Martineau Johnson senior partner, Roger Blears, one of Birmingham’s best-known corporate lawyers, believes Britain’s private equity providers must seize the moment and make China their number one target.
Roger Blears has been convinced since the late 1990s that China represents the world’s biggest opportunity for deal-making.
Now, fresh back from a 10-day visit to the Yangtze River region, he is convinced that a new initiative – driven by the British Government – is critical to finally realising the potential.
The Treasury is now passing Whitehall research papers on tax and regulation to senior government officials in China, with a view to helping them to build a thriving private equity industry.
The UK Government hopes to take advantage of political and economic tensions between Beijing and the White House, to persuade the former to favour British private equity interests against those of the US.
Mr Blears is convinced that the Treasury’s unexpected actions have created a pivotal moment in the fledgling relationship between China’s corporate sector, and Western private equity providers.
“There is no doubt that the Government is pushing at a door which is starting to swing open,” he said.
However, Mr Blears believes with equal certainty that professional advisers from the UK must respond speedily, and not be distracted by other international target economies.
“You can forget Western Europe, the old Soviet bloc, South America and the Gulf States for the moment,” he said. “If we don’t follow the Treasury’s lead in trying to woo China away from the US private equity sector, then we will regret it for decades to come.
“If the Americans entrench their foothold in the market, they will be immensely difficult to dislodge.”
Mr Blears says the pressure for action is made more intense by the ongoing economic uncertainty, which has effectively ended ‘big ticket’ corporate buy-outs, at least for the time being.
“Private equity firms are struggling to get sizeable deals away, but the scope for activity in China is enormous,” he said.
Until now, outside providers of corporate finance have struggled to break into Chinese markets, largely because of Beijing’s reluctance to dilute state control of strategic sectors.
Latest research suggests that little more than £250 million of venture capital from Western sources was deployed in the Chinese market during the year to mid-May.
However, Mr Blears sees signs that China is finally willing to relax its grip, as it accepts private equity capital – and funds from wider Western sources – as catalysts for growth and investment.
“When I was in the Yangtze River region, we were told about one local authority which is now undertaking its second fund-raising exercise in a joint venture with overseas fund managers,” he recalled.
“The first fund raised $10 million, which, whilst respectable, wasn’t a huge amount, but the second is set to raise more than $300 million. Can you imagine a council in the UK looking to attract such a vast amount of capital to invest in the competitiveness of local industry?
“It underlines the massive opportunities which await funders, private equity providers and professional services firms in China – if we follow the Treasury’s lead and act now.”
Martineau Johnson has been appointed as exclusive legal advisers to a new business support initiative in China. The law firm will now provide UK legal representation for SMEs in the Yangtze River Delta Co-operation and Development Board.
This is a new initiative by the Chinese authorities to help SMEs in the region known as the Yangtze Basin to trade overseas or obtain listings on the UK stock exchange.
