Next up on our special M&A focus is Frank Wu, Co-Chair of the Greater China Practice Group at Haynes and Boone, LLP. Frank talks about the current M&A landscape in China, where it’s heading towards, and what kinds of challenges are involved in agreements and transactions within the East Asian nation.
In the M&A landscape, what recent transactions have you and the firm been involved in?
We are seeing an increase in outbound investments coming from China. Many of these investments are driven by Private Equity firms. We recently represented a consortium of four major Chinese PE funds in its acquisition of Ambrx, Inc. (a biotechnology company based in San Diego). In addition, we have represented WuXi PharmaTech (a major biotech company) in several high profile acquisitions in the US. We are likely to see more of these transactions as Chinese PE funds and major Chinese companies focus on making investments in key biotechnology assets.
Were there any new challenges involved? What have you learnt on the back of these fresh deals?
In addition to the typical M&A issues, Chinese acquirers are also subject to governmental approvals and regulations specific to China. We work to balance the business goals and the legal needs of our clients in the potentially complex arena of cross-border acquisitions.
How would you describe the current M&A landscape in China, specifically regarding corporate deals and its relationship with the US?
M&A and cross border strategies are being more frequently utilized to accelerate growth by Chinese companies. China is in the midst of a transition where the focus is now on more quality growth as the country moves from a manufacturing-intensive, export-led model of growth, to a concentration on high value deals especially in the areas of consumption and innovation. This is a not an easy transition and a significant task for the world’s second largest economy, however, progress is being made and the development of these new growth sectors is among the top policy priorities of the government. As a firm, we are seeing more and more outbound investments coming from China to address this transition in the Chinese economy.
As Co-Chair of the Greater China Practice Group, how do you push for the most commercially rewarding deals in your M&A work?
At Haynes and Boone, we have been fortunate to have worked on some high profile Chinese transactions. Yet not all cross-border transactions can make it all the way through from promising initial negotiations to closure. It is navigating through these stages where experience with US-China M&A is important in explaining to our clients the cultural differences that need to be bridged in order to consummate a transaction for both parties. We make sure our clients understand the legal issues at hand, to help them make informed choices throughout the transaction process, resulting in transactions that are both successful and rewarding.
With many years of M&A legal experience in numerous sectors, from energy to biotechnology, which would you say has been the overall strongest sector and why do you think this is?
Whereas energy and natural resources used to comprise the majority of transactions, Chinese investment in virtually all non-resources sectors increased last year. Chinese buyers are targeting a more diverse and mature mix of assets.
Our current key focus at Haynes and Boone for the Greater China Practice Group is intellectual property and technology. With a very strong IP Section in the US, we see Chinese companies making strategic investments in technology, which is one of the sectors showing one of the largest increases from Chinese investment last year.