We have had increasing interest from Chinese companies in the industrial space coming to us for Europe bound expansions and investments. There have been various waves of interest and expectations from the European continents about the influx of Chinese capital over the past five years. Many have fallen in common post-investment traps; post-integration misalignment resulting in value-destruction, Chinese acquisition bids have been used to gain enhanced bids from non-Chinese bidders, JV that fails to start due to management (usually the lack thereof) can’t align on responsibilities and reporting measures. We see time and time again expansion both ways fail, and the underlying factor is for the most part – lack of trust.
What must businesses seeking to expand from China to Europe prepare in advance?
- Money isn’t everything; many European businesses operate under formal rules and regulation and informal social structures, that makes it difficult to finalize a transaction during one or two visits to Europe.
- Trust; many European executives want ironclad agreements with counterparties whereas many Chinese companies view complicated agreements as a sign of distrust and a weak bond between the management.
- Involve other stakeholders; look at the business as part of the community in which it is situated.
About the China Board Room
The China Board Room is a forum where Laursen van Swieten invites its partners, portfolio companies, and domain experts to discuss business strategy, tactics, and operations from a hands-on perspective. We aim to stimulate an applicable and actionable conversation between our China Board Members around current topics.