Chinese companies have been buying up foreign businesses, including in the US, at an unprecedented rate — but they could probably use a little help.
“I think a lot of these companies are still learning how to do M&A,” Lemkau said.
He said he is heading over to China this week with a team of bankers to speak to clients about how to organise financing, get regulatory approvals, and win over Western companies that could be sceptical about their ability to close deals.
Lemkau noted that, recently, many of the major transactions have involved Chinese companies encroaching on existing deals, or buying assets that were already up for sale.
“They’re saying, ‘Here’s something that’s actionable — I know it’s for sale because they have announced a transaction with somebody else; I know what the price is, so all I have to do is pay a slightly higher price; and I know that someone has come along and done due diligence on the asset, so it must be clean,'” Lemkau said.
That was the case for Anbang’s $14 bid for Starwood Hotels. The hotel chain had already agreed to sell itself to Marriott International when the Chinese insurance giant showed up with a higher offer.
It may not sound like a bad strategy — but it hasn’t always worked out for the Chinese bidders. After engaging Marriott in a bidding war, for example, Anbang ultimately had to walk away from Starwood deal.
So it makes sense for banks like Goldman to be pitching Chinese clients right now. Especially if they believe the buying spree will be an ongoing trend.
Lemkau has repeatedly said this activity feels “centrally-driven.” That is to say that the Chinese government is supporting this kind of dealmaking.
If that’s the case, it won’t be going away anytime soon.