Getting over the line: clearing regulatory hurdles to outbound M&A

While the pace of Chinese outbound deals has declined in 2017, China’s long-term aspirations (as evidenced by policies such as Made In China 2025 and the Belt & Road Initiative) means that outbound investment and acquisitions from China will continue to be a significant force over the long-term. We estimate, from synthesizing analyst and official forecasts, that Chinese outbound investment flows may come to $1.5 trillion over the next 10 years: approximately a 70% rise from the level of the preceding 10 years.

However, as highlighted in our March report, ‘Getting over the line: clearing regulatory hurdles to outbound M&A’, concern is rising over whether deals can get over the line due to increased regulatory scrutiny. Up to a third of Chinese outbound M&A deals by value announced during 2016 were either blocked by regulatory authorities or withdrawn by investors.

The report, which was initially prepared for the China Development Forum in Beijing, China’s foremost platform for dialogue between its senior leadership and representatives from global businesses, has now been updated with fresh insights on the current state of play of regulatory concerns.

Concerns relating to “reciprocity” (that is, the mutual openness of economies to foreign direct investment) are driving political discourse on the regulation of overseas direct investment, especially into Europe. This is coupled with continued regulatory concerns over particular sectors considered by host governments as being “critical” or “significant” to national security or national interest.

Our updated report aims to provide background and assistance on the potential regulatory barriers for Chinese outbound M&A across key jurisdictions by providing high-level guidance for succeeding in such deals, as well as country-specific information to assist in considering the deliverability of such deals.

Read our China Outbound M&A report here to listen to our China outbound specialist, Richard Gu, discussing some of the insights in this report.

Linklaters has a successful track record advising Chinese and other global corporates on China Outbound deals. If you would like to discuss the report and how this may impact any transactions you are currently involved in, or any future plans, please contact our China Outbound team

The European Commission has recently issued a proposal for regulation establishing a common framework for screening of foreign investments, it confirms that Member States may adopt measures to control foreign investments, click here to read more

Chinese outbound investment

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US$ worth of deals announced in 2016
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US$ worth of investment blocked
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US$ worth of deals estimated in next 10 years