Worldwide: Nationalism And Cross-Border M&A: Navigating Populist Politics In Deal Making

More than half of the G20 countries voted-in campaigns that focused on harming foreign, outside interests as a means to strengthen domestic ones. Nationalism is in. Globalisation is out.

Nationalistic rhetoric is proliferating across the global political landscape. From India, and Prime Minister Narendra Modi's "India First," to the United States, and President Donald Trump's "Make America Great Again," politicians are scoring popularity points and galvanising voters who yearn for national glory.

With increased nationalism, two elements of globalisation—the free flow of goods and services (trade) and people (immigration)—have come under attack across the world, where protectionist and anti-immigration policies are disrupting the globalised world order. The third element—the free movement of money or investment—also might not be immune to nationalism.

Several anecdotes signify that a rise in nationalism could jeopardise cross-border investments and deals. Two of the most recent include Ant Financial's (China) takeover of MoneyGram (US), and the implosion of PPG Industries' (US) prolonged pursuit of Akzo Nobel (Netherlands). These examples do not necessarily mean that increased nationalism translates into a decline in international deal-making. Nevertheless, nationalism is a risk variable that further adds to the complexity and prickly nature of cross-border investment and M&A.


Since January 2017, Ant Financial, which is headquartered in China and is the financial payments affiliate of Chinese e-commerce giant Alibaba, has been battling Euronet, a US-based financial payment provider, to acquire MoneyGram, a US-based cross-border payments service. After much negotiation among the three companies, Ant Financial prevailed over Euronet with a US$1.2 billion offer in April 2017.

Throughout the negotiations, and even since MoneyGram accepted Ant Financial's offer, Euronet stressed security and data privacy concerns over having a Chinese company control a US-based payments provider. Euronet has repeatedly pushed the idea that because Ant Financial is owned primarily by Chinese investors, it does not meet sufficient standards for being a US money transmitter.

Someone in the US Government may have been listening to Euronet. On 11 July 2017, Ant Financial was forced to resubmit the deal for review by the Committee on Foreign Investment in the United States (CFIUS) after failing to obtain clearance within the normally allotted 75 days. CFIUS performs a national security review of all acquisitions of US companies by foreign entities. The fact that Ant Financial could not obtain clearance within the normal review period reflects a heightened level of scrutiny by the US Government. US Senator Jerry Moran, who represents the state where Euronet is headquartered, has spoken publicly and advocated to CFIUS that the deal represents a significant security concern to US citizens.

Against the political backdrop of President Trump's America First foreign policy agenda, the commercial relationships between US and Chinese companies are complex and difficult to gauge. Nevertheless, Euronet's security concern claim places its and the Trump Administration's interests in alignment, as it plays well with the Administration's security concern over Chinese financial manipulation. The Ant Financial–MoneyGram deal remains in limbo, partly owing to nationalist rhetoric and policy, putting MoneyGram's shareholders at risk of taking Euronet's smaller (by US$200 million) bid if CFIUS rejects Ant Financial's deal.


In early March 2017, PPG Industries, a US-based paint and specialty coating manufacturer and supplier, made a US$28 billion offer to buy Dutch competitor Akzo Nobel. The timing for PPG was not good, as the Dutch national elections, which were largely dominated by anti-foreign, pro-national rhetoric, were to occur a few weeks later. The Dutch public had grown increasingly concerned over foreign acquisitions of Dutch companies. This concern was further stoked by nationalist leaning politicians who attempted to tie foreign acquisitions to a loss in Dutch identity.

Even after the elections, in which more moderate politicians prevailed, Dutch politicians continued to oppose the deal, culminating with multiple provinces, as well as the Dutch Economic Affairs Minister, openly criticising the potential deal. They cited concerns over Dutch workers, labour standards, and the need to maintain Dutch-controlled entities.

Akzo Nobel, which refused to engage in negotiations with PPG, used the nationalist political landscape to continually rebuff PPG's advances, despite PPG making three additional offers that topped out at US$29.5 billion in May 2017. Although most Akzo Nobel shareholders approved of its defensive posture, Elliot Advisors, a hedge fund with significant holdings in Azko Nobel, attempted to get a Dutch court to remove Akzo Nobel's management for failing to engage with PPG.

The Dutch court rejected Elliot Advisors' arguments, finding that Akzo Nobel's actions aligned with most shareholders' wishes. The case, however, further strengthened the nationalist message and sent lawmakers scurrying to put in place laws that would make it harder for a foreign entity to acquire a Dutch company. On 1 June, PPG formally withdrew its offers, realising it did not have the legal or political capital to leverage the deal.

PPG's attempt to acquire Akzo Nobel provides an example for how nationalist winds can put further pressure and embolden defensive measures against an unsolicited, foreign takeover. Without the strong political pressure in favour of Akzo Nobel's independence, the company might have found it much harder to make its case to shareholders.


Like trade and immigration, international investment and cross-border M&A are not immune to the growing wave of nationalism. The Ant Financial–MoneyGram deal shows how nationalist tendencies have the possibility of shaving US$ hundreds of millions from a company's valuation. And PPG's efforts to acquire Akzo Nobel reflect how companies can use a country's nationalist fervour to strengthen their defensive position.

Although these examples suggest a negative outlook for cross-border M&A in a world of national interests, international deal making is not necessarily doomed.

First, nationalism remains strongest in large, developed economies, while cross-border M&A is growing fastest in emerging markets. Moreover, investment flows between developing countries continue to increase. For example, despite the recent setbacks in China's high-profit acquisition projects in the United States and Europe, which is mainly attributable to rising nationalism, China's investment in developing countries in the Middle East and South Asia under China's One Belt One Road initiative continues to grow. As a result, international deal-making no longer relies on the mature markets where nationalism poses the greatest risk.

Second, nationalist policies like trade protectionism and anti-immigration reform do not necessarily restrict cross-border deal flow. In fact, the opposite may be true as a World Bank study found that when trade protectionism increases, international M&A and investment also increase.

Third, outbound cross-border M&A might be a mechanism for advancing a nationalist agenda. For a country that wants to play a larger role on the global stage and increase its national stature, having its domestic companies become more prominent internationally through cross-border acquisitions could be complementary. This is clearly one of the reasons behind the recent boom in China's outbound investment.

Regardless of nationalism's impact on international deal flow, the growth in nationalist tendencies has become a significant variable that must be addressed by any entity engaging cross borders.

Nationalism And Cross-Border M&A: Navigating Populist Politics In Deal Making

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