Analysis of recent reduced outbound M&A from China; New trends and analysis of Chinese M&A in Europe and Italy; Case studies on transactions

1. China Talk Presentation
Bocconi University, 1 March 2017

2. Connecting Businesses Between Europe and China
Paving the New Silk Road for International Investments and Businesses
Seta Capital is active in Cross-Border Corporate Finance Advisory and Strategic Consulting. Since its inception, it
has been unlocking value for clients with proven expertise and extensive network.
Cross Border M&A Advisory
International Strategic Consulting
Main Activities
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3. Macro Perspective: Size and growth
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Top 5+1 Economies: Nominal GDP (Current Prices, ‘b USD)
USA: GDP Japan: GDP United Kingdom: GDP Germany: GDP China: GDP India: GDP
30%
25%
20%
15%
10%
5%
0%
5%
10%
15%
20%
1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Top 5+1 Economies: Real GDP Growth (Annual, % YoY)
USA: GDP Growth Japan: GDP Growth United Kingdom: GDP Growth Germany: GDP Growth China: GDP Growth India: GDP Growth
Source: Wind, WB, APS China overtook Japan in 2010 to become the world’s second largest economy, and even accounting for a slower pace of growth moving forward, could
surpass the US in just over a decade.
China’s current size and growth potential are large, and growth remains respectable at 6.9% YoY in 2015.
MACRO VIEW (1/2)
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4. MACRO VIEW (2/2)
Macro Perspective: Growth potential
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0
10,000
20,000
30,000
40,000
50,000
60,000
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Top 5+1 Economies: GDP per Capita (Current Prices, USD)
USA: GDP per Capita Japan: GDP per Capita United Kingdom: GDP per Capita
Germany: GDP per Capita China: GDP per Capita India: GDP per Capita
Source: Wind, WB, APS Size can be a double edged sword. As Premier Wen Jiabao once said, “When you multiply any problem by China’s population, it is a very big problem. But
when you divide it by China’s population, it becomes very small…”
China’s GDP per capita, divided by 1.37b people, remains relatively low at USD 7,925 as at 2015. Household consumption as a percentage of GDP is
relatively low at under 40%.
We see this as growth potential.
35%
40%
45%
50%
55%
60%
65%
70%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Top 5+1 Economics: Household Consumption to GDP Ratio (%)
US: Household Consumption as % of GDP Japan: Household Consumption as % of GDP UK: Household Consumption as % of GDP
Germany: Household Consumption as % of GDP China: Household Consumption as % of GDP India: Household Consumption as % of GDP
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5. TRENDS & POLICIES
Some critical national policies and initiatives that have shaped and will continue to shape
the landscape of China Outbound Investments
China’s Five-Year Plans
13th FYP announced in 2016 under President Xi with a GDP growth target of 6.5% over 2016-2020
One Belt, One Road
The Silk Road Economic Belt or One Belt, One Road policy framework is designed to enhance trade between Europe and Asia
through a series of infrastructure investments in road, rail and ports.
Made in China 2025
Policy to upgrade the Chinese manufacturing industry, especially for IT, automation and high speed rail. The heart of the "Industry 4.0"
idea is intelligent manufacturing, i.e., applying the tools of information technology to production.
Urbanisation and Connectivity
20% of the Chinese population are undocumented migrant workers. Household registration reforms would allow them access to social
safety nets, and their consumption would be expected to grow by almost a third.
Property Rights Reform
Move to affirm the rights of private businesses to property and other assets acquired should encourage private sector investment.
Infrastructure
Within the next 5 years, all Chinese cities will be linked by 180,000 km of track, with almost a fifth of that carrying high speed trains.
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6. Source: MergerMarket, DealLogic
Growing China Outbound M&A Trend
Sector Focus
198 206 191 200
272
382
671
38.8 42.5
60.3
50.6
55.7
67.4
164.3
$0
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$180
0
100
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2010 2011 2012 2013 2014 2015 2016
Q1-Q3
DisclosedDealValueinbillions
Number of Deals
Disclosed Deal Value
The combination of consumption upgrade and national policy stimulates the growth
of Chinese outbound investments
Global Trends of China Outbound M&A
Environmental Automotive Industrial 4.0
New Energy Health Care Consumers
NumberofDeals
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7. THE REASONS BEHIND CHINA-EUROPE M&A
Why European Assets are particularly attractive to Chinese Investors and why European
Companies choose a Chinese investor
Technology & Know-how
Low Asset Price Level
The European Market
Brand Value
Why European assets are attractive
Offers
Higher
Valuation
Access to
Chinese
Markets
Non-Invasive
Investment
Style
Chinese
Investor
Why European companies choose
Chinese investors
Europe
has become the
main investment
destination of China
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8. More War Stories
Issue we have faced with Chinese and Italian clients
CULTURAL DIFFERENCES & BUSINESS ETIQUETTE
ATTITUDE TOWARDS DEAL PROCESS
REAL UNDERLYING MOTIVES
ISSUES WITH FAMILY BUSINESSES
DIFFERENT VIEWS ON VALUATION
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9. SETA CAPITAL
Via San Vittore 40, Milano, Italy 20123
www.seta-capital.com
https://www.linkedin.com/company-beta/5727032/
Contacts
TANYA WEN
Managing Partner
twen@seta-capital.com
Italy: +39 3888765341
China: +86 152-2119-6726
TOMMASO LAZZARI
Managing Partner
tlazzari@seta-capital.com
+39 3471507302
Disclaimer The material in this presentation has been prepared by Seta Capital Srls (Seta Capital) for purposes of
presentation and discussion, only and is general background information about Seta Capital’s activities current as at the
date of this presentation. This information is given in summary form and does not purport to be complete. The content
may not be reproduced or circulated in whole or in part, and it is in summary form for convenience of presentation, it is
not complete and it should not be relied upon in the form it is presented. Unless stated otherwise, any opinions expressed
herein are current as of the date hereof and are subject to change at any time. All sources which have not been otherwise
credited have derived from Seta Capital.
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