Chinese Companies Investing in German Technology Through M&A

In recent years, a number of Chinese companies have either bought German firms outright or acquired a shareholding in them, according to a collaborative study by Technische Universitat Munchen (TUM) and the Munich Innovation Group.

 

The report notes that this investment activity is being driven by a desire to gain access to state-of-the-art technology. But contrary to initial expectations, most of the new owners are not interested in draining their newly acquired companies of knowledge. Instead, we are seeing productive collaboration inresearch and development. Chinese companies are looking at these investments as a way to expand their product portfolios, strengthen their position in China, and gain a lasting foothold in Europe.

 

Sany acquired German mid-sized company Putzmeister, a leading manufacturer of concrete pumps, to become a world leader in heavy machinery. Lenovo took over the electronics company Medion. Weichai Power bought a stake in Kion, one of the world's biggest forklift truck manufacturers.

 

The list of Chinese companies that have recently bought German firms outright or acquired a stake in them is long. By realising an opportunity in the midst of the economic and financial crisis, they have been have made a change towards medium-sized technology and market leaders.

 

The Chinese companies examined in the study were all seeking high-value intellectual property. But there were only rare cases of the new owners relocating the know-how to Asia. Instead, more than 75 percent of them chose to strengthen the German research and development departments. In many cases, the German management team was retained.

 

The acquisitions enabled around half of the companies to add new technologies to their product portfolio. Some of the Chinese investments were prompted by a desire to extend the buyer's value chain by integrating upstream or downstream development and production steps.

 

Securing market position
Bolstered by an improved product portfolio, Chinese companies in the mechanical engineering and electronics industries in particular are seeking to strengthen their position on the Chinese market. But they also have their sights set on the German and European markets: The new owners are using their acquisitions to extend their research and development capabilities, establish new sales locations and expand their customer and logistics networks.

 

Some Chinese companies are less concerned about transferring intellectual property or building up their business in Europe. They are more interested in the opportunity to observe and gain insights into the European and US markets. Finally, another motive for acquiring German locations may to avoid the EU's customs and import regulations.

 

"Acquisitions by Chinese companies do not pose a threat per se," explains Prof. Isabell Welpe of TUM's Chair for Strategy and Organization. "In many cases, the experience has been a very positive one for the German companies involved. The investors' strong financial footing has helped them safeguard jobs and production capacities, advance the development of their technologies and gain access to the Asian market."

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