Advisers find China boutique M&A work rewarding

Andy Bell was once global head of mergers and acquisitions at a huge bank but now finds work at 2-year old Shanghai startup advisory DG Capital International more rewarding.

"The Chinese outbound market is likely to be a growing opportunity," he said. "A senior M&A banker in (a big investment bank) may spend 5 percent of their time on the Chinese market, whereas … I'm speaking to Chinese colleagues and clients every day."

Bell estimates the company is advising on $2.4 billion of mid-sized deals. The market was worth $225 billion in 2016, according to Dealogic, a financial markets platform.

Historically, most large Chinese outbound investments received advice from giant banks, such as HSBC and Goldman Sachs. Things started to change six or seven years ago, said Mike Wang, a partner at the law firm King & Wood Mallesons.

"There were so many deals taking place and they were so varied in nature that even the biggest investment bank couldn't handle this many deals at once," he said.

Chinese conglomerate Lander is on track to buy Southampton soccer club for an estimated 200 million pounds ($255 million), and Yunyi Guokai (Shanghai) Sports Development last year bought West Bromwich Albion for a reported 175 million pounds. The Lander deal is being advised by DG Capital and the Yunyi Guokai deal was advised by London-based Vermilion Partners Limited, another boutique adviser.

In addition, non-traditional advisers, such as law firms and accountancy companies are also offering advice and Chinese securities companies are expanding overseas.

"For big investment banks, deals worth hundreds of thousands of dollars are too small to be noticed. We are able to advise the mid-sized deals," said Linda Yang, global partner at Beijing-based law firm Yingke.

In the past two years, it has set up 10 overseas advisory offices for M&A deals.

In 2016, 90 deals involved Chinese investment in the range of $100 million to $250 million. In total, they were worth $14 billion. In 2006 there were only eight, worth$1.15 billion.

But competition to offer advice is fierce, and advisers are looking for ways to distinguishing themselves from their peers.

"Boutique advisory firms could be more hands-on, personal and patient with thorny issues and communication difficulties," said Lily Zhang, a director at Vermilion, which has been advising on such deals since 2005.

But, big investment banks argue they have the advantage of abundant cross-industry resources, global connectivity, and the ability to provide major financing.

Dirk Albersmeier, co-head of Europe, the Middle East and Africa M&A at JP Morgan, said his team spends a lot of time in China and "we see Chinese bidders in many of our transactions".