While low fees have helped Chinese banks to win market share from U.S. and European counterparts in stock offerings and loans Sergio Aguero Manchester City Jersey , they figure nowhere among the 10 biggest M&A advisers by value of deals, Thomson Reuters data up to the end
of November showed.
China’s biggest investment bank, CITIC Securities, ranked 11th, advising on US$68.7 billion worth of deals. The number of Chinese banks among the top 20
M&A advisers in the region fell to seven from eight and their market share
slumped to 13.8 percent from 33.7 percent last year.
The Chinese banks’ struggles to emerge as leading advisers on big ticket acquisitions have curtailed their fee income growth at a time when the lending
business is under pressure due to a slowing domestic economy.
“When Chinese companies go global, they will tend to call on banks and advisers who have global reach so there’s still a strong role for the
international banks and advisers,” said Aga Guzewska-Radzka, consultant at
Accenture Strategy in Hong Kong.
A push by Chinese State-owned enterprises and private companies to buy assets abroad and the massive restructuring of the region’s biggest conglomerates are
driving the deal-making boom. The trend is expected to continue, bankers say.
Top deals in 2015 include the US$33.7 billion combination of assets of China’s three main telecom operators as well as the US$15.4 billion purchase of
British mobile phone company O2 by Li Ka-shing’s Hutchison Whampoa.
Chinese firms tend to advise on domestic deals, where they have relationships on both sides of transactions, but that’s less likely in cross-border
acquisitions. They also have fared better than international rivals in financing
M&A deals, where they have won business with cheaper funding because of
their sizeable balance sheets, but that’s not the case for merger advice.
“They can’t compete on fees there,” said the head of M&A at a global investment bank that couldn’t be named.
Semiconductor, Internet and telecoms transactions have accounted for about a quarter of M&A deal value this year, a sector so far dominated by global
firms such as Goldman Sachs and Morgan Stanley.
In order to win more cross-border deals, Chinese banks are adopting several tactics. CITIC Securities, for instance, appointed Italian banker Federico
Bazzoni, formerly at Bear Stearns, to originate deals in Europe, Middle East and
Africa.
Haitong Securities, China’s second-largest brokerage, completed in October the purchase of the investment banking arm of Portugal’s Novo Banco to use it as
a platform for global expansion.
Some Chinese securities firms are also teaming up with European law firms to help source potential acquisition targets for mainland suitors, according to a
source with direct knowledge of the tie-ups who was not authorized to discuss
them publicly.
Despite the jump in deal activity to a record US$1.1 trillion, estimated fees fell 1.8 percent to US$3.7 billion, according to Thomson ReutersFreeman
Consulting Co., reflecting an increase in less lucrative corporate
restructurings. Activity in Asia still accounted for just 21 percent of global
value, compared with nearly 50 percent for deals in the Americas region.
“Where the biggest fees are going to be made are in the complex, cross-border deals where banks that understand the situation across different jurisdictions
and geographies are needed,” said John Kim, head of M&A for Asia ex-Japan at
Goldman Sachs.
The Gap Japan flagship shop is pictured in Tokyo's Ginza shopping district on March 3, 2011 (AFP PhotoKazuhiro Nogi)
New York - Retail group Gap Inc. said Thursday it would shutter 75 stores this year
amid sagging sales, including 53 of its kids-focused Old Navy brand outlets in
Japan.
Announcing a fall in first quarter earnings, the San Francisco-based retailer also warned that its might not achieve previous
earnings forecasts for this year given the headwinds buffeting the apparel
industry.
"Old Navy will strategically shift its focus to markets most favorable to the brand's
growth," the company said, explaining the Japan closings.
It pointed to the US and Mexican markets as well as China as its focus for Old
navy, its lowest-priced brand.
But it said that Japan "remains an important market" with the continued presence of
more than 200 Gap and Banana Republic stores.
The closings, aimed at cutting overall costs, will also include Banana Republic
outlets, most of them in international markets, though the locations were not
detailed.
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