Click or swipe to read our partners’ perspectives on:
- Outbound Mergers and Acquisitions
- Managing Risk for Korean Companies
- Hong Kong Capital Markets
OUTBOUND MERGERS AND ACQUISITIONS
Where is outbound M&A headed in 2013? What are the challenges facing these outbound investors?
Jia Yan
Shanghai
The “Going Out” policy, which was first unveiled in 1999, has become a key policy for the Chinese government to advance domestic economic development and global business development. Promoting outbound investments is now part of China’s 12th Five Year Plan and Chinese companies are becoming more active in global M&A. Looking ahead, 2013 deal prospects look strong, especially in resource-rich regions. The big-ticket outbound acquisitions will continue to be made by state-owned enterprises (SOEs), with the support of state banks. We also expect private companies to be active acquirers of technologies, skills, and brands.
Regulatory factors will continue to be the main obstacle for Chinese strategic investors when acquiring a foreign business. With regard to post-deal acquisitions, cultural and management differences will be the primary challenges.
Daniel Kim
Seoul
Early signs are that 2013 will be a historical year for Korean outbound M&A. It started with several outbound deals by LG Household & Healthcare, LG Electronics, and Samsung Electronics; several others are reported to be in the bid or negotiation stage. Prior to 2007, Korean corporations and conglomerates (known as chaebols) established special M&A taskforces of experts with banking, consulting, accounting, and legal expertise. The global financial crisis delayed deal flows, but Korean strategic investors began preparing for global expansion via M&A.
This has been a natural progression after decades of relying on organic growth and greenfield developments when expanding overseas. Korean companies are now looking to expand through acquisitions and joint ventures — long favored as efficient and time-saving growth tools by their U.S. and EU counterparts. Chaebols are no longer Korean enterprises with some overseas operations — rather, like Hyundai Motors, POSCO, and Samsung Electronics, they have become truly global companies with a much higher percentage of their revenues derived from foreign customers and consumers.
Chaebols and even mid-size companies are now confident acquirers and investors internationally, buying companies and assets and efficiently integrating them post-acquisition. This year will see outbound acquisitions completed in various jurisdictions, including the Americas, the EU, Japan, and ex-Japan Asia, as well as in a variety of industries, including technology, energy, consumer/retail, and auto/auto parts.
Toshiyuki Arai
Tokyo
Outbound M&A from Japan this year may be affected to some degree by a lowering in the value of the yen compared to the last few years. That said, we don’t expect that the deal flow will slow down very much, particularly for strategic investments. Japan outbound M&A started in the early 21st century, long before currency considerations were a factor. Meanwhile, Japan’s population continues to decline and Japan’s multinationals must expand their markets elsewhere. In order to achieve this, M&A is the most conventional solution and is now focused on BRIC and ASEAN economies. By the same token, acquisition of American and European companies will likely continue to capture market growth outside of Japan. Japan’s outbound acquisition was never private-equity driven and so the flow of acquisitions will likely be unaffected by uncertainties in that sector.
Next, read about Managing Risk for Korean Companies
MANAGING RISK FOR KOREAN COMPANIES
What are the best practices for Korean companies to manage their exposure to U.S. regulatory risk and associated litigation, whether in relation to IP, trade secrets, antitrust, white collar crime, or product liability?
Jong Han Kim
Seoul
As Korea’s multinational companies continue their international expansion, particularly into the U.S. market, they face legal challenges from their competitors and from U.S. and other international regulators to an unprecedented degree. Such challenges result not only from the competition’s desire to check the Korean companies’ successes, but also from the regulatory agencies’ intent to vigorously enforce against Korean companies’ improper conduct and behavior in the global market. To lower the risks associated with such enforcement proceedings and lawsuits, it is imperative that Korean companies institute more robust compliance programs that are in line with the global standards. Such compliance programs should not only exist on paper, but also be fully and truly incorporated into their business practices. To achieve optimal results given these challenges, Korean companies need expert advice on the best practices to ensure compliance to the highest global standards, along with strong and sustained training of their staff.
Next, read about Hong Kong Capital Markets
HONG KONG CAPITAL MARKETS
What is the outlook for Hong Kong IPOs in the next 12 months? How will this affect the dim sum market?
Vivian Lam
Hong Kong
Market sentiment in Hong Kong has improved with continued capital inflows and a better outlook for the Chinese economy. We expect several areas of growth for the Hong Kong IPO market this year: the trend for B-share companies to delist from the illiquid Shenzhen exchange and re-list in Hong Kong, more small- and medium-sized Chinese enterprises being encouraged by the China Securities Regulating Commission to list in Hong Kong as H-shares, and more foreign issuers listing in Hong Kong by way of secondary listing or depository receipts as a result of the Hong Kong exchange’s effort to streamline the listing process. Strong liquidity and bullish views on the renminbi have also helped the dim sum market, and we had an extremely busy start to the year. With recent relaxation of regulations allowing Chinese companies to issue offshore bonds, we expect to see more dim sum issuances, not just in Hong Kong but also in other markets such as London and Singapore.
