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China Talk Presentation Bocconi University, 1 March 2017
Connecting Businesses Between Europe and China Paving the New Silk Road for International Investments and Businesses
Seta Capital is active in Cross-Border Corporate Finance Advisory and Strategic Consulting. Since its inception, it has been unlocking value for clients with proven expertise and extensive network.
Cross Border M&A Advisory
International Strategic Consulting
Main Activities
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Macro�Perspective:�Size�and�growth
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02,0004,0006,0008,000
10,00012,00014,00016,00018,00020,000
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Top�5+1�Economies:�Nominal�GDP�(Current�Prices,�‘b�USD)
USA:�GDP Japan:�GDP United�Kingdom:�GDP Germany:�GDP China:�GDP India:�GDP
Ͳ30%Ͳ25%Ͳ20%Ͳ15%Ͳ10%Ͳ5%0%5%
10%15%20%
1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Top�5+1�Economies:�Real�GDP�Growth�(Annual,�%�YoY)
USA:�GDP�Growth Japan:�GDP�Growth United�Kingdom:�GDP�Growth Germany:�GDP�Growth China:�GDP�Growth India:�GDP�Growth
Source:�Wind,�WB,�APS � China�overtook�Japan�in�2010�to�become�the�world’s�second�largest�economy,�and�even�accounting�for�a�slower�pace�of�growth�moving�forward,�could�surpass�the�US�in�just�over�a�decade.
� China’s�current�size�and�growth�potential�are�large,�and�growth�remains�respectable�at�6.9%�YoY�in�2015.� Investing�in�China,�is�therefore�about�buying�into�the�longͲterm�growth�and�structural�transformation�narrative.��
MACRO VIEW (1/2)
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MACRO VIEW (2/2) Macro�Perspective:�Growth�potential
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0
10,000
20,000
30,000
40,000
50,000
60,000
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Top�5+1�Economies:�GDP�per�Capita�(Current�Prices,�USD)
USA:�GDP�per�Capita Japan:�GDP�per�Capita United�Kingdom:�GDP�per�Capita
Germany:�GDP�per�Capita China:�GDP�per�Capita India:�GDP�per�Capita
Source:�Wind,�WB,�APS � Size�can�be�a�doubleͲedged�sword.�As�Premier�Wen�Jiabao once�said,�“When�you�multiply�any�problem�by�China’s�population,�it�is�a�very�big�problem.�But�when�you�divide�it�by�China’s�population,�it�becomes�very�small…”
� China’s�GDP�per�capita,�divided�by�1.37b�people,�remains�relatively�low�at�USD�7,925�as�at�2015.�Household�consumption�as�a�percentage�of�GDP�is�relatively�low�at�under�40%.���
� We�see�this�as�growth�potential.
35%
40%
45%
50%
55%
60%
65%
70%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Top�5+1�Economics:�Household�ConsumptionͲtoͲGDP�Ratio�(%)
US:�Household�Consumption�as�%�of�GDP Japan:�Household�Consumption�as�%�of�GDP UK:�Household�Consumption�as�%�of�GDP
Germany:�Household�Consumption�as�%�of�GDP China:�Household�Consumption�as�%�of�GDP India:�Household�Consumption�as�%�of�GDP
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TRENDS & POLICIES Some critical national policies and initiatives that have shaped and will continue to shape the landscape of China Outbound Investments
China’s Five-Year Plans 13th FYP announced in 2016 under President Xi with a GDP growth target of 6.5% over 2016-2020
One Belt, One Road The Silk Road Economic Belt or One Belt, One Road policy framework is designed to enhance trade between Europe and Asia through a series of infrastructure investments in road, rail and ports.
Made in China 2025 Policy to upgrade the Chinese manufacturing industry, especially for IT, automation and high speed rail. The heart of the "Industry 4.0" idea is intelligent manufacturing, i.e., applying the tools of information technology to production.
Urbanisation and Connectivity 20% of the Chinese population are undocumented migrant workers. Household registration reforms would allow them access to social safety nets, and their consumption would be expected to grow by almost a third.
Property Rights Reform Move to affirm the rights of private businesses to property and other assets acquired should encourage private sector investment.
Infrastructure Within the next 5 years, all Chinese cities will be linked by 180,000 km of track, with almost a fifth of that carrying high speed trains.
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Source: MergerMarket, DealLogic
Growing China Outbound M&A Trend
Sector Focus
198 206 191 200 272
382
671
38.8 42.5
60.3 50.6 55.7
67.4
164.3
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2010 2011 2012 2013 2014 2015 2016 Q1-Q3
Dis
clos
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eal V
alue
in b
illio
ns
Number of Deals
Disclosed Deal Value
The combination of consumption upgrade and national policy stimulates the growth of Chinese outbound investments
Global Trends of China Outbound M&A
EnvironmentalAutomotiveIndustrial 4.0
New Energy Health Care Consumers
Num
ber o
f Dea
ls
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THE REASONS BEHIND CHINA-EUROPE M&A Why European Assets are particularly attractive to Chinese Investors and why European Companies choose a Chinese investor
Technology & Know-how
Low Asset Price Level
The European Market
Brand Value
Why European assets are attractive
Offers Higher
Valuation
Access to Chinese Markets
Non-Invasive Investment
Style
Chinese Investor
Why European companies choose Chinese investors
Europe has become the main investment
destination of China
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More War Stories Issue we have faced with Chinese and Italian clients
CULTURAL DIFFERENCES & BUSINESS ETIQUETTE
ATTITUDE TOWARDS DEAL PROCESS
REAL UNDERLYING MOTIVES
ISSUES WITH FAMILY BUSINESSES
DIFFERENT VIEWS ON VALUATION
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SETA CAPITAL Via San Vittore 40, Milano, Italy 20123
www.seta-capital.com
https://www.linkedin.com/company-beta/5727032/
Contacts
TANYA WEN Managing Partner
Italy: +39 3888765341
China: +86 152-2119-6726
TOMMASO LAZZARI Managing Partner
+39 3471507302Disclaimer The material in this presentation has been prepared by Seta Capital Srls (Seta Capital) for purposes of presentation and discussion, only and is general background information about Seta Capital’s activities current as at the date of this presentation. This information is given in summary form and does not purport to be complete. The content may not be reproduced or circulated in whole or in part, and it is in summary form for convenience of presentation, it is not complete and it should not be relied upon in the form it is presented. Unless stated otherwise, any opinions expressed herein are current as of the date hereof and are subject to change at any time. All sources which have not been otherwise credited have derived from Seta Capital.
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