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.