Originally published 13th June 2017
Chinese overseas investments in Europe and especially in Germany have grown exponentially in the past years. 2016 was a record-breaking year in terms of deals and volume transaction with respect to Chinese mergers and acquisitions. China's outbound M&A grew by 246%, 3.5 times the previous record year in 2015.
Among the European countries Germany was/is the most prominent target for merger and acquisitions for Chinese investors.
Germany's strong industrial manufacturing, chemical, renewable energy, automotive industries and computer hardware companies offer attractive investment opportunities for Chinese investors who are seeking for growth, technical know-how and intellectual property for enhancing their existing products.
Chinese investors can utilize German acquisitions as a 'gateway to the European market', to sophisticated technology and to local management expertise, while German companies gain access to financial support and access to the Asian markets. The production relocation to China can substantially lower the production as well.
Furthermore, even after the takeover, many German companies can maintain their independence by keeping the management control since most of the Chinese investors do not insist on complete restructuring.
This creates win-win situations for both sides.
German technological know-how
One of the main reasons of Chinese investments in Germany is the German technological know-how and expertise.
With German company M&A, Chinese investors can gain access to German technological know-how and enhance their products. In addition, they can expand their product portfolio and secure strategic bridgeheads in Europe.
Germany is a very attractive place of business for Chinese Investors. In 2016, 58 German companies were acquired by Chinese investors, spending 11,6 billion Euros. The year before the number of acquisitions was 37 and in 2014 only 30.
Many Chinese electronics companies are investing in R&D capacities in Germany. Huawei, a global leading Chinese information and communication technology solutions provider is currently building its new European R&D centre in Munich to better understand their German client's needs. In its growth strategy Huawei was based on joint ventures and on cooperation with German companies like Motorola, Symantec, Siemens and the German Telekom. To protect its technical know-how Huawei focused primarily on the application of intellectual property rights in Europe (30% in Germany) and in the US. Germany is the third most attractive investment location for Huawei after China and the US.
Chinese investors are also interested to buy established brands and technology (e.g. Sanhua Group – acquisition of Aweco) or to invest in young but rapidly growing technologies (e.g. Hytera – takeover of Rohde & Schwarz division).
Especially state-owned enterprises have shown high interest in the German Engineering Industry and to access to high-tech technology.
The state owned Dalian Machine Tool Group, one of the world's largest tool manufacturing firm with focus on milling machines has acquired the Swabian F. Zimmermann GmbH in 2004 in order to enhance their products.
State-owned Harbin Measuring & Cutting Tool Group (HTMC) specialised in measuring and cutting tools, overtook the Swabian Kelch GmbH a Europe-wide leading company in the field of adjusting devices and precision tools in order to further develop itself technologically.
As part of their strategic development, the three major Chinese machine builder giants, XCMG, Zoomlion and Sany Group invested in German technology and market leader companies as well.
Sany Group overtook the German concrete pump manufacturing company, Putzmeister which is technology leader in its own. XCMG has acquired the majority of Schwing, a pump manufacturer from Nordrhein-Westfalen and Zoomlion bought the German crane manufacturer, JOST Cranes.
Chinese companies are willing to pay high very amount of money for the German high-tech knowledge.
The Industrial robot manufacturing company from Augsburg, KUKA AG was bought by MIDEA CO LTD for 4,6 billion Euro.
Krauss-Mafei Group GmbH the famous machine builder company from Munich was bought by ChemChina AGIC Gr., Gouxin Intl. Co. Ltd., for 1 billion Euro.
EEW fr. Waste GmgH a garbage incineration plant was bought by Bejing Enterpises Holdings Ltd. for 1,6 billion Euro.
Germany is still one of the leading nations in the field of green energy development. It is favoured among Chinese investors as well due to their experience and innovative technology.
A prime example in this field is the acquisition of Solibro, a leading company in the field of innovative and forward-looking CIGS-technology. A further example is the takeover of Vensys Energy GmbH, a leading geared wind turbines manufacturer company which was overtaken by Goldwind in 2006. With the acquisition of VENSYS, Goldwind could better compete against the market leader giants Siemens and Vestas, who determined the market.
All the above-mentioned company acquisitions had positive outcome. However, it is important to mention that there are challenges, especially lingual and cultural differences, for both sides. To be successful on the long term both sides must overcome on lingual and cultural differences.
Shanda Consult is specialised in consultancy regarding project-based investments and as a partner in bringing together investors and investment projects. We have an active investment consultancy practise in Germany, thus we can assist Chinese investors in identifying the right target, to conduct proper due diligence, and to overcome language and cultural barriers.
For a personalised consultation for your business investment needs in Germany, please feel free to contact us.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.