An insider's advice on Sino-German transactions

Christian Roedl, partner of Germany-based management consulting firm Roedl & Partner, gives his thoughts on how Chinese and German companies can more effectively do business in each other's domestic markets.

What can European companies expect as China is implementing the Belt and Road Initiative?

The Belt and Road is not only an economic, but also a geopolitically motivated initiative. When President Xi Jinping proposed the initiative he demanded improvements in infrastructure access and interconnection with China's neighboring countries.

This will also bring in new opportunities for European companies. Due to their technology and engineering know-how, European companies can participate in infrastructure projects. The initiative can also increase China's outbound investment activities to assimilate specific knowledge from abroad. Chinese companies are well positioned to expand their worldwide investment journey.

What advice do you give Chinese companies when they are planning to invest in Europe?

Actually, I am advising our Chinese clients in exactly the same way as our German clients: "Be cautious, but don't be anxious!" Foreign investors have to understand the mentality of the people and the way business is conducted.

In general Chinese investors should not expect that decisions will be taken as quickly as they may be used to. Furthermore, European authorities are powerful but sometimes their capabilities to support investment decisions are limited. They may also contribute to a longer timing in deal processes. Thus, find an advisor who is familiar with German and Chinese affairs, and who will explain to you the processes and organizational steps.

What advice do you give German companies when they are planning to invest in China? What are the main challenges they will face?

Focus on what you are good at. German companies are excellent in their products and their manufacturing know-how. Being endowed with these assets they strive for foreign markets.

If you are planning for a market like China, you must hone not only your products, but also your organization to the particular needs in this special market. Outsource whatever is not your core business to professional partners - no matter if these are Chinese or German firms; accept that quality has its price and be sure your business plan includes spare capacity for all possible events.

How can German or Chinese companies overcome cultural differences in their cooperation or business-related cases?

In our daily experience, quite often we notice that not only German, but also Chinese companies have an idealized understanding of the other's culture and business environment. Obviously, this may lead to disharmony and even endanger a deal.

Please give an example of a successful merger and acquisition case between Chinese and German companies in which your company participated.

In early 2015 Chinese electronics group Skyworth acquired the television production and distribution units of the German TV manufacturer METZ. In this transaction we advised the Chinese side with a holistic approach from a legal, tax and economic perspective. This acquisition by Skyworth is a best practice example for China's going-out strategy and outlines the path of Skyworth's internationalization strategy by entering the German and European markets.

zhuanti@chinadaily.com.cn