Newspaper article The Evening Standard (London, England)

Fee-Starved Bankers Seeking Salvation in Brave New China

Newspaper article The Evening Standard (London, England)

Fee-Starved Bankers Seeking Salvation in Brave New China

Article excerpt


CHINA'S booming factories are beginning to flood the globe with their goods, but the next big export could be capital as Chinese companies hit the takeover trail. That is the hope of the world's top investment bankers who are camping out in Beijing and Shanghai looking for two-way mergers and acquisitions.

Any action from China would certainly be welcome, for there have been slim M&A pickings recently.

The collapse of stock market values and sluggish earnings saw the total value of deals plummet from $3.42 trillion (u2.16 trillion) in 2000 to $1.12 trillion last year, according to investment bank JP Morgan Chase.

At $444 billion, the value of US deals was back to 1995 levels. The $481 billion of European M&As was no better than the 1997 figure.

Still, China's M&A market is in its infancy. Thomson Financial Securities Data logged 892 deals last year, with a total value of $29 billion, up from 567 deals worth $15 billion clinched in 2001, and investment bankers see the acceleration continuing.

Foreign direct investment into China is also soaring. Last year, a record $52.7 billion poured in and it has approved 428,000 foreign-funded enterprises.

No wonder that China looks like an oasis in the desert for banks thirsting for fees and facing massive downsizing in their M&A departments, although fee income is hardly going to make a big impact on the bottom line just yet.

"In a depressed global M&A environment, China remains one of the few bright spots. It is a small market but we see significant growth potential," says Ed King, an M&A executive director with Morgan Stanley in Hong Kong.

HE IS not alone in his opinion. The cake might be relatively small but everyone wants a slice, and Morgan faces tough competition from CitiGroup, Goldman Sachs, Merrill Lynch and JP Morgan Chase among the heavyweight bankers. Also coming up on the rails are brokerages such as Salomon Smith Barney.

The selling point they can put to potential buyers is a strong one. China has abundant, low-cost labour, rising productivity and technology skills, and a huge domestic market. …

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