As Chinese companies have matured, they’re eagerly looking to the U.S. as a source for technology innovation, talent and market penetration, says Jackie Liu, a partner in Morrison & Foerster’s San Francisco office. Until recently, Chinese companies have had a low success rate in acquiring companies abroad. But that has started to change as Chinese companies have hired management teams with education from, and work experience in, the U.S. who are effective facilitators in getting these transactions successfully completed, Liu says: “They have the language skills, they under-stand the business dynamics, and they understand the American way of doing a deal that has its own deal cadence.”
While many state-owned Chinese enterprises are behind the curve, some less-regulated Chinese tech companies are gaining sophistication in outbound deal-making, adds Gordon Milner, a partner in Morrison & Foerster’s Hong Kong office. Whether they succeed depends on the quality of their financial backers and advisors and their ability to overcome controversies over foreign ownership.
In the life sciences arena, forward-thinking Chinese companies and investors are looking beyond copycats and generics and seeking innovative products for the Chinese market, says Sherry Xiaowei Yin of Morrison & Foerster’s Beijing office. They’re finding willing partners in American early-stage companies coping with a dearth of venture capital. These deals take a variety of forms: In some cases, Asia-based private equity funds are investing in American companies and then helping them set up a Chinese subsidiary. In others, intermediaries are funding the acquisition of Chinese rights to a technology and then setting up a new company focused on the Asian market.
With many Chinese eager to move money out of China, more American companies may be reviewing tempting offers of Chinese capital in the coming years.