- Number of Chinese takeovers in Switzerland fell from 13 to 12 in 2019, but the transaction value rose from USD 492 million to USD 571 million
- Number of transactions falls from 196 to 182 across Europe, transaction value falls from 31.2 to USD 17.3 billion
- For the first time since the first half of 2016, the number of transactions rose again in the second half of last year: from 83 to 99
In Europe, there have recently been signs of a turning point – although the number of transactions for the full year 2019 fell from 196 to 182 compared to the previous year, more investments were counted in the second half of the year than in the first half: The number rose from 83 to 99 in the half-year comparison. The transaction value in particular was on the rise: From USD 2.4 billion in the first half of the year, invested capital jumped to USD 14.9 billion in the second half. In total, USD 17.3 billion were invested across Europe last year – following on from USD 31.2 billion in 2018.
These are the findings of a study by the EY audit and advisory group that examines M&A investments by Chinese companies in Switzerland and Europe. The study examined acquisitions and equity investments by companies with headquarters in China and Hong Kong or their subsidiaries; the target companies have their headquarters in Europe and are operational.
“In the second half of the year, the market picked up noticeably; the willingness to also enter into larger deals has increased significantly”, observes Yi Sun, Head of China Business Services for Germany, Austria and Switzerland at EY. "Chinese financial investors are now also increasingly pushing into Europe, those who previously only travelled in their home country and who were therefore largely unknown here. Some of them specialise in transactions in the triple-digit millions range and are increasingly competing in this segment with the established major financial investors from America and Europe.” Although the rate of contracts coming to completion is not yet high, Yi Sun notes that there is a “steep learning curve”.
Sun also says that more large target companies came on the market in the second half of the year. ”Chinese investors were actively involved in a number of large private equity exits and carve-outs of industrial groups. Further deals of this kind are in the pipeline.”
Most of the transactions were counted in Germany, with 39 transactions – ahead of the UK (31 deals) and France (18). Switzerland comes in at 5th place with 12 transactions. The volume in Switzerland rose from USD 492 million to USD 571 million. This puts Switzerland among the top ten in Europe, at 6th place.
“Industry and high-tech are currently in great demand again – with Chinese companies operating as strategic investors both in strong niche suppliers and in companies with weak growth in Europe. A number of small and medium-sized companies were given access to the enormous Chinese sales market last year through a Chinese investor”, says Yi Sun. “We also find that well-known Chinese high-tech companies are increasingly investing in high-tech start-ups in Europe, giving these start-up companies fresh capital as well as access to the major platforms that Chinese high-tech companies have built up”, Sun adds.
Chinese invest in British beer and German cars
Europe’s largest investment in the past year was the acquisition of the British Greene King brewery group (including pubs and hotels) by the CKA Group based in Hong Kong. The second-largest transaction was the acquisition of a five percent stake in the Daimler Group by the Chinese car maker BAIC – at the time when the transaction was announced, this corresponded to a stock market value of USD 2.9 billion. In third place came the purchase by the Jiangsu Shagang Group of a stake in the British data centre operator Global Switch for USD 2.2 billion.
Mixed outlook for 2020
Fabian Denneborg expects continued high activity in the transaction market, with the number of transactions increasing against the background of portfolio streamlining by large corporations. In today’s transaction market, the proportion of target companies that are showing profitable growth has become significantly smaller. Consequently the interest in such hidden champions is all the greater”, continues Fabian Denneborg. “However, the net investment of Chinese capital in Switzerland could be reduced by a possible sale of Chinese-held companies in Switzerland”
At the same time it should be noted that “in the trade conflict between the USA and China a solution is emerging that both sides can live with and that would end the long period of uncertainty. This will have the effect that more Chinese companies will once again start thinking about their strategic development abroad”, Sun said.
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