n intelligent, highly rational decision.
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