By Ben Simmons
Chinese manufacturers are set to lead a wave of acquisition activity into Europe in order to remain competitive and innovative.
This is according to analysis by Deloitte, the business advisory firm, whose China Manufacturing Competitiveness study shows that senior executives at large and medium-sized manufacturing companies in China believed that innovation is the biggest challenge facing the industry.
Ross James, manufacturing M&A partner at Deloitte, comments: “While a competitive advantage on costs has helped the development of Chinese manufacturing companies, they are also facing numerous challenges and pressures that should not be overlooked.
"Over 50% of senior executives believe that innovation is the biggest challenge to the manufacturing industry in China in maintaining its competitiveness. Well executed M&A is an important way for enterprises to strengthen their competitiveness and as a result we are likely to see more outbound M&A activity from China, allowing enterprises to expand and leap-frog development.”
This year has already seen the acquisition of five European companies by Chinese manufacturers at a total deal value of around £1billion. One of the largest deals to complete was Shandong Heavy Industry Group’s recent 75% stake in Italian luxury-yacht builder Ferretti Yachts at £309 million. The deal reflects the increasing demand for luxury goods in China and will enable the company to gain overseas technology know-how as well as an international brand name.
2011 saw 13 Chinese manufacturers buying into Europe, the largest volume of deals ever announced. Despite the current Eurozone crisis and concerns around a slowdown of the Chinese economy, the total value of the 13 transactions announced in 2011 was well in excess of £6billion, surpassing the previous record of eight deals into Europe that completed in 2010.
Ross continued: “Recent mega deal acquisitions illustrate just how quickly major sectors such as the automotive industries are being transformed by Chinese investors. Through purchasing well-known brands such as Volvo, Chinese manufacturers are able to gain significant technology, engineering, styling and marketing capabilities. Although the automotive assets are perhaps the highest profile, the purchases also include assets in chemicals, energy and industrial power. We fully expect this trend to continue with many more acquisitions from China into Europe in 2012 and beyond.”
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