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Owners of European family businesses had had "mixed feelings" towards selling assets to strangers from abroad. Buyers needed to convince they had a clear strategy and showed they "want to build, not destroy", the targeted business. Photo: EPA

Europe family businesses lure Chinese investors

Now is good opportunity to acquire technology and market share but challenges remain

Like it or not, European family businesses may increasingly lean on Chinese investors to help sustain them in a euro zone where consumers scarred by the debt crisis remain gun-shy in opening their wallets.

"Many family businesses in Europe have struggled to survive because of the global financial crisis and problems in their own operations," Simmons & Simmons partner Eric Lin told the .

Advisers are calling for cash-rich China Inc not to miss the opportunity to acquire both advanced technologies and market share in the continent, which may be a wiser bet compared with rushing to pick up assets such as real estate as European economies take the first tentative steps to recovery.

However, these advisers caution that while taking over a European business might be relatively easy due to its mature rules, Chinese buyers would face daunting tests to manage the companies well.

Scores of European companies were in the manufacturing sector such as car-parts suppliers, which shipped goods to car giants such as BMW and Volkswagen, Lin said.

Hermann Meller, a partner of Dentons, said interest from China to invest directly in Europe had been growing rapidly with deals in the manufacturing sector accounting for about 80 per cent of the total transaction value last year.

"We see a growing trend of mid-sized German companies, very often family-owned, looking to find succession," Meller said. "That's where Chinese investors can come in. They can gain technological advantages and open new markets."

China's outward direct investments soared in a decade to US$7 billion in 2012 from a measly US$145 million in 2003. The government encouraged companies to invest abroad partly to reduce the pressure from its ballooning foreign exchange reserves.

A deal that Dentons closed in March as legal adviser was Zoomlion Heavy Industry Science & Technology's takeover of M-Tec, a German-based dry mortar producer whose early history was that of a family-owned business.

"There was huge interest from Zoomlion in buying the technology because it fits its strategy for their products in China," Meller said.

Owners of European family businesses had had "mixed feelings" towards selling assets to strangers from abroad, he said. Buyers needed to convince they had a clear strategy and showed they "want to build, not destroy", the targeted business.

Shaanxi Blower (Group), based in Xian, had been in talks with a few targets in Europe, investment project manager Sun Bing told the . "The prices are relatively low and opportunities are big. One or more deals may be sealed by the end of this year," he said.

But Sun said the company was clear-minded about its capabilities. With that in mind, it would focus on smaller private companies and some research institutions.

Making acquisitions happen was relatively simple in Europe, Meller said. "The works start afterwards. Integration is the big thing."

This article appeared in the South China Morning Post print edition as: Europe's family businesses lure Chinese investors
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