Europe is making overtures to Asian investors, with private equity
leading the way, says Dr Frank-Jürgen Richter of Horasis.
At a glance
- Europe is attracting large amounts of FDI, particularly from China and India
- Competing on a global basis requires root-and-branch change in the way
companies operate - as well as investment
- Private equity's skills in this area, plus the depressed valuations of
European companies, present a major opportunity
The last few years have been terrible for Europe. The sovereign debt
crisis, combined with overall stagnation in most European economies,
has led to unprecedented uncertainty. Such turbulence has also led to
an overall fall in foreign direct investment (FDI) globally.
Most countries in Europe have realised that the solution to these
issues lies outside Europe. In February 2011, Vince Cable, secretary
of state for business, innovation and skills, presented a paper
entitled "Trade and Investment for Growth" to the parliament. The
paper laid out the government's plans to encourage exports from the
UK, enhance inward investment and strengthen international trading
systems. The UK remains one of the top destinations in Europe for FDI.
Cable's paper shows the way forward for other European economies as
The UK and France have retained their dominance in European FDI but
other countries, such as Germany and members of Eastern Europe, are
providing stiff competition. Sectors in which we are seeing the most
action include business services, software, machinery and the
There are a host of new opportunities in this interconnected world.
New consumers in BRIC countries are an exciting prospect for European
companies. Apart from opportunities to expand in Europe, there are
several possibilities in fast-growing emerging markets.
The challenge of global competition
Competing globally will require grass-root changes in the way
companies function. With the support of British government, over
20,000 SMEs have ventured into new international markets and secured
over £800m (EUR961.2m) of high-value opportunities overseas in just
one year. These changes require financing.
Indian industrial giant Tata has invested over $15bn (EUR11.4bn) in
buying iconic British companies including Jaguar Land Rover, Corus and
Tetley. With Tata's investments, the companies have grown
considerably. They have been able to bring in innovation and expand
their markets in emerging economies. In fact, Tata is now one of the
UK's largest employers in the manufacturing industry with over 45,000
In 2011, Europe emerged as the leading destination for China's
international investment, ahead of the US. This month, China
Investment Corp received $30bn from the Chinese government with the
intention of targeting Europe. Chinese companies are also aggressively
acquiring assets in the continent - one of the most notable being
Geely Holding Group's purchase of Volvo Car Corporation from Ford in
The trend for international investments in Europe has been to
acquire strategic assets that have an ability to scale up and expand.
Brands with a significant global legacy and heritage are also highly
Private equity involvement
This is where privatee equity comes in. Such firms are playing a
dominant role in bringing in investment to Europe and reviving
economies. They are helping European companies become more competitive
globally by augmenting growth and developing business beyond
boundaries. They are also playing a major role in fostering
entrepreneurship and innovation. A host of private equity firms are
also talking about a strategy involving buying in Europe and expanding
David M Rubenstein, co-founder of the Carlyle Group, said at the
recent SuperReturn International conference that Europe is currently
one of the world´s greatest investment opportunities. There´s no other
part of the world that will see so many assets sold at a discount.
With the current slowdown in European economies, the valuation of many
companies has become extremely interesting for buyout houses, and once
invested they have the necessary nous to catch the eye of cash-rich
Dr Frank-Jürgen Richter is founder and chairman of Horasis.
Horasis is a global visions community committed to enact visions for a sustainable future. (http://www.horasis.org)
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