Brands key to Chinese takeover plans

16 November 2012

BEIJING: Large Chinese companies are focusing on acquiring access to innovative technologies and "reputable brands" when buying overseas counterparts, according to a report by Deloitte.

The consultancy polled 69 executives active in this space, some 26% of whom agreed that securing leading technology was likely to be a prime motive for a Chinese firm to snap up a North American rival in the next year.

A further 20% predicted that obtaining "reputable brands" was likely to be the key goal behind Chinese acquisitions in the region. Another 20% said Chinese acquirers would be mainly driven by a desire to grow their market share.

Respondents identified slightly different motivations behind Chinese acquisitions in Europe. Some 28% thought the main driver of deals was equally as likely to be the prospect of acquiring reputable brands, as it was to gain access to technology.

The study noted that Chinese companies have been actively buying high-end apparel and footwear groups in Europe, citing the purchase of brands such as Robert Clergerie, Salvatore Ferragamo, Sonia Rykiel, Aquascutum and Gieves & Hawkes, among others.

In contrast, only 6% of interviewees believed that buying big-name brands would be the principal reason for Chinese firms to take over Asian companies.

Some 30% of respondents thought that Chinese acquirers in Asia were more likely to be motivated by the prospect of extending existing product lines via acquisitions.

The executives interviewed said that across all three regions the main obstacles to acquisition were
regulations that limited or prohibited takeovers by Chinese companies. This was seen as a particularly significant barrier in North America.

Other hindrances included differences in company cultures and an unwillingness among some target companies to sell to Chinese buyers.

"Despite it being a tumultuous time, both abroad and at home, Chinese corporate and financial investors alike have continued to invest overseas with some 133 acquisitions, worth a total of $52.2bn being announced over the first nine months of 2012," the study added.

Data sourced from Deloitte; additional content by Warc staff