Business Leaders Delve Into Acquisitions of U.S. Technology Assets by Chinese Investors

With Chinese investors focused on US assets, approved deals provide lessons for successful deal-making strategies.

March 05, 2013

Beijing / Shanghai / Hong Kong … Latham & Watkins¹, in partnership with Lazard Ltd, has hosted a series of senior level seminars exploring market trends in the acquisition of U.S. technology assets by Chinese investors. Held in China’s regulatory and financial capitals – Beijing, Shanghai and Hong Kong – from February 25 through March 1, the conferences were attended by more than 300 top executives from multinational and Chinese companies, banks, private equity and venture capital firms, as well as entrepreneurs and representatives of government bodies.

Themed as “Successful Strategies and Lessons Learned for Buying Technology Assets in the United States: Insights from Recent Transactions,” the events featured a review of successful cross-border transactions that have recently been completed – including the acquisition of A123 Systems by Wanxiang Group in the lithium ion automotive battery space and the sale of Complete Genomics to BGI-Shenzhen in the biotechnology sector.

As Chinese companies expand internationally and increase their capabilities, their ability to acquire technology and knowledge from abroad has become a critical tool of their corporate strategies. As a result, Chinese investors are developing an increased appetite for acquiring U.S. technology assets. In 2012, Chinese investment into the U.S. increased to $10.5 billion, equaling the aggregate amount for 2007-2011 combined, according to Dealogic. In addition to the usual challenges of a cross-border acquisition, there are concerns that sales of US assets to Chinese entities may face increased scrutiny related to national security or critical technologies, including reviews by The Committee on Foreign Investment in the U.S. (CFIUS), a government inter-agency committee that reviews foreign acquisitions.

In a keynote address, Mr. Hanscom Smith, Minister Counselor for Economic Affairs at the United States Embassy of Beijing, China, said: “There is no doubt that two-way trade and investment have benefited both the United States and China enormously, and both countries depend on it for growth and prosperity. Chinese investment in the United States is a ‘win-win’ opportunity, just as U.S. investment in China has been beneficial for both countries.”

“In 2011, the United States attracted some $227 billion of foreign direct investment from all around the world - more than any other single country. In the past few years, we have already seen an exponential growth in Chinese direct investment in the U.S., and there is the potential for even greater growth. We welcome Chinese investment in the United States the same way that we have welcomed companies from other countries around the world. [At the same time] as China pursues its robust ‘going out’ policy, it also needs to ensure it has a fair and welcoming ‘coming in’ policy,” added Smith. 

Rowland Cheng, Office Managing Partner of Latham & Watkins in Shanghai, said: “Outward bound investment by Chinese companies will accelerate and the U.S. technology sector is a major target for this investment flow. The high level of attendance at our seminars is a testament to the strong interest among Chinese companies to look overseas to grow, diversify and further strengthen their businesses as global leaders in their industries.”

"Chinese investment into the U.S. technology sectors is being driven by a number of compelling forces, including the increasing sophistication of the PRC economy and the continuing role of the US as the global leader in technology,” said Peter Kuo, Managing Director at Lazard, who is based in the firm’s Hong Kong office. “These seminars have been a timely and exciting forum to discuss and share best practices, recent successful precedents and areas of mutual interest to parties in China and the U.S."

The seminars covered a wide range of topics, including:

  • An analysis of market trends that will drive cross-border M&A with a U.S./China nexus
  • Guidance on how Chinese acquirers have completed U.S. acquisitions
  • Insight into buying distressed and bankrupt assets in the United States
  • Issues and trends related to CFIUS reviews of foreign acquisitions.

Alan Mendelson, Silicon Valley-based partner and Co-chair of Latham & Watkins’ Emerging Companies practice, who advised Complete Genomics in its acquisition, said; “I am hopeful that the Complete Genomics-BGI Shenzhen transaction, which we expect to close soon, will provide an encouraging sign to China and U.S. companies that cross-border deals between our two countries are not only possible but potentially highly desirable. It was an honor to be able to provide some lessons learned from our experience on behalf of Complete Genomics to so many interested business people from the great cities of Beijing, Shanghai and Hong Kong.”

“Early attention to US foreign investment clearance through CFIUS – in strategy, diligence, and deal structure – can pave the way for success as scrutiny of inbound deals continues to intensify,” commented Edward Shapiro, a litigation partner in Latham & Watkins’ Washington, D.C. office, who chairs the firm's CFIUS practice.

In his presentation, Dave Vieau, the former CEO of A123 Systems, explained how A123 conducted a successful auction process in which a number of foreign bidders, including the Wanxiang Group, a Chinese bidder, participated as part of its bankruptcy case. The Wanxiang Group outbid the other participants at the auction in December 2012 and after receiving CFIUS approval in January 2013, A123 Systems consummated the transaction.

The three events were held on February 25 in Beijing; on February 27 in Shanghai; and on March 1 in Hong Kong. The three city seminar series was co-organized by Latham & Watkins and Lazard, with support from the China Venture Capital and Private Equity Association.

About Latham & Watkins
Latham & Watkins is a global law firm with approximately 2,000 attorneys in 31 offices, including Abu Dhabi, Barcelona, Beijing, Boston, Brussels, Chicago, Doha, Dubai, Frankfurt, Hamburg, Hong Kong, Houston, London, Los Angeles, Madrid, Milan, Moscow, Munich, New Jersey, New York, Orange County, Paris, Riyadh, Rome, San Diego, San Francisco, Shanghai, Silicon Valley, Singapore, Tokyo and Washington, D.C. For more information on Latham & Watkins, please visit the Web site at www.lw.com.

Notes to Editor
1 Latham & Watkins operates as a limited liability partnership worldwide with affiliated limited liability partnerships conducting the practice in the United Kingdom, France and Italy and affiliated partnerships conducting the practice in Hong Kong, Japan and Singapore. Latham & Watkins practices in Saudi Arabia in association with the Law Office of Salman M. Al-Sudairi.

 
 
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