This content is from: Corner Office

Asian Deal Makers, Focusing Their Pocketbooks on the World, Unite

Power brokers mingle in Shanghai at the Asia Institutional Investors Alliance.

  • Allen T. Cheng

Willard McLane, head of corporate and investment banking at Citigroup’s Asia operations, was recently reminiscing at a major gathering of Asian investors in Shanghai. A decade ago, he recalled, most of his clients were global multinationals and asset owners.

Not today.

“Many of my clients and partners today are Asian institutional investors, which was not the case ten years ago,” McLane said, adding that the rapid growth of the Asian economy over the past 30 years has only lately given rise to a new generation of homegrown investors who are making their weight felt globally.

Among Asian investors, according to research firm Dealogic, the Chinese stand out with the most global impact in recent years. During the first nine months of 2016, Chinese deal makers announced 601 outbound mergers and acquisitions worth a total of $173.9 billion, surpassing rivals from the U.S. who have for years led the M&A league tables.

The milestone also came with a record number of withdrawals, however, as 42 of the Chinese-initiated deals, collectively worth $35.8 billion, fell through after many hit regulatory hurdles. Many of the failures occurred in the U.S., where members of the Congressional-linked Committee on Foreign Investment in the United States, or CFIUS, use national security concerns to reject the sale of sensitive high-technology assets to foreign buyers.

The increasing number of obstacles that many Asian investors face was a key factor in the formation of the Asia Institutional Investors Alliance, which drew more than 200 Asian deal makers to its first summit, on October 12 through 14. Held at Shanghai’s famous Xijiao State Guest Hotel, the three-day event was packed with panel discussions — and deal making on the sidelines.

Rising economic and political uncertainty — combined with populism, extremism, and xenophobia — are issues that concern Asian deal makers the most, announced Kevin Lee, executive vice chair of Shanghai-based China Minsheng Investment Group (CMIG), during the opening proceedings, which were hosted by Lee and other top CMIG executives. Affiliated with China Minsheng Bank, the country’s leading private sector retail bank, CMIG is known for a number of its offshore deals. Its recent actions include the $2.6 billion acquisition this year of European reinsurer Sirius International Insurance Group. Just last month CMIG bought the London office tower of Société Générale for $112 million.

“We feel there are significant opportunities for cooperation and communication among Asian investors,” said Lee, adding that Asian deal makers can be far more effective when they cooperate, rather than compete, in global markets. “Effective dialogue can be achieved among all investors in Asia in this alliance, including co-development and investments and sharing resources.”

Asian investors’ aggressive outward march is happening at a time of mounting geopolitical and economic risks, says Roland Berger, founder of the eponymous Munich-based consulting firm. “Many people today are worried about China’s slowdown, but China’s slowdown is really connected to the outbreak of the global financial crisis,” notes Berger, who is an adviser to the newly formed alliance. He cautions that the crisis “is not really yet over. We see several crises that are still ongoing, including the crisis in Europe today.”

The alliance will hold regular summits around the region, says Calvin Choi, president of CMIG’s operations in Hong Kong, as part of an ongoing effort among major Asia-based private equity firms and fund houses to share mutual resources, especially knowledge, insight, and experience.

Many Asian deal makers certainly need more instructional advice in their offshore ventures, says Xu Weichuan, head of Washington-based International Finance Corp.’s China and Mongolia office. Xu notes that the IFC — whose primary focus as recently as a decade ago was on helping global investors with their Asian market entry strategies — is today concentrating its Asia operations on assisting local entrepreneurs with their global acquisition strategies.

“Most Asian enterprises, especially those in China, are under 30 years old, and they’re run by young entrepreneurs who have not experienced too many economic downturns, as they all grew in an environment of fast growth and got used to it,” Xu explains. “Many have gone overseas and made acquisitions, but many lack understanding of local laws, environmental regulations, labor laws, the political environment.” In other words, he says, many Asian deal makers need help sharpening their skills.

The Asia Institutional Investors Alliance will play a key role in providing just that — in particular by hosting regular seminars in which Asian deal makers can learn from a wide range of global M&A experts, says CMIG’s Lee. “The alliance will offer roundtable discussions throughout the region,” Lee says. “We will build effective communication among all Asian investors. Our goal ultimately is connecting global capital with Asian capital.”