Successful cross-border transactions with China
Undeniably, both the number and volume of Chinese M&A transactions in Germany and Europe have risen sharply in recent years. Certainly, technology acquisition is also often a driving force.
But there are also other motivations: in our core consulting field of the automotive industry, for example, a Chinese automotive supplier without manufacturing sites and development capacity in Europe and North America will ultimately remain a regional player. A Chinese company that wants to supply global OEMs globally must itself have a global footprint — Europeans, Americans and Japanese have shown you this. So completing this footprint can also be a motivation behind M&A transactions. Chinese companies want to become global companies, as ours have long been.
Furthermore, I would like to point out that the motivation for the technology acquisition does not have to be negative for the workforce of the purchased company: A Chinese investor does not acquire a company in order to withdraw knowledge and close the company — after all, he would destroy what he has acquired here. Technological competence consists primarily of the knowledge, experience and relationships of employees. In my experience, Chinese investors are aware that they can only work European markets successfully with European employees.
The automotive industry is simply one of the world’s major industries and thus, with its employment and export potential, the focus of Chinese industrial policy.
The Chinese interest in mechanical engineering and here especially in automation technology and Industry 4.0 is, I think, logical, because the Chinese business model is under pressure: China has become the workbench of the world due to a huge army of workers, low wages and low environmental protection requirements. This is not sustainable. In China’s rapidly aging society, the labor force is already shrinking. Wages are rising — absolute low-wage industries have long since migrated to poorer countries. China must also face up to its environmental damage — the current state of affairs is not sustainable.
All this makes production in China less attractive — in Europe and the USA, the first reshoring trends are already visible. Thus, from a Chinese perspective, it is plausible to increase its level of automation in order to remain competitive while offering higher-value products. Simply covering growing domestic consumption in the future will require more automation. Chinese companies are looking for products and technologies to meet these needs.
How to do it in China: By building long-term personal relationships. As management consultants, we have provided operational advice to the company for over 10 years. Based on this solidly built trust, we were also mandated as M&A advisors to Zhongding when it was decided to become a global company through acquisitions. As a result, we have now established a dedicated China desk for such transactions.
The success of this process and the resulting referrals opened further doors for us, so that today we have direct access to Chinese companies in a wide range of industries.
About Perlitz Strategy Group
Perlitz Strategy Group (PSG) is a medium-sized management consultancy based in Mannheim, Germany. The company has been advising companies in the automotive industry, mechanical engineering and other sectors for over 20 years. His consulting focus is on strategy, turnaround/restructuring, sales and innovation management. Within the scope of the consulting field “Strategy”, PSG also advises its clients on M&A transactions (commercial due diligence, deal structure, negotiation, post-merger integration), among other things.