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Huanping Zhang: Chinese acquisitions of German blue chips must win over shareholders and the public

The following content is translated from the German Securities Times (Börsen-Zeitung) report dated July 12:

Fear of Chinese investors is back. With the home appliance manufacturer Midea Group's tender offer to acquire the robotics manufacturer Kuka, the fear of technology transfer, information security risks, or job relocation that had been largely forgotten in recent years' many merger and acquisition cases seems to be resurfacing.

Mr. Huanping Zhang, Managing Director of Eurasian Consulting GmbH, shared his views on this case with a journalist from the German Securities News (Börsen-Zeitung): "KUKA holds the core of Germany's industrial competitiveness, and as a listed company, it receives more attention." Thus, the KUKA case is a rather special one, as KUKA leads in digital production ("Industry 4.0"), differing from other cases such as the China National Chemical Corporation's acquisition of injection molding machine manufacturer KraussMaffei and XCMG's acquisition of concrete pump manufacturer Schwing.

Huanping Zhang stated that Eurasian Consulting GmbH did not participate in the recent Kuka transaction. Eurasian Consulting GmbH has offices in Frankfurt, Shanghai, and Beijing, and has been dedicated to merger and acquisition transactions between China and Germany for twelve years. As an exclusive buyer's advisor, it has successively assisted in the acquisition of the German automotive electronics company Preh by Ningbo Joyson Investment Group Co., Ltd., the acquisition of the German concrete giant Schwing by XCMG Group, and the acquisition of the German private bank Hauck & Aufhäuser by Fosun Group, among other important cases.

Emphasizes Communication

Huanping Zhang believes that during the process of M&A transactions between China and Germany, it is also crucial to communicate carefully and cautiously with the public. The buyer must clearly explain the reasons for acquiring a company and the changes they intend to make, which can help avoid many negative reports.

In recent years, the image of Chinese investors in Germany has improved significantly, with the successful acquisition of forklift manufacturer Kion Group by Weichai Power contributing to this. "Chinese companies are generally considered to be prudent investors, with investment horizons typically longer than those of private equity firms," Huanping Zhang said. Additionally, they can help German companies enter and further penetrate the Chinese market. "Generally, Chinese buyers tend to retain the management of German companies unchanged. They usually create a new position in the management, which is filled by a representative sent from China," Zhang mentioned. This is crucial for communication between German companies and Chinese owners.

Regarding the notion that German companies face more difficulties entering China compared to Chinese companies entering Germany, Huanping Zhang believes it cannot be generalized. When one focuses solely on the heavily restricted merger and acquisition transactions in sectors such as telecommunications, banking, and media, this view appears valid. However, when considering the impact on employment in both countries, a different picture emerges: "By 2015, German companies had directly created approximately 1.1 million jobs in China, whereas acquisitions of German companies by Chinese investors had resulted in fewer than 50,000 jobs," Huanping Zhang stated.

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