Are Chinese acquisitions overpriced for foreign investors?
- An insider view on Chinese M&A
Despite dialed-down growth, on-going anti-corruption campaign as well as bloated and inefficient stateowned enterprises, China remains one of the top destinations for foreign investors to pursue M&A deals. Nevertheless, China is also deemed to be amongst the most challenging environments for deal-making despite having huge investment potential. With regard to various “deal breakers”, one of the greatest challenges foreign investors are facing these days is the valuation expectation gap between buyer and Chinese entrepreneurs. This causes investors to either prematurely sentence “death penalty” on the envisaged transaction or to psychologically deny adapting to these facts without attempting to comprehend the deep-rooted factors causing such gap. Foreign investors should listen closely to what their Chinese business counterparties have to say, and most importantly formulate pragmatic, sometimes even creative, not-by-the-book workarounds. It is China, after all.