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By Richard Butterwick, Cathy Yeung, Yilong Du, Karima Salway

Overseas direct investment by Chinese companies increased significantly in 2016 to US$212 billion, a 143% increase from 2015. While outbound M&A interest remains strong in China, recent measures taken by the Chinese government to scrutinise transaction fundamentals more closely and slow capital outflows may impact deals in 2017. Consequently,

Chairs in a meeting room

what should European corporates know and do in order to minimise the risk of an aborted deal?

1. Why Do the Deal?

Chinese regulators are focusing on the authenticity and commercial purpose of deals by Chinese companies. Acquisitions with a solid rationale that benefit the Chinese economy are unlikely to be rejected outright. So-called “irrational” deals (outside of a Chinese buyer’s core sector, particularly in the real estate, media, sports or hospitality sectors) will face greater regulatory hurdles and carry a higher abort risk. European corporates and their advisers need to factor this into any approach from a Chinese company.

By Lex Kuo, Hui Xu, Gail Crawford, Jennifer Archie and Serrin Turner

The Standing Committee of the National People’s Congress of the People’s Republic of China (PRC) has introduced China’s first and comprehensive Network Security Law (also referred to as Cybersecurity Law). The law will have far-reaching implications for parties that utilize the internet and handle network data and personal information in the PRC.

What this means for China’s internet users

Both individuals and entities which access internet in the PRC will be subject to enhanced security requirements and new regulation relating to the use and transfer of personal data. Network operators, equipment suppliers, security solution providers and other market participants will need to comply with the sweeping new security requirements and national standards, which will come into effect on June 1, 2017. Key requirements of the new law are set out below:

By Charles Ruck

The exit outlook for Israeli M&A is especially positive, particularly in light of the ever-growing interest from the Far East. While the vast majority of inbound capital still comes from the US, China has emerged as a prolific investor in Israeli start-up and tech businesses.

Shanghai Giant Network Technology’s $4.4bn acquisition of Playtika, the social and mobile games business sold by Caesars Interactive Entertainment (CIE), is a marquee example of the increasing flow of capital coming from the East – Latham & Watkins advised CIE. Other investments have been equally eye-catching. At the end of 2014, Chinese search engine Baidu invested $3m into Pixellot, the Israeli sports video start-up. Baidu also provided financing to Carmel Ventures, the Israeli venture capital firm.

With a greater variety of foreign investors and acquirers hunting for high-quality Israeli assets, we can expect Israeli targets to achieve higher valuations.

By Amy Beckingham

In recent years, Chinese companies have become increasingly bold in the search for new deals, looking beyond the country’s borders for transformational takeovers. This year already, we have seen PEViews China chartthe largest ever outbound deal attempted by a Chinese company, with ChemChina’s $43billon bid for Swiss agribusiness Syngenta. As China becomes more relaxed about international deals, private equity firms looking to exit their portfolio companies should take note.

Chinese buyers have bought several private equity-backed assets this year. In March, KKR sold French luxury retailer SMCP to the Chinese textile maker Shangdong Ruyi. A month later, 3i sold baby products maker Mayborn to one of China’s biggest insurance companies, Ping An. Chinese buyers have been willing to pay high multiples for European assets, in the hope of importing products to their domestic market. Consumer and technology assets are of particular interest.