The Localisation Imperative

Results Of InterChina’s Country Manager Survey

Part 2: Impact On M&A Deal Structures

For multinationals in China, the preferred route to localisation is increasingly becoming M&A. But multinationals need to take an approach to deal-making that suits the current business reality in China, and in terms of deal structures, that means being innovative and flexible. Not only will this increase the chances of closing the deal in the first place, but also improve integration and enhance the performance of the business over the long-run.

• InterChina survey reveals thatlocalisation and decoupling are now having a huge impact not only on M&A appetite, but also the way transactions are being structured between multinationals and Chinese players.
• Multinationals are deploying more innovative and flexible approaches to deal-making in China, not only seeking to increase the chances of closing the deal in the first place, but also to improve integration and enhance the performance of the business over the long-run.
• Adopting a two-stage acquisition approach, which keeps existing owners involved in the business to ensure continuity, is now an increasingly favoured option.In addition, multinationals are much more ready to target Chinese companies intent on an IPO or already listed.
• Multinationals bringing in strategic or financial investors to the China business, thereby adding relevant resources and capabilities to help strengthen local operations, is demonstrating that acquisition is not the only path to localization in China. While such divestments are not a major trend, they are becoming more common when faced with intense competition or technological sensitivities.