The Exit Factor: Eastern Promise

Having discussed the strength or weakness of your international expansion plans in my first ‘Exit Factor’ blog, the next thing you need to consider is the agenda of the international buyer.

Asia is hot topic and getting hotter for anyone planning a sale. This is for two basic, but separate, reasons.

First, the incidence of acquirers, particularly from China and Japan, is on the up. Second, Asia represents a source of potential growth for a number of British businesses, particularly where the brand or business has some level of awareness in Asia.

Both Japan and China have a series of trade or corporate buyers such as Suntory (Japan) who acquired Ribena Lucozade and Bright Foods (China) who acquired a stake in Weetabix.

One important factor when dealing with buyers like these is understanding the different agendas. A recent shift with Chinese buyers, for example, is that they no longer want to be a passive distribution partner. They want to own the business and take control.

The level of investment in people on the ground is much greater with the Japanese where there are a handful of established so called ‘Trading Houses’ which include Mitsubishi, Mitsui, Sumitomo, Itochu and Marubeni.  A number of these have big operations in Europe and hold significant investments. The Chinese don’t have a comparable European presence yet.  Names such as Hony Capital, Citic, Fosun and Unitas may not be familiar names in Europe, but as they begin to participate more and more with their Western equivalents, they will be.

Such collaborations can benefit both partners. The Chinese house brings specific knowledge of, and access to their own market, while the Western partner has the know-how required to manage the business. Access to these markets is of course crucial for a number of European companies looking for new and clear avenues for growth.

Having such an international story can mean that a significantly higher multiple of EBITDA can be achieved on a sale. Cultural differences abound, but this will be addressed over the next few years, particularly by the Chinese, who are digging permanent footholds in Europe right now.

What's been your experience of the differing agendas of international buyers? Share your story below or feel free to set up a meeting to discuss things more confidentially.

Neil Sutton | Chairman of Corporate Finance
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