Growing trust helps flurry of Sino-German deals

Fri Feb 12, 2016 2:09am EST
 
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By Arno Schuetze and Ludwig Burger

FRANKFURT (Reuters) - A flurry of sales of German and Swiss companies to Chinese buyers in the past month is testament to increasing Chinese expertise in European bidding processes and growing trust, German bankers and advisers say.

Those involved in the deals, which include ChemChina's $43 billion agreement to buy Swiss seeds and pesticides group Syngenta SYNN.VX and the two biggest-ever Chinese acquisitions of German companies, say the two sides are making strides in mutual understanding.

China has for years sought to buy in key technology rather than develop it at home more slowly, but attempts to reach deals have often failed.

"The cultural dimension is very important," said Frank-Christian Raffel, Munich-based partner in boutique advisory firm MelchersRaffel, which specialises in M&A deals between German-speaking and Asian countries.

"One serious issue is a lack of trust on both sides. Whatever one side says is seen by the other as a tactic or a ruse, or is overinterpreted."

One Chinese investor became so suspicious on learning that not all of the German target company's top and second-tier managers had yet been informed of the talks that the would-be investor walked out, seeing it as a sign that key personnel might not stay on after a takeover.

"For them, the transaction was dead. It took three or four meetings to get the investors back to the table," Raffel said.

He added that when a Chinese firm was the target of a Western buyer, it was not unusual for as many as 10 top executives of the Chinese company to be present at M&A negotiations.   Continued...

 
The logo of Swiss agrochemicals maker Syngenta adorns it's plant in Muenchwilen, Switzerland February 3, 2016.  REUTERS/Arnd Wiegmann