International investments China continues German shopping spree

Chinese investors are acquiring German companies in ever-bigger deals as the United States’ protectionist policies deter foreign buyers.
Li Ka-shing seems happy with his purchases.

Although teutonic resistance to Far East takeovers is growing, Chinese buyers have invested a record sum of $13.7 billion (€11 billion) in German companies in 2017. The number of takeovers from China declined by 21 percent to 54 transactions, per a study published Wednesday by consulting firm EY.

Some experts believe that the Chinese shopping spree will continue in 2018. "Despite political opposition, the industrial logic remains intact," said Alexander Kron, head of transaction advisory services for German-speaking countries at EY, formerly known as Ernst & Young. "This is why we will see more deals in the high triple-digit million range with Chinese participation in Germany and Europe over the next 12 months."

In 2017, acquisitions across Europe dropped by 20 percent to 247 transactions, a result of protectionist tendencies and stricter conditions imposed by the Beijing government. The volume of mergers and acquisitions (M&A) fell by a third to $57.6 billion.

The long-term outlook for takeovers with Chinese participation remains good, said a lawyer at an international law firm. He also predicted that China will open up further, leading to a more balanced M&A business. According to EY, in addition to China’s traditional industrial investments, future mergers and acquisitions will increasingly focus on fashion/retail, food and pharmaceuticals.

In 2017, the largest deal in Germany with Chinese participation was the sale of Essen-based energy service provider Ista International to billionaire Li Ka-shing's Cheung Kong Property Holdings for $6.7 billion, followed by HNA's investment in Deutsche Bank.

Washington's isolationist policies have significantly stunted the takeover ambitions of Chinese companies in the US domestic market. The transaction value of Chinese acquisitions in the United States fell drastically in 2017 to about $10 billion, compared with a record more than $50 billion in 2016, according to Thomson Reuters. Antitrust and foreign trade investigations are increasingly throwing up obstacles. The Committee on Foreign Investment in the United States is "more active than ever before," said Rod Hunter of the Baker McKenzie law firm.

Peter Köhler is a Handelsblatt editor in Frankfurt, reporting on banks, private equity firms, venture capital and corporate funding. To contact the author: [email protected],