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1 © Rödl & Partner 10/18/2017
Globally active
Rödl & Partner
Chinese Outbound: Germany M&A Report 2017
2 © Rödl & Partner 10/18/2017
Agenda
Executive summary
Chinese Outbound: Germany M&A Report 2017 02
M&A outlook and trends 03
About Rödl & Partner 04
01
Your contact 05
3 © Rödl & Partner 10/18/2017
4 © Rödl & Partner 10/18/2017
Executive summary
At the end of 2016, China tightened administrative reviews for capital outflows, which has
slowed down the pace of Chinese outbound M&A activity in the first half of 2017 in
Germany
The new deal activity in 1H 2017 also shows a smaller average deal size compared to
2016 with a series of mega deals (e.g. Kuka/ Midea, KraussMaffei/ ChemChina, etc.)
The 2016 M&A boom was largely driven by private companies, whereas the first half of 2017
shows a new rise of state-owned companies
The new investment environment also had an impact on the industry composition of the
target companies in Germany and Europe: while the M&A activity has fallen in most sectors,
industrials, high-tech and health/ medical are most resilient
Due to investment restrictions, the completion time for Sino-German deals has increased.
The risk of not moving towards closing is still high, but after closing the development is more
sustainable
Outlook for 2H 2017: resilient but further positive M&A activity
5 © Rödl & Partner 10/18/2017
Top M&A deals in Germany first half 2017
Target company Industry Buyer Type of acquirer Deal value in
EUR billion
Deutsche Bank Financials HNA Group Listed company > 3,000
Biotest AG Healthcare Creat Group Listed company 1,300
Robert Bosch
Starter Motors
Energy & Power Zhengzhou Coal
Mining & China
Renaissance
Capital
SOE 545
Romaco
Pharmatechnik
Gmbh
Healthcare Truking Technology
Ltd.
Listed company
150
In-tech Gmbh Automotive/ IT Beijing BDStar
Navigation Co. Ltd.
Listed company
80
Grammer AG Automotive Ningbo Jifeng Auto
Parts Co. Ltd.
Listed company
60
SMA Railway
Technology GmbH
Beijing Dinghan
Technology Co.Ltd.
Listed company
23
6 © Rödl & Partner 10/18/2017
Top M&A deals in Germany 2011-2016
Target company Industry Buyer Type of acquirer
Deal value in
EUR billion
Kion Group Industrials Weichai Power Listed company 2255.1
EEW Energy Renweable
Energies
Beijing Enterprise Listed company 1438
KraussMaffei Heavy Machinery ChemChina/ AGIC SOE/ PE 925
Medion AG IT Lenovo Listed company 627.7
Örlikon Industrials Jinshen Group PE 540
普茨迈斯特 Industrials Sany Listed company 525
BHF Bank 金融 Fosun PE 513.6
Hilite International Automotive AVIC SOE 473
KHD Humboldt
Wedag
Industrials AVIC SOE 471.3
Schwing Industrials XCMG SOE 423.1
7 © Rödl & Partner 10/18/2017
Chinese investment in Germany
Deal value of Chinese FDI in Germany (in 100 million EUR)
18 20
30 36
46
65
13,87 19,59 17,01
13,72 12,40
112,61
0
20
40
60
80
100
120
2011 2012 2013 2014 2015 2016
Total of transactions Deal value in 100 m. EUR
Source: own research
8 © Rödl & Partner 10/18/2017
Chinese investment in Europe
Deal value of FDI between China and European Union (in billion EUR)
0
5
10
15
20
25
30
35
40
2008 2009 2010 2011 2012 2013 2014 2015 2016
Investment of EU countires in Europe Chinese investment in EU countries
Source: own research
9 © Rödl & Partner 10/18/2017
First half-year 2017 compared to same period 2016
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
10.000
1 H 2016 1 H 2017
28
23
FDI in million EUR Transactions
Despite foreign exchange
control Chinese Outbound
investment still on high
level
FDI in first half year of 2017
about 5.5 billion EUR
compared to 8.6 billion
EUR same period 2016
High rise because of HNA
investment in Deutsche
Bank worth 3.3 billion EUR
First half-year 2017 counts
23 M&A transactions
compared to 23 to same
period 2016
Total of M&A transactions in Germany
Source: dealogic, Platform M&A China/Germany
10 © Rödl & Partner 10/18/2017
Chinese Outbound investment in Europe
0
5
10
15
20
25
30
35
40
2017 2016
Germany took an outsized
role in attracting Chinese
investment in 2016 and was
the largest recipient of
Chinese FDI
In 1H 2017 Germany is still
leading slightly before in
terms of amount of deals
Regarding the total
investment volume UK is
leading due to mega deal of
China’s CIC EUR12bn
takeover of Blackstone's
Logicor
M&A transactions by European countries
Source: dealogic, own research
11 © Rödl & Partner 10/18/2017
German industry trends 2014 - 2016
Mechanical engineering,
health care and automotive
sectors remain stable since
2014
Germany’s strong industrial
manufacturing and
automotive industries offer
attractive investment
opportunities for Chinese
companies seeking growth
and know-how
Sino-German investments
has grown by over 130% in
2014 over the past five
years
21%
14%
14% 10%
7%
4%
3%
2%
3%
21%
Mechanical Engineering
Health
Automotive
Energy
Retail & Consumer Goods
Electronics
Traffic Engineering
Aerospace
Software
Other
Chinese Outbound M&A in Germany: Industry Trends 2014 - 2016
Source: dealogic, own research
12 © Rödl & Partner 10/18/2017
Industry trends 2016 - 2017
Recent M&A industry trends
show acquisitions of large
industrial players and
technology leaders
Popular target companies
are in the areas of
mechanical engineering,
health care/ medical and
automotive
Renewable energies as
well as energy and power
sector and automation are
moving more and more into
focus of Chinese investors
21%
15%
10%
10%
8%
8%
6%
5%
5%
13% Mechanical Engineering
Health
Automotive
Energy
Environment engineering
IT/Software
Retail & Consumer Goods
Electronics
Rail Engineering
Other
Chinese outbound M&A Germany: Target industry transactions
Source: dealogic, Platform M&A China/Germany
13 © Rödl & Partner 10/18/2017
Sino-German transactions in Germany / Europe first half 2017
16 3
2
2
2
Industrials
Healthcare/Medical
Energy and Power
High Technology
Financials
41
18 16
11
6
7
6 5
4 3
Industrials
High Technology
Financials
Healthcare-Medical
Materials
Media and Entertainment
Consumer Staples
Energy and Powers
Consumer Products & Services
Retail
Three Sino-German
transactions are among the
top 10 China outbound
deals in Europe in 1H 2017
Especially in the industrial
sector German and
European targets are
attractive investment
targets
Due to Brexit, investment
activity in Germany will
further increase and shifts
of European HQ from UK to
Germany to be expected
Europe
Germany
Source: dealogic, own research
14 © Rödl & Partner 10/18/2017
Industry focus Made in China 2025 – perfect match with
Germany
Source: Merics “Made in China 2025”
High-end computerized machines and robots
Space and aviation
Maritime equipment and high-tech ships
Advanced railway transportation equipment
New energy and energy-saving vehicles
Energy equipment
Agricultural machines
New materials
Biopharma and high-tech medical devices
Made in China 2025 key technologies
Dec 2013:
AVIC acquires KHD
Wedag Jun 2014:
Joyson acquires
IMA Automation
Jan 2016:
ChemChina acquires
Krauss Maffei
May 2016:
Shanghai Electric
acquires Manz
May 2016:
Shanggong Group
acquires H.Stoll
Aug 2016:
Midea acquires Kuka
Mar 2017:
Truking acquires
Romaco Pharma
15 © Rödl & Partner 10/18/2017
Distressed M&A in Germany: Chinese investors on the rise
88
51
34
20
9 4
5
10
32 53
63 63
7
39 34
20 28
33
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
China Germany USA UK Switzerland Japan
High investment interest Medium investment interest Neutral
Source: Roland Berger “Distressed M&A-Survey 2017”
Finance and M&A experts
predict a new rise of
Chinese investors in the
market of companies in
special situations /
distressed M&A in Germany
88% forecast new
competitors from China,
while only 51% say that
German investors show a
high interest in distressed
targets
Overall higher competition
in bidding on distressed
targets is predicted
From which regions do you expect investment activities in the German
distressed M&A market?
16 © Rödl & Partner 10/18/2017
Chinese serial investors in Germany focusing on automotive
Year Volume (million €) Target Buyer
2017 60 Grammer AG Ningbo Jifeng Auto Parts Co., Ltd.
2017 6 Schürholz GmbH, Schürholz GmbH & Co. KG Stanztechnik, Schürholz Polska Sp z o.o. Jiangsu Olive Sensors High-Tech Co., Ltd.
2017 N/A Finoba Automotive GmbH China National Machinery Industry Corp (Sinomach)
2016 170 TriStone Flowtech S.A.S. Anhui Zhongding Sealing Parts Co., Ltd.
2016 200 Carcoustics International GmbH Liaoning Dare Industrial Company Ltd.
2016 N/A Sideo Vogt GmbH, Hermann Vogt GmbH & Co. KG Shenzhen Kaizhong Precision Technology Co., Ltd.
2016 130 AMK Holding GmbH & Co. KG Anhui Zhongding Sealing Parts Co., Ltd.
2016 N/A Metalsa Automotive GmbH China National Machinery Industry Corp (Sinomach)
2016 180 TechniSat Automotive Ningbo Joyson Electronics Corp., Preh Holding GmbH
2015 N/A Elektrofahrzeuge Stuttgart (EFA-S) GmbH Beijing Zhonghuan Investment Management Co., Ltd.
2015 N/A Whitesell Germany GmbH & Co. KG, Werke in Becklingen und Schrozberg Shanghai Prime Machinery Co., Ltd.
2015 N/A Mercedes-Benz Vertriebsgesellschaft mbH Lei Shing Hong Ltd., Hongkong
2015 3.5 Waldaschaff Automotive GmbH Lingyun Industrial Corp. Ltd.
2015 95 Wegu Holding GmbH Anhui Zhongding Holding (Group) Co., Ltd.
2014 N/A Russ & Janot GmbH (Tochter der Daimler AG) Lei Shing Hong Ltd., Hongkong
2014 90 Quin GmbH Ningbo Joyson Holding Group Co. ,Ltd.
2014 0,9 Alterprodia GmbH Ningbo Huaxiang Electric Co. (NBHX)
2014 N/A KS Aluminium und Technologie GmbH Shanghai Automotive Industry Corp (SAIC)
2014 N/A Koki Technik Transmission Systems GmbH AVIC Electromechanical Systems Co., Ltd.
2014 N/A KACO GmbH + Co. KG Anhui Zhongding Holding (Group) Co., Ltd.
2014 20 IMA Automation GmbH Amberg Ningbo Joyson Holding Group Co., Ltd.
2014 3 Schumag AG Meikai via Meibah International GmbH
2014 N/A Kokinetics GmbH AVIC Electromechanical Systems Co., Ltd.
2014 473 Hilte International AVIC Electromechanical Systems Co., Ltd.
Source: dealogic, own research
*Red marked buyer have invested several
times in Germany.
N/A = not available
Listing of M&A transactions in the automotive industry in Germany 2014-2017
Among Chinese
investors who
acquired German
OEM suppliers are
several serial
investors like
AVIC, Anhui
Zhongding or
Joyson
Through the
acquisition they
took the next step
to become the
world's most
successful
automotive
suppliers
17 © Rödl & Partner 10/18/2017
Minority vs. majority investments
16
13
Total transactions 1st half year 2017
Majority Minority
47
3,2
Total transactions 2016
Majority Minority
Source: Platform M&A China/ Germany
In 2016 a clear
trend of majority
share deals have
been observed in
Sino-German M&A
transactions
In the first half of
2017 there seems
to be a slight shift
that Chinese
buyers tend to
minority
investments which
might be linked to
the new political
environment
18 © Rödl & Partner 10/18/2017
Analysis of the Chinese big buyers in Germany
65%
35%
SOE or POE (2011-2016)
Privately-owned enterprise State-owned enterprise
Source: Bloomberg, Rhodium Group
Among SOE’s the ratio of
serial investors is notably
high
The majority of SOE are
originated in the industrials
are, whereas most of the
private companies are
focused on automotive
As the 2016 M&A boom
was largely driven by
private companies, experts
predict that state investors
are staging a comeback
starting from 2017
19 © Rödl & Partner 10/18/2017
Top four announced Chinese outbound M&A deals by quarter (2015-2017)
0
10000
20000
30000
40000
50000
60000
70000
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Source: Bloomberg, Rhodium Group
Other Private sector acquirers State-owned acquirers Deal Value in USD Millions
20 © Rödl & Partner 10/18/2017
Target structure in Germany
1 4
2
39
Chinese Majority Holdings in Germany 2016
Family-owned Listed Distressed Private
1
3
12
Chinese Majority Holdings in Germany 1st Half Year 2017
Listed Distressed Private
Source: Platform M&A China/ Germany, own research
21 © Rödl & Partner 10/18/2017
Leading clusters in Germany
The most popular cities for
foreign investors are
Munich, Dusseldorf, Berlin
and Frankfurt
The top provinces are
Northrhine-Westphalia,
state of Baden-
Wurttemberg and Bavaria
Chinese investors are
tightly located in
Northrhine-Westphalia and
Frankfurt area
Apx. 900 Chinese
companies are located in
Germany
194 foreign
investment*
projects in
2016
244 foreign
investment
projects* in
2016
232 foreign
investment*
projects in
2016
Source: Germany Trade and Invest * Investment projects defined as greenfield and M&A
22 © Rödl & Partner 10/18/2017
M&A outlook & trends from the German perspective
In general, the amount of cross-border deals between China and Europe is expected to
increase. Germany will continue to attract investors looking to acquire advanced technology
Financial investors will play even a stronger role in the future, either through buy-outs or as
co-investors
There will be fewer big-ticket deals, whereas the investments in mid and small-cap targets
will increase
German sellers tend to have a quite strong position in the market since the demand is much
higher than the supply which leads to the fact that in some cases buyers are willing to
overpay fair values of target
Since 95% of all German companies are family-owned, many entrepreneurs encounter
difficulties with finding a successor who will lead their company onto the next generation. This
gap will be a key driver for foreign investors in the future
The rise of China as an investor and the commensurate shift in Chinese preferences also opens
up a unique window of opportunity to improve investment governance in Europe and globally
23 © Rödl & Partner 10/18/2017
24 © Rödl & Partner 10/18/2017
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Best practice (non exhaustive)
Transaction support for
acquiring a UK company in
the area of smart TV
Transaction support for
SuK (acquired by
Shenzhen Luxshare
Precision Industry Co., Ltd)
Advising Bilfinger in Post
Merger Integration
(acquired by Techcent)
Advising WEGU in Post
Merger Integration
(acquired by Anhui
Zhongding Group)
Advising Ningbo Huaxiang
Electronic Co., Ltd.in
acquiring Sellner Group
Advising Cybex in Post
Merger Integration
(acquired by Goodbaby)
Transaction support for
Estun Automation Co., Ltd.
in acquiring British Trio
Motion Technology Ltd.
Transaction support for
Skyworth in acquiring TV
division of Metz
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Anna Ereth
Consultant
China Practice, M&A
Rödl & Partner
Denninger Str. 84
81925 Munich, Germany
Tel. +49 (89) 92 87 80 – 216
Fax +49 (0) 89 / 92 87 80 – 300
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