China Cross-border M&A – Challenges and Opportunities

In this interview, Bagrin Angelov, Head of China Cross-border M&A, China International Capital Corporation Limited (CICC) shared with APAC BUSINESS some observations and future trends on China’s cross-border M&A activities

Bagrin Angelov joined China International Capital Corporation Limited (CICC) in 2015 in Beijing where he is dedicated to China Cross-Border M&A and where he leads a team of investment bankers focused on origination, structuring and execution of M&A and private placement transactions. He has more than 17 years of experience in advising Chinese and Multinational clients in a variety of complex cross-border transactions. Prior to CICC, Bagrin spent more than five years in the Middle East at Barclays Capital in Dubai and at a Middle Eastern Sovereign Wealth Fund in Oman. Bagrin began his Investment Banking Career in London and worked in the M&A teams of ABN AMRO, Royal Bank of Scotland and Barclays Capital in London from 2005 to 2010. To date Bagrin has advised on 100+ M&A deals globally with a combined transaction value of some USD 100bn. He is a regular speaker at conferences and forums, and is being frequently invited to lecture at academic institutions in China. Bagrin holds a Diplom-Kaufmann (MBA equivalent) from the Katholische Universität Eichstätt-Ingolstadt in Germany and a MSc in Finance from the University of Strathclyde in Glasgow, Scotland. Bagrin is a German national, married with two kids and resides in Beijing, China.

APAC BUSINESS: Chinese companies are increasing their presence in Asia Pacific region and worldwide. But some China’s outbound M&A activities are facing challenges due to geopolitical tensions and regulatory restrictions. Mr. Angelov, could you share some insights on the current cross-border M&A landscape? How will the current economic environment affect the M&A transactions?

Bagrin Angelov: While China Outbound M&A volumes have come down to about USD 29bn in 2021 (from around USD 109bn in 2017), it deserves highlighting that this is not necessarily representative of activity levels and ongoing demand from Chinese corporates for overseas investments. We at CICC very much continue advising Chinese firms with their Outbound M&A, but we have also been observing an outbound diversification across a number of geographies globally. What we are also noticing is a higher degree of scrutiny from Chinese corporates when screening for overseas M&A opportunities and our Chinese clients being increasingly specific as to M&A targets they would want to acquire. China Outbound M&A alone does however not paint a complete picture of Cross-Border M&A. To do so, we would also have to take a look at China Inbound M&A. In fact, since 2020 China Inbound M&A volumes have surpassed China Outbound M&A volumes and in 2021 this trend further continued. In 2021, total China Cross-Border M&A amounted to about USD 78bn, of which ~ USD 49bn was Inbound M&A vs. Outbound M&A of ~ USD 29bn.

APAC BUSINESS: Covid-19 has had a large and uneven impact on global supply chain and people’ daily life around the world, what are the challenges and opportunities for cross-border M&A transactions?

Bagrin Angelov: As to Covid-19 implications, we at CICC believe that the increase in uncertainty has in fact further magnified the short-term impact of Covid-19. What we have observed is that overall, the willingness of companies to expand production capacity post Covid-19 has weakened. Data of listed Chinese companies showed that the elasticity of companies’ investment expenditure to revenue after the Covid-19 outbreak was overall lower than before the outbreak. Having said that, it remains important to bear in mind the other side of uncertainty – once Covid-19 related uncertainty substantially subsides we believe that companies (and consumers) will change their wait-and-see attitude and investments should rebound again. Covid-19 related global supply chain challenges on the other hand are likely to help motivate localization activities of manufacturing operations closer to end markets, which in return should help create demand for investments and boost cross-border M&A.

APAC BUSINESS: From your observations, which regions or countries are the M&A hotspots for investors? And what are the most appealing industries and sectors this year?

Bagrin Angelov: It is difficult to pinpoint one single region or even a single country when it comes to China Outbound M&A. LatAm for example is likely to keep attracting investments in clean energy, utilities, and infrastructure. Southeast Asia on the other hand is increasingly gaining interest from a diverse set of corporate players in China and increasingly also from financial investors. Interest for investments into Europe, North America, Middle East, Korea, Japan etc. can however not be ignored and there very much is demand from Chinese corporates to also be investing in those countries and regions. China Outbound M&A remains complex and highly diversified across a number of geographies globally. At present, the true M&A hotspot for investors is in fact China. “China’s Opening Up” of its capital markets to foreign investors, as well as implemented measures such as the new investment law and the ongoing reduction to the Negative List have had a positive impact on Inbound M&A. Inbound M&A activities by Multinational Corporates into China have in fact increased by over 60% year on year in 2021. We at CICC expect that China Inbound M&A is here to stay, because of China’s growing global economic importance and leadership in a number of sectors and technologies.

APAC BUSINESS: CICC is no doubt one of the leading M&A advisors in APAC, can you tell something about your team and your deals? And What’s the unique advantages of CICC ?

Bagrin Angelov: CICC has built the leading investment banking franchise in China and our in-depth knowledge of China have won us high recognition from clients and many have chosen to make CICC their primary investment bank. Over the years, CICC has established a very strong international presence and we are able to provide one-stop global services to Chinese and Multinational clients. CICC has also grown wealthier by gathering the best talents and has built professional teams with outstanding experience in China related IB products and services. In terms of deals, we at CICC have led many complex, large and precedent-setting deals, such as:

  • In 2021, Mercedes Benz reached an agreement with Great Wall Motors on the sale of its passenger car plant in Iracemapolis, Brazil. In this transaction, CICC acted as the exclusive financial advisor to Mercedes Benz;
  • In 2021, CICC advised Australian listed SEEK on the sale of a 76.5% stake in Zhaopin (Beijing), the domestic entity of online recruitment platform, to an investor consortium led by Chinese private equity firm Primavera Capital;
  • In 2021, CICC also advised several other Multinational Corporates such as Reckitt Benckiser Group and Whirlpool Group with their M&A deals in China.

APAC BUSINESS: Mr. Angelov, I know that you also worked in several large investment banks before. Could you tell us something about your personal background and experience in this industry? And what’s your personal feeling in working at this Chinese financial giant?

Bagrin Angelov: I am an M&A Managing Director in the Investment Banking division of China International Capital Corporation Limited (CICC) based in Beijing, where I am heading up the China Cross-Border M&A business. I have joined this very exceptional institution in 2015, and I feel extremely proud to have been part of the remarkable transformation of the Chinese economy in sectors such as autonomous driving, semiconductors, online services, etc. Over the last seven years in China I have advised numerous clients ranging from private corporates, state owed enterprises and MNCs with their cross-border M&A undertakings in China and abroad. Looking back on an Investment Banking career across London (UK), Dubai (UAE), Muscat (Oman) and Beijing (China), I was privileged to be part of over 100 cross-border M&A deals globally (in China and in numerous other global markets such as USA, Brazil, Mexico, UK, Germany, Egypt, Kuwait, Turkey, Kazakhstan, Korea, Japan, New Zealand, etc.) with a combined transaction value of some USD 100bn.