What are some of the key hurdles and obstacles for Chinese investors in Europe? Tips on how to manage them. 中国投资者在欧洲面临的主要挑战及其处理心得

Mergers & Acquisitions Alert | 12.21.16

Chinese outbound foreign direct investment ("ODI") has grown rapidly in Europe. 2016 was no exception, and Chinese enterprises are constantly presented with new opportunities to expand overseas. China's footprint as a global investor is expanding at a rapid pace, and the entire world is taking notice. 2016 certainly contains many success stories of Chinese investments in Europe, most notably the UK's approval of China General Nuclear Power Corporation ("CGN"), EDF Group's project to build a new £18 billion nuclear reactor in the UK, Midea's successful acquisition of publicly listed German industrial robot manufacturer Kuka, and Portugal's approval of Fosun's purchase of 17% of the shares of Millennium BCP Bank. However, some tales of caution are also emerging, notably the Swiss government's review of the China National Chemical Corporation ("ChemChina")-Syngenta transaction, the German and the U.S. governments' review of Aixtron transaction, which ultimately resulted in Fujian Grand Chip Investment Fund LP ("Fujian Grand Chip") rescinding its voluntary takeover offer in December 2016, and the German government's review of the Osram transaction.

In addition, as outbound investment is facing tighter foreign exchange controls within China with the State Council announcing new restrictions since late November 2016, it is especially important for Chinese enterprises to be well prepared when they are ready to capitalize on investment opportunities in Europe. These types of preparation may be especially important to ensure success of the ODI in light of the new investment climate on both sides of the transaction, whether in China or in Europe.

Before a Chinese enterprise, fund or entrepreneur embarks on an investment in Europe, it may be helpful to consider the following points. These points are the accumulated observations of evolving themes over recent years, based on the actual investment experiences of Chinese ODI into Europe.

1. Start with an informed investment strategy. While this may seem to be a self-evident statement, there are several aspects to this in practice. Structurally, there may be a range of investment hurdles to overcome in order to successfully negotiate, close and integrate the proposed transaction: from regulatory and legal through business integration to counterparty communication issues. The regulatory hurdles may arise from many sides of the transaction, as evidenced by Beijing's plan to lower thresholds and formulate new restrictions on certain types of ODI, the EU decisions on the Syngenta, Aixtron and Osram deals and the U.S. block of the sale of Aixtron's U.S. operations in December 2016. All of these can impact the proposed deal timetable, and a plan for addressing known regulatory approval risks should be built into that timeline in a realistic way. A good strategy will take these issues into account in terms of the cost and advisory impact and will thereby build trust in the process with the European party.

  • Regulation in the European Union is not just national but is also directed at the EU's internal market. For example, the joint selling of a product by a contractual joint venture may require specific clearance by the EU Commission's competition directorate for the impact that it will have on competition in a defined sector of the EU internal market. A full-function joint venture operating in the EU may be subject to merger control depending upon the functions of the participating businesses affected. A seasoned adviser will assist in building this into the People's Republic of China ("PRC") party's process at the outset of the deal engagement process as this may not always be immediately obvious and could cause complications for the PRC internal supervisory and approval process. Two recent examples of this arose in the resources space: the Shah Deniz Consortium (seeking to export pipeline gas from Azerbaijan) and the partners of an LNG production project in Angola both sought joint selling clearance from the EU upon taking advice from counsel. This was on the basis that, even though these projects were located outside the EU and the sales were effected outside the EU in several cases, the jurisdiction of EU competition authorities could be invoked if some or most gas shipments were to be directed to the EU by their buyers. There was therefore a potential effect on competition in EU internal markets that could potentially be attributed to the decision to effect joint sales.
  • Importance of identifying early on if the European target company has sensitive technology in the U.S. The recent December 2016 decision by the U.S. to block the sale of Aixtron's U.S. operations to Fujian Grand Chip is an emerging lesson. Even if only 20% of Aixtron's global revenues was derived from its U.S. operations, the U.S. was able to block the sale based on the American defense and security officials' views on the sensitive technologies held by Aixtron U.S.
  • Any decision to restructure the deal once commenced can have a major impact. This can commonly occur with respect to decisions around investment protection strategies. There are a number of investment protection and double taxation treaties that will offer protections to the foreign investor and affect the structuring of the chain of investment vehicles used by the acquirer. There is a complex interplay between these and the tax structuring of a deal for the acquirer. If it is ultimately more efficient, and also offers better investment protection, for a particular investment to be structured through multiple holding companies (e.g., non-EU and EU), then this should be determined at the outset or, at the latest, before finalization of transaction documentation. Having to change the structure of the acquirer later in the deal process can lead to avoidable changes of control and additional counterparty costs of legal and investment adviser review to be paid by the acquirer. Inevitably, this is best achieved where there is a high level of understanding of the potential tax structuring outcomes at a very early stage of the transaction evaluation process.
  • Protectionism and national industrial policy may have a role to play. Most recently, there are some indications of a rise in regulatory review in Europe for certain foreign investments, notably for certain large Chinese investments, as we have recently seen in Switzerland and Germany. While this is a moving landscape, a seasoned adviser will assist in managing this delicate and changing process. The approval of the Hinkley Point C investment by CGN and the EDF Group was made in September 2016 with an unprecedented number of conditions, including a "golden share" for the UK government and an undertaking by the foreign investors not to dilute their holdings until the project was fully constructed.

2. Incorporate the PRC investment approvals into the timetable early. It is understood by European counterparties that there is a domestic process supervision and approval authority process for the Chinese bidder to go through. There has been ample press about China's recent plan to limit certain types of ODI, but the European counterparties are not typically aware of the exact details of these limitations, nor would they typically keep abreast of updates on any changes to China's rules on ODI. As the rules within China may be reformulated, it will be important to convey any changes or updates to the European counterparties. In some cases, European counterparties may ask for more definitive PRC regulatory information before spending management time and advisers' fees on advancing a transaction.

In addition, the dynamics between provincial and national authorities and the delays that can be caused by changes to the approval sought are already less well understood by European counterparties. Explaining this will obviate the possibility that the deal dynamics change unnecessarily due to such delays or that the European party mistakenly believes such delay is a negotiating strategy.

  • Articulate the timing and contingencies to the other side early in the process. Even a sophisticated PRC party may not fully anticipate the extent to which changes to the fundamental parameters of the proposed transaction require further interplay between supervision and approval authorities at the provincial and national levels. This ensures an open communication flow and minimizes any misunderstandings.
  • Chinese companies may consider this process to be well understood by western companies with PRC operations and might not feel the need to fully explain it to the counterparty when, in fact, the governance of western companies can be such that different divisions operate at commercial arm's length and there is not institutional communication between those divisions on such issues.

3. Consider what deal documentation strategy is appropriate. Europe-China deals can be document‑heavy, not least because of the need for translation. In some deals, it might be more appropriate to develop detailed term sheets for approval purposes before moving on to principal documents that are then developed in fewer drafts. Too many turns, each translated, can be an expensive and time‑consuming process that appears inefficient, and even indecisive, to the European counterparty.

  • We would suggest that a rolling summary of the executive summary of the DD report is translated periodically from English to Chinese to allow decision-making while also preventing the document production process from becoming expensive and the primary use of trusted advisers' time.
  • Consider appointing a mid-senior level in-house business/legal executive to prioritize the risks involved from an internal viewpoint (after he/she reviews the due diligence reports). Outside advisers provide companies with the complete range of risks. Someone inside the company needs to properly digest all the risks and prioritize them in the ambit of the company and its investment strategy. Too often, the failure to delegate leads to an inefficient and unresponsive process from the acquirer.
  • Understand what documents must go to the board for approval of the transaction. It is not the case that all documents need to go to a board for approval. A term sheet at an advanced, but not excessive, level of detail will lead to a better process. This vets out potential issues in the documentation.

The perceived value of this to the European counterparty should not be underestimated as, where this process more closely resembles their own, they will view it as being more decisive. This is the case even where, in actual fact, the PRC process may mask other layers of considered review and value addition in the quality of decision‑making.

4. Have a solid understanding of European regulation before starting. The European Union is the most complex, and heavily regulated, free trade area in the world. When looking to invest in a project, it is not just a case of competition law and foreign investment approvals but also of internal market rules. In addition, keep abreast of the recent developments in Europe. The European investment landscape is also evolving as foreign investments are increasing at a brisk pace. For example, infrastructure may be governed by third‑party access rules. Sales by joint ventures can invoke merger rules, investigations of pricing or a need to seek approval for distribution and marketing agreements. A failure to have a good understanding of this first is a common reason for deal delay and deal failure.

  • Invest in a preliminary study of the market beforehand. Talk to local advisers on the ground. Also discuss with local advisers any trends they may notice. Set aside a budget to engage local European advisers for the pre-deal stage.
  • A failure to do this may likely lead to the process and regulatory stumbles identified above and may very well be more expensive in the end. An example of this is the continuing regulatory review of ChemChina's $40 billion+ takeover for Syngenta by EU (and Australian) authorities, having been announced in February.

5. Be prepared to disclose a PRC company's ultimate beneficial ownership ("all the way up the chain"). European disclosure and transparency standards are fairly rigorous, and a PRC company should be prepared to respond to these types of questions and requests for supporting documents. The queries and diligence on the true beneficial ownership of the PRC company could likely extend to any affiliate that becomes a party to the transaction.

  • There needs to be frank internal discussions within the company and with core legal and financial advisers on this topic before substantive engagement with the counterparty.
  • Determine what public disclosures will be required before formal engagement with PRC supervision and approval authorities so that any issues around state secrets or restricted economic or ownership data can be addressed in the relevant approval process. The ChemChina-Syngenta merger alluded to above is stalled pending more detailed information about the merger being provided to regulatory authorities.

6. Localization and Integration. Consider the extent to which local employees are a key part of the business continuity based upon financial adviser's advice and as modeled. Consider the extent to which the securing of their commitment to the business during the transaction period requires further understanding by them as to how the business and their roles will be integrated post-completion. Key employees will have an understandable apprehension about the commitment of the new business owners to them.

7. In an active bidding process, or with any coveted target, it is important to ensure that the funds are available at the time of closing or when the final bid is submitted. This timing/delay/lack of clarity is one of the largest stumbling blocks between Chinese and European partners. The delay is often viewed with suspicion because a certain date is never provided.

8. In an active bidding process, we are seeing with some frequency a request for the PRC company to place some of its funds for the acquisition in a large European/international bank, as opposed to a Chinese bank. Companies that are involved in one of these bids might want to think about initiating contacts with the China branch of a selected European/international bank early on in the process.

9. While there may be a tendency to focus on investing in/purchasing high‑profile large targets, it should not be viewed as a defeat to invest in/purchase a medium‑sized target when investing in a European country for the first time. This may be especially relevant given Beijing's recent plan to limit certain ODI above €1 billion. In addition, as mentioned above, Europe is generally heavily regulated and relatively complicated to navigate. By investing in a medium‑sized project in the first instance, it would allow a PRC company to build up its name in the local market, meet local experts and gain the operational experience in the local market. Then the PRC company could be in a better position to successfully manage any of the investments, large and small, in the local European country. The German authorities' withdrawal of the approval and reopening of the review of Fujian Grand Chip takeover of Aixtron in October 2016, the U.S. authorities block of the sale of Aixtron's U.S. subsidiary in December 2016, and Fujian Grand Chip's withdrawal of its voluntary takeover offer in December 2016 have arguably damaged all parties concerned.

10. Consider hiring some local professionals to assist the PRC company in integrating the business and navigating the local business climate post-investment. This will assist the PRC company immensely in terms of efficiency and having its own "set of ears" in Europe. We would recommend hiring locals with various levels of experience and in different operational roles so that the PRC company can receive direct feedback on its European investment on multiple levels.

  • Designate at least one director with specific veto rights. A PRC company may also consider designating its CFO. On the operational side, we would recommend incorporating some of the PRC company's own senior technical and operational people to be on the ground of the target company post-acquisition.

In summary, while Chinese companies will still be presented with a plethora of attractive investment opportunities in Europe in 2017, given the rapid changes in today's investment climate and regulations and the increasing competitions between bidders, the difference between a well‑prepared investor and one less prepared could be the determining factor in the success of a transaction.

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近年来中国对外直接投资在欧洲持续性快速增长,2016年也不例外。中国企业在海外扩张的机遇不断涌现,中国企业做为国际投资者的足迹快速蔓延并成功引起了全世界的关注。毋庸置疑,中国投资者在2016年中于欧洲完成了众多成功的投资项目,其中尤其值得关注的是英国政府批准中国广核集团与法国电力集团EDF在英国建造一座价值180亿英镑的核电厂、美的(Midea)成功收购德国工业机器人上市公司库卡(Kuka)以及葡萄牙政府批准复星集团收购千禧银行(Millennium BCP)17%的股份。然而也有部分交易正面临挑战,比如瑞士政府对中国化工集团收购先正达(Syngenta)交易的审查,德国和美国政府对爱思强(Aixtron)收购案的审查(最终导致中国福建宏芯投资基金,以下简称“福建宏芯”,于2016年12月撤回其自愿收购要约),以及德国政府对欧司朗(Osram)交易的审查。




  • 欧盟的监管并不限于成员国层面,同时也针对欧盟整体的内部市场。例如,契约性合营企业联合销售某产品可能因为需要满足欧盟竞争法的要求而由欧盟委员会竞争署根据该销售行为对相关内部市场产生的影响做出专门的评估和批准。在欧盟营业的“全功能合营企业”(full-function joint ventures)根据其所参与行业的受影响情况,可能会受到反垄断方面的限制。由于这一点并非显而易见,而且可能导致中方内部监督和审批流程的复杂化,所以经验丰富的顾问往往会在交易初始便协助投资者将其纳入流程。最近的两个相关案例都出现在能源行业:Shah Deniz 银团(寻求从阿塞拜疆向欧盟出口管道天然气)以及安哥拉某液化天然气生产项目的合作伙伴在征求过律师的意见后,均向欧盟申请欧盟竞争法条例下的联合销售许可。这是因为即使这些项目位于欧盟境外而且其销售在某些情况下也是在欧盟之外进行的,但如果其中部分、甚至绝大部分天然气被其买家最终运送到欧盟,则可触发欧盟竞争监管机构的管辖。因此,联合销售的批准与否亦取决于该销售对于欧盟内部市场竞争的潜在影响。
  • 如果欧洲标的公司的业务涉及美国境内的敏感技术,那么对其早期识别至关重要。美国政府于2016年12月决议禁止爱思强出售其美国业务予福建宏芯就是一个最新的实例。尽管爱思强美国业务仅占其全球营业额的20%,美国政府还是能够根据其国防与安全官员关于爱思强美国子公司所持有的敏感技术的观点而阻止该交易。
  • 交易一旦开始,任何交易结构的变更都可能对交易本身产生重大影响。这通常与有关投资保护战略的决定相关联。一系列投资保护和双边税收协定可为外国投资者提供保障,从而影响收购方投资工具链条的结构设计。上述协议与收购方对交易的税务架构之间存在着复杂的互动关系。如果可以通过多个(非欧盟及欧盟的)控股公司的架构使某一特定投资更具效率并为投资者提供更好的保护,那么该架构应在交易开始时或最迟在交易文件最终完成之前就得以确定。在交易过程的后期变更收购方的交易架构可能导致原本可以避免的控制权变更并产生需由收购方承担的交易对手方额外的法律和投资顾问审查费用。因此,我们建议在交易初期的评估过程中就应对潜在税收架构的影响进行深入研究。
  • 保护主义和国家产业政策也可能产生影响。通过最近在瑞士和德国发生的实例,我们观察到欧洲对某些外国投资,尤其来自中国的大额投资的监管审查有所增强。尽管监管环境在持续发生变化,投资者在经验丰富的顾问的协助下还是可以有效地予以应对。中国广核集团与法国电力公司对英国欣克利角(Hinkley Point)C核电厂的投资交易于2016年9月获得批准,但其中限制条件之多可谓前所未有,包括给予英国政府的“黄金份额”(golden share)和外国投资者在项目竣工前不得稀释其占股的承诺。



  • 在交易过程初期向对方明确说明交易时间表及或然事件。即使一个经验丰富的中国投资者也无法完全预见潜在交易中哪些基本参数的变化会触发省级和中央监管机构之间的进一步互动。先期对不确定事件进行说明不但可确保沟通的开放性,也可尽可能地避免误解的产生。
  • 中国公司可能误以为那些已经在中国开展业务的西方企业会清楚了解中国的审批流程,从而觉得不再有必要就此向对方充分说明。但事实上,西方企业的治理结构的可能是:尽管同一企业不同部门之间保持着商业上的联系,但并不会就上述监管流程等特定问题形成制度上的交流。


  • 我们建议定期将尽调报告最新版本的摘要部分从英语翻译成中文以便决策,从而避免文件准备过程中费用的增加并且方便顾问更为合理地分配工作时间。
  • 投资方应考虑任命一名中高层的内部业务/法律高管,(在其审阅尽调报告后)从企业内部角度排定相关风险的优先顺序。外部法律顾问负责向投资者提供整体的风险评估报告。公司内部则需要有专人负责理解并消化所有已确认的风险,并结合公司的实际情况和投资策略对风险进行主次划分。在大多数情况下,交易中这一重要角色的缺位往往导致收购方在程序中反应迟缓以及程序本身的低效。
  • 应确定哪些交易文件必须提交董事会审批。因为并非所有交易文件都需要董事会的批准,一份内容清晰,而非过于详细的条款清单往往可使交易流程更为顺畅,并同时避免文件准备中的潜在障碍。



  • 应事先对市场进行初步调研。通过与本地顾问的交流,讨论他们可能注意到的最新市场趋势。为在交易准备阶段聘请欧洲本地顾问预留部分预算。
  • 如果忽视这一点,交易极有可能会遭遇程序和监管障碍,最终导致更高的交易成本。这方面的典型例子是,中国化工超过400亿美元的先正达收购交易在今年2月份宣布,至今仍然处在欧盟(和澳大利亚)当局的监管审查中。


  • 在与交易对手方进行实质性推进前,在公司内部以及在公司与核心法律和财务顾问间应当就此议题进行坦诚的内部讨论。
  • 应在与中国监管和审批机构展开正式接触前,确定究竟需要进行何种公开披露,以便与国家机密、受限经济部门或所有权信息有关的任何问题可在相应的批准过程中得到妥当处理。前文提到的中国化工与先正达合并交易的受阻也是因为监管当局要求当事方提供关于该交易的进一步详细信息。






  • 委派至少一名具有特定否决权的董事。中国公司也可考虑委派标的企业的首席财务官。在运营方面,我们建议中国公司在收购完成后,将本公司的部分高级技术人员和高级运营人员纳入标的公司的本地员工队伍。