When Li Ka-shing hung over £ 10 million (HK $ 118.8 billion) against the owners of British mobile operator O2 last month, some Chinese private investors may have been feeling pretty cocky for his own momentum in European markets .
Dealmaker's followed by Asia has been attracting attention from what is seen by many as a sale of assets in Hong Kong and mainland China for investment abroad, especially in Europe. Li weight to a partial sale of port assets owned by Hutchison Whampoa adds weight to this view.
However, a growing number of private equity funds in China have also smelled the trend. A key reason is the difficulty of carrying out its exit strategy favored through an initial public offering on the stock markets of the country, where more than 800 companies are queuing for listings.
The market reform deal is said to be a priority for regulators, including a proposal to deliver the vetting of applicants to stock traders, as part of moves towards a more market-based system.
Investors are not holding their breath and freeze listings 14 months that ended one year ago is still fresh in memory. Meanwhile, Europe remains an attractive destination for cash from private equity looking to make the most depressed values.
Liu Xuong, managing director of specialist change management Alvarez & Marsal, is one of the believers in "growth story" in Europe, where economic output in much of the continent remains stagnant rates and unemployment are persistently high. He said the backdrop of an economic slowdown in the country gave new impetus for Chinese investors seeking better returns abroad.
Hony Capital said it planned to make major deals abroad after private equity firm based in Beijing bought the restaurant chain Pizza Express UK £ 900 million last year, his first leveraged buyout in Europe.
The change in appetite for 12-year-old investment company, which is used to invest heavily in state-owned enterprises in China, reflects a shift in thinking in the industry is driving a new wave of Chinese investment abroad.
In addition to private equity firms, the Chinese tech giants and tycoons have also been spending money on targets in Europe. Huawei Technologies spent $ 25 million in September to Neul specialist based in Britain in communications from machine to machine, while Wang Jianlin, founder-film-property conglomerate Dalian Wanda Group, bought a landmark building in Madrid by € 260 million (HK $ 2.3 billion) in March last year.
Foreign investment in China rose 10 percent to $ 56.9 billion last year, according to a report by professional services firm PwC, Europe accounts for 82 deals.
Although housing demand has been strong in Europe, information technology is emerging as the most attractive sector for Chinese funds. About 79 percent of 151 industry executives foresee an increase in merger and acquisition activities in these areas this year, a survey by law firm Pinsent Masons found.
Paul Haswell, partner at Pinsent Masons, said China is leading the way in foreign acquisitions of technology and telecommunications, citing Hutchison with Huawei and Lenovo Group. "The trio often have a long-term vision that other global bidders on the value of the business or assets, meaning that you will likely pay a higher premium," he said.
If Hutchison agreement O2 is closed - the conglomerate is in talks with mobile operator Telefonica owner - will mark the largest acquisition concocted by Hong Kong's richest man.
Lenovo has been prominent in foreign deals in the last year. In September, the division of low-end servers IBM was purchased for $ 2.1 million after the acquisition of Motorola Mobility division of Google for $ 2.9 billion in January.
PwC partner David Brown said the weak euro could encourage more Chinese buyers in search of technological knowledge and advanced manufacturing in the region.
The euro has lost about 19 percent against the yuan over the past three months, reflecting concerns about deflation and sovereign debt.
The increased interest of Chinese investors in the European objectives coincide with acuity reduced to China by foreign private equity funds.
International businessmen often complain about the lack of investment opportunities, either through an inability to take a majority stake in a company or get a contract at a fair price. Oaktree Capital Management, distressed-asset investment world's largest, consisting of US $ 1 billion investment company administrator from bad assets of China Cinda Asset Management in 2013, but the unit has yet to make any investment.
"More international private equity firms have become bearish on the outlook for Chinese investment, partly due to regulatory processes and opaque quote," Liu said. "Brands and technological expertise are the most sought after assets in the European market."
Patrick Yip, a partner at Deloitte, said he aggravated the headaches of regulation and poor growth prospects in China, foreign companies selling a stake in a Chinese domestic company faced a percent withholding tax of 10 per percent on capital gains.
While private equity players have become cautious in China, especially with the difficulties of an output profile, investors apparently taking more insight to keep knocking on the door.
Foreign direct investment rose 1.7 percent last year to a record US $ 119.56 billion, data from the Ministry of Commerce.
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