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Wednesday, 31 October 2012

PwC: China's investment in Europe will continue to grow despite the economic recession

Despite the recent emergence of signs of slowing economic growth in China and the continuing uncertainty surrounding the eurozone crisis, PwC conducted analysis shows a steady increase over the past six years, the volume and number of transactions for investments in Europe with the participation of companies in mainland China. In 2006 Chinese capital committed 11 such transactions, while in 2011 already 61.

Although historically more active European investors bought the company in China, a break in the flow of transactions between Europe and China is shrinking. Despite the fact that Chinese companies have made ​​fewer transactions, in fact, they have invested in European acquisition targets more funds than European companies in Chinese assets. Now deals flow in the opposite direction, and from Europe to China shows a decline - from a high of 163 deals in 2006, down to 85 deals in 2009. In the period to 2009, this index has recovered slightly, European investors have intensified the process of transactions in the fast growing Chinese market. This is just some of the findings from the analysis of activity in the M & A deals between China and Europe, presented in the new report, "Transactions involving Chinese companies: a new look," which was prepared by Emerging Markets, PwC. Chinese companies are expanding their business through the acquisition of foreign companies , the report says that in the I quarter of 2012.

Chinese companies have made ​​32 deals with investments in Europe, and in Europe - only 26 deals with investments in China. Thus, the number of transactions with investments in Europe for the first time exceeded the number of transactions with investments in China. Chinese companies with state participation are the leaders in investments in Europe. In this case, private Chinese companies are trying to expand our business, including through the acquisition of companies abroad in various sectors of the economy. For many years, Britain has been most active in the market of mergers and acquisitions between China and Europe. The streams of transactions between the two countries were going in both directions. Much of the investment in the UK came from Hong Kong, but in recent years a growing interest in Europe by investors from mainland China, who see Europe as a possible target for investments and also purchased the company in the UK.

Despite this trend, the share of Chinese investment in Europe attributable to the UK, has declined over the past 15 months, and the main European destination for Chinese companies on the M & A market was Germany. In 2011. France ousted from the position of the UK's largest investor in the Chinese market of mergers and acquisitions. Chinese companies show a thoughtful approach to investing in Europe emphasizes partner at PwC Transaction support Philip Bloomfield, Chinese companies show a thoughtful approach to investing in Europe. "There were times when they paid a premium for strategic investments, often taking a decision based on whether it is possible to use technology that they get in China and whether they will open the deal to acquire access to new markets," - experts say. According to his calculations, in the long run the number and volume of transactions made ​​by Chinese companies in the European market of mergers and acquisitions to grow. "We expect an increase in activity in the segment more traditional transactions, along with the continuation of the practice of acquiring minority interests," - said F.Blumfild. PwC experts remind that Chinese companies typically acquire a relatively small share in the UK and other European companies for large sums of money in contrast of companies in the UK and other European countries, which tend to invest smaller amounts in large blocks of shares. This suggests differences in the priorities of Chinese enterprises under the control of the state, and European companies in terms of investment strategy, analysts say. said, according to the report, and suggests the following. Despite the fact that the largest amount of the transaction for the Chinese companies in Europe are in the segment of fuel and energy, mining and infrastructure projects (with 2006. 12 of the 20 largest deals were made ​​in these areas, and seven of them - for the sum of 1 up to 6 billion euros), the number of deals in the lead production of industrial goods, telecommunications, media and high technology, retail, and consumer goods.

Director of PwC, advising on international transactions to Chinese companies, Allan Zhang stressed that mergers and acquisitions are complex even in good times. "Some Chinese investors, the continued uncertainty in the eurozone increases their chances of better deals with debt-ridden European companies, many of which were previously inaccessible to them. As the Chinese bidders will get more complete picture of the European assets increases the likelihood that in the future they will become habitual buyers in this market. Therefore, owners of assets in the UK need to seriously consider China as a way to release all or part of their investment. At the same time because of the long time required to process transactions, established by law in China, they should think about how to start working with Chinese investors in advance and effectively manage the active process of information exchange for the completion of the transaction at the optimum time, "- said A.Zhang.


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