Chinese foreign direct investment (FDI) has increased significantly in the past two years as the Asian powerhouse has sought to play a bigger part in the global economy.
Outbound M&A and joint venture transactions by Chinese companies were the drivers of this increase, with official Chinese figures showing that non-financial FDI was $118bn (£82.4bn) in 2015, a 14 per cent increase on 2014.
The strategy
Chinese companies have been keen to target international companies with established brands, supply chains and distribution networks.
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One of the best examples of this strategy was provided as early as 2005 when China’s largest e-commerce company, Alibaba Group, partnered with Yahoo!, a deal which led it to buy back a 20 per cent stake in itself from the US technology company for $7.1bn in 2012.
According to data from The Lawyer Market Intelligence (LMI) Wachtell Lipton Rosen & Katz acted as lead legal counsel to Alibaba on that deal with corporate partner Mark Gordon leading the team. Freshfields Bruckhaus Deringer and Fenwick & West also provided specialist legal advice. Skadden Arps Slate Meagher & Flom and Weil Gotshal & Manges advised Yahoo!, led by corporate partner Leif King and IP partner Karen Ballack respectively.
Davis Polk & Wardwell advised Chinese entertainment giant Dalian Wanda Group when it acquired US-headquartered AMC Entertainment for $2.6bn in 2012. Weil Gotshal once again represented the transaction target – in this case AMC.
Some of the largest recent transactions have also involved Chinese companies, which have
sought counsel from a wide variety of international firms.
International advisers preferred
Davis Polk made another appearance, alongside Simpson Thacher & Bartlett and Swiss firms Bär & Karrer and Homburger, on one of the largest deals in recent weeks, China National Chemical Corporation’s (ChemChina) $43bn acquisition of Syngenta.
Davis Polk represented the target, Syngenta, on US matters, with a team led by New York partner Louis Goldberg. The Swiss-headquartered agrochemical company also turned to local firm Bär & Karrer who fielded a team led by partners Rolf Watter and Dieter Dubs.
ChemChina turned to Simpson Thacher for advice, with partner Alan Klein leading the team. Swiss legal matters were handled by Homburger corporate head Dieter Gericke. The firm has won other mandates for the company, advising a subsidiary on its acquisition of Israel’s Makhteshim Agan Industries in 2011. M&A partners Shaolin Luo and Kathryn Sudol led on that deal.
“Chinese companies have sought counsel from a wide variety of international firms”
ChemChina has been on an acquisition spree over the past year, with the state-owned group buying German industrial machinery maker KraussMaffei Group and Italian tyre company Pirelli. For those deals, LMI data reveals that the company turned to both local and global firms including Freshfields and Clifford Chance, and Hengeler Mueller and Pedersoli e Associati.
Chinese firm Fangda Partners, which LMI data reveals counts e-commerce behemoth Alibaba as a client, is working alongside Norway’s Thommessen on Qihoo 360’s $1.2bn acquisition of Norwegian software company Opera. The acquirer group, led by internet security company Qihoo, also comprises games company Beijing Kunlun.
The Fangda team is led by Beijing corporate partner Tan Peng while Oslo-based Thommessen, fielding corporate partner Baard Bale, is advising the Chinese consortium on Norwegian law. Interestingly, Fangda advised Canadian buyout firm Onex on the sale of its portfolio company KraussMaffei to ChemChina.
Fellow Norwegian firm Schjødt is acting as legal adviser to longstanding client Opera, with partner Erling Christiansen leading the team.
Favoured sectors
Research by Baker & McKenzie suggests that the food, energy and real estate sectors are the most popular targets of Chinese interest and investment, especially in Europe.
Mayer Brown recently acted for longstanding client Beijing Enterprises, led by Frankfurt-based partner Klaus Riehmer and Hong Kong partner Chester Wong, on its addition of German power supply company Energy from Waste for €1.4bn (£1.1bn). Clifford Chance advised the seller, Swedish private equity group EQT.
Mayer Brown first advised the investment holding company in 1997 in its IPO on the Hong Kong Stock Exchange. The company seeks primary counsel from Mayer Brown in relation to Hong Kong and US law. Beijing firm Haiwen & Partners provide the company with PRC law advice.
Another German company, forklift truck maker Kion Group, was snapped up in 2012 by Chinese state-owned diesel energy Weichai Power for €738m. In that transaction King & Wood Mallesons, Hengeler Mueller and Paul Hastings advised the Chinese buyer, while the target was represented by Freshfields and Gleiss Lutz.
Interestingly, Freshfields’ client base includes a roster of state-owned companies such as China City Construction (International), China CITIC Bank International, China Communications Construction Company and China Mobile Communications.
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