When M&A and global politics collide...

Qualcomm’s announcement that it will not be moving any further with its attempted takeover of chipmaker NXP after an 18-month pursuit because it failed to receive the required clearance from Chinese regulators, despite approval in a number of other jurisdictions around the world, is just another example of the growing influence that the current global geo-political environment is having on M&A deals.

While there is no evidence to support that this is retaliation for President’s Trump’s recently introduced tariffs on Chinese imports, this is the conclusion being drawn by the financial press. 2018 does seem to have been the year when a number of governments have gotten a little hot under the collar about some of their perceived national corporate treasures being targeted by foreign buyers. Unfortunately, it would seem that it is Chinese buyers who are ruffling the most feathers. In February of this year, when China’s Geely Holdings acquired a 9.68 per cent stake in Daimler via two consecutive deals, there were protestations made by the German government about the Chinese company becoming Daimler’s single largest shareholder, followed by a potential review and, ultimately, tightening of German takeover laws.

It hasn’t happened yet, but in the current environment, one could imagine that if another German household name company were to be subject to a takeover (especially from a Chinese buyer), the demands for a review would arise again. Just this week, we saw the British government announce it is tightening takeover rules in relation to UK-based targets operating in sensitive sectors and in relation to national assets to “ensure that we have the appropriate safeguards to protect our national security”.

When I look at the evolution of where acquirors have been based over the last 10 years, after the USA, the UK and China have been running a pretty close second. That is until 2014, when China finally overtook the UK as the second-most acquisitive country. However, it is still not at a level anywhere close to US-based acquirors. 

Perhaps the underlying message here is that it’s not necessarily about where the acquiror comes from, it’s about who and what they want to buy and the state of global politics when the deal is announced.