Linklaters LLP (Photo : Getty Images)
In a report on Monday, Linklaters LLP said that Chinese acquirers are seeing a large number of cross-border deals blocked at home and abroad due to the scrutiny of outbound investments. Regulators on both sides of the deal become more cautious when there is a sudden increase in volume.
$40 billion to $75 billion, or as much as 33 percent, of the $220 billion deals announced by Chinese acquirers were canceled or withdrawn last year, according to the report. Many of the deals were scuppered because of issues on national security or interest.
The tightening on both sides is in response to the surge in outbound Chinese investments, Linklaters said.
According to the data compiled by Bloomberg, consumers from China increased their outbound spending 15 times in the last decade and more than doubled volume in the previous year.
Based on the report, Chinese buyers were blocked by regulators from various sectors including those which are seen to be critical to national security and interests such as energy infrastructure, technology and electronics.
In December, the planned sale of German semiconductor equipment maker Aixtron SE to a Chinese-supported company flopped after the deal was opposed by the U.S. government. As a result, China’s GO Scale Capital’s plan to buy Lumileds, Royal Philips NV’s lighting unit, collapsed.
Chinese legislators have also increased scrutiny of outbound investments, especially on sports and entertainment.
Last week, the Chinese group buying Silvio Berlusconi’s AC Milan soccer team lost the support of its state-owned partner after Chinese regulators increased criticisms of sports deals.
In February, the Chinese General Administration of Sports cautioned of the risks around large, irrational overseas investments, including in soccer.
According to People’s Bank of China Governor Zhou Xiaochuan, some purchases of overseas sports and entertainment assets are not in line with the country’s industrial policy.
The increasing scrutiny of outbound investments is now starting to impact Chinese enterprises.
