Chinese Appetite for European Assets Unabated Despite Regulatory Challenges

Marcia Ellis was quoted in the article "Chinese appetite for European assets unabated despite regulatory challenges" published on Mergermarket.

The article argued that Chinese sponsors and strategic buyers are showing a growing appetite for European assets but are having to craft innovative strategies to overcome increasing regulatory hurdles to complete transactions.

On 24 January, the European Commission published a proposal to European Union member states to further tighten an existing bloc-wide framework on acquisitions in “critical areas”. Some law firms are looking closely to the CFIUS or clues on how to appease regulatory concerns in Europe. “The German government has definitely moved closer to a US-style foreign investment review regime and concerns over Chinese investors have become greater,” said Marcia. According to her, advisors are looking at what CFIUS has done and the remediation that it has required, in order to determine what they're going to do to gain approval from the German regulators. US-focused remedies resulting from the CFIUS process include installing special boards whose members are effectively all Americans – an approach Chinese acquirers could mirror to gain approval for their European target. Sometimes, the issue is intellectual property (IP), and if the IP can be ringfenced so that the German government is confident that it will not leave Germany and cannot be filtered through the shareholders or otherwise to China.

She echoed the view that the appetite from Chinese buyers has not abated, despite the execution difficulties, noting there is an increase in the number of funds from China that are looking at assets in Europe. “If you want to do that next fundraising, you have to do something to widen your investment brief,” Marcia said. “If you are exclusively focused on China investments, then maybe it’s hard to fundraise, but if you have been able to spread out and invest elsewhere, you probably can still raise funds.”

Read the full article (subscription required).