Global advisory group eyes China M&A wave

January 29, 2015 18:58
Managing director Xuong Liu (center) says challenges remain for Chinese companies in how they manage assets acquired overseas. Photo: A&M

Global advisory firm Alvarez & Marsal (A&M) is launching a new Shanghai-based business group to capitalize on Chinese companies’ outbound mergers and acquisitions spree.

Managing director Xuong Liu, who will lead the new transaction advisory group, said challenges remain for Chinese companies in how they manage assets acquired overseas.

“They have to be really transparent in their governance and ownership structure. They should really be working with those companies they acquire,” he said.

“There should be very good management in place, not necessarily just replacing management with local Chinese management but really viewing them as a partnership,” he said.

Such practices are very important in overcoming perceptions and skepticism from overseas companies and governments around Chinese capital, he said.

Oliver Stratton, managing director and co-head of Asia, said this thinking can help overseas firms navigate the lack of transparency in mainland China.

"Numbers have inconsistencies and sometimes there are discrepancies between different sources. When we are doing due diligence on a business, that's really the root we are trying to get to," Stratton said.

Established in 2003, the A&M unit offers advice on due diligence and operational issues, Liu said.

The three offices in Hong Kong, Beijing and Shanghai are staffed by about 50 people.

Meanwhile, Liu said Chinese firms are increasingly looking for intangibles other than cheap capital from investors to grow their companies.

“The Chinese equity market in the past decade has been characterized by who can pay the highest price. Essentially Chinese companies have been looking for cheap capital," he said.

"But that has very much changed and Chinese companies are now really looking for intangibles such as expertise and network.”

China's outbound M&A hit US$67 billion in 2014, up 86 percent from US$36 billion in 2009, according to figures from Dealogic.

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EJ Insight reporter