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Business Deals

French bank Natixis beefs up China-related M&A services

Acquisition of Vermilion Partners to bring more work on outbound deals

Vermilion Partners advised on the acquisition of West Bromwich Albion Football Club by Yunyi Guokai (Shanghai) Sports Development.   © AP

HONG KONG -- French investment bank Natixis is expanding its China-related acquisition financing operations by taking a majority stake in Beijing-based M&A advisory firm Vermilion Partners.

Despite outbound investment restrictions that the Chinese government has imposed to crack down on capital flight, mainland companies' appetite for M&A has continued to grow, and the bank sees opportunity in the sector. "The potential for growth for a bank like us in China is enormous," said Alain Gallois, CEO of corporate and investment banking for Asia-Pacific at Natixis at a press conference Tuesdsay.

"Chinese state-owned enterprises continue to look for acquisition opportunities," said Damien Cleris, co-head of Asia-Pacific investment banking. Investment in the sectors that are strategic to the country's development, such as infrastructure, health care, technology and food and beverage are well-supported by the government, Cleris said.

Natixis facilitated the acquisition of French food and beverage producer St Hubert by a Chinese consortium formed of Fosun International and Beijing Sanyuan Foods. The 625-million-euro ($733 million) deal closed in March.  

Notably, Vermilion advised on the acquisition of West Bromwich Albion Football Club by Yunyi Guokai (Shanghai) Sports Development, a company controlled by Chinese businessman Guochuan Lai.

Alain Gallois, CEO of Asia Pacific corporate and investment banking at Natixis (right), and Peter Batey, chairman of Vermilion Partners. (Photo by Mayuko Tani)

By roping in a China M&A specialist like Vermilion, Natixis can enhance advisory capability, on top of deploying its own financial resources. Vermilion, co-founded in 2004 by British businessman Peter Batey, is equipped to advise European companies investing in China as well as Chinese companies investing in Europe and the world. Vermilion has offices located in Beijing, Shanghai, Shenzhen, London and Munich.

Batey said: "High-profile companies [such as HNA Group] may have had their wings clipped, but there are plenty of others ... The interest is growing and the number of players is increasing."

The volume of outbound M&A from China and Hong Kong decreased to $137 billion in 2017, after recording a historical high of $204 billion in 2016, according to data by Mergermarkets.

Yet, "[2017] was the second largest year ever and obviously higher than the long-term average," said Raghu Narain, Natixis head of investment banking for Asia-Pacific. The number of such deals decreased but to a lesser extent compared with the fall in volume, from 455 deals in 2016 to 411 deals in 2017. "Value is shrinking, but deals are still happening," Narain noted.

The government supports Chinese state-owned and private entities in investing in technology, intellectual properties and brand, because such acquisitions strengthen the companies' competitiveness, Narain said.

Acquiring boutique M&A advisory firms is Natixis' growth strategy. The company also announced it will buy a 51% stake in British company Fenchurch Advisory Partners, as well as Clipperton, a French specialist in tech M&A. The company also acquired M&A advisers in the U.S. and Spain in the past few years.

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