You're watching...
Harris Williams Managing Director Derek Lewis on how investors can profit from Chinese acquisitions of U.S. companies.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Facing a slowdown at home China is busy snapping up companies in the United States it's on -- setting new records acting like a gigantic whale swallowing up US assets.
Already spending eight billion dollars on mergers and acquisitions this year alone here in America so.
How can investors bank on the downturn in China joining me now Harris Williams he's managing director Derek Lewis who wrote this report -- thought it was really interesting because.
It was so reminiscent as we said -- the Japanese back in the eighties snapping up everything here in the US.
The difference though is it was -- time back in Japan that time right now China slowing down but there are resourceful enough to come here and say.
Stocks are cheap here in the US let -- -- them up.
It's interesting case -- Chinese are pouring a lot of money into the US economy however interestingly.
They're actually acquiring relatively few companies in terms of control buyouts.
If you look back over the last ten years only one half of 1% of all companies -- in the US were bought by Chinese acquires.
I think that trend is gonna change in the future as Chinese.
It's companies get increasingly sophisticated in understanding how to acquire.
US businesses but there's also the though the risk of owning a company that's thousands of miles away from you.
There's also a lot of regulatory hurdles that I'm Chinese companies -- and Chinese investors.
Have to face with buying in the US there some people are making money -- -- there's got to be away right set do you go for the acquirer or the acquire it.
I think it depends.
And -- if you're a company that is looking if you're an individual investor institutional investor and you're looking.
To put money and place bets on on China.
You can look for US or European companies there have strong strategies for getting into the Chinese market and tapping into the large spending on consumer market is one way.
On the other hand to you could be looking at a company that might be a logical acquisition target.
A Chinese company has an opportunity for capital appreciation.
You don't need the numbers that that were released in October showed that Chinese emanate activity actually dropped pretty precipitously police numbers about 34% and yet.
What activity they were engaging -- was here in the US outlook for example you know you you -- that the company want to group buying AMC theaters.
That to me indicated that there are Chinese companies out there saying wait a minute.
The real opportunities here in the US now the big question becomes a kind of regulatory hurdles that you talk -- transactional.
Resistance of course people say the Chinese are coming keep them away reminiscent 2005 Sihanouk the oil companies partly owned by the Chinese Government and I remember that -- try to buy Unocal and they were batted away by the government by protests.
So how do you avoid getting burned by something like.
Well we have to definitely be prepared Chinese acquirers often take much longer.
-- US or European acquires to get through the process they tend to be much more relational and wanna get to know management teams and get to -- companies.
And their approach tends to be different oftentimes they value companies differently they look at maybe net asset value rather than looking -- cash -- can you spot to Eric could spot certain sectors Hussein the Chinese will go for companies in this particular sector and if so which sectors have yet there -- number of sectors the Chinese are trying to get more and more control of natural resources in order to continue to grow their GDP.
At the rates they've historically -- have done they need to get.
Access to natural resource for so that's a big sector.
In addition -- manufacturing technology is important to them.
-- -- historical labor arbitrage that has made China so competitive in that in the past.
Is narrowing and they need to do things to make their manufacturing more competitive so I think those two sectors are are big sectors that China's interest today do you foresee a change in the attitude toward Chinese companies buying American companies at some point will we be unfriendly your terms absolutely I think if you look at the past ten years -- the next ten years.
It will be an evolutionary process I think -- US sellers get more and more comfortable with Chinese.
Get a lot of that historical concerns -- a big part of it is historically concerns have been about protecting your intellectual property.
I think some of that over time will will become less important.
Well it's a fascinating development to see the Chinese now -- -- know some of you don't like it -- You know what on the jurors wanted to merge with the New York Stock Exchange listen it's it's happening you can't fight the free market will be watching absolutely thank you so much thank you Derrick Lewis with Harris Williams he's the managing director we'll -- next time.
Closing --
