From maker to taker: China's $5bn search for M&A tech targets

In what should come as no surprise to readers of this blog, a Chinese investment firm last week said it is looking to launch a whopping $5bn fund in a bid to scour the globe for technology firms to buy. It’s proof, if any more were needed, of the inexorable rise of China on the technology world stage. So which Western firms could benefit from an Eastern windfall?

Who’s GSR?

The firm in question, GSR Capital, first caught the eye back in April when it joined forces with a US venture fund to spend $2.8bn on Philips Lumileds, the lighting component arm of the Dutch electronics giant. With offices in Hong Kong, Beijing and Palo Alto, the VC giant is now targeting “cross-border buyouts and M&A” for tech companies which have a chance of scaling into the multibillion dollar range, the firm said.

"Our new fund will either buy out or acquire a minority stake in target enterprises through a combination of equity and leveraged debt; and then we will create value for them by converging China and global resources, adopting cross-border and technical arbitrage and eventually realising the capital gains through IPO or M&A exits," said GSR Capital chairman, Sonny Wu, in a statement.

Former Nortel exec Wu told Bloomberg he was after “the top one or two companies in the world in their sectors.” These are listed as including, but not limited to, clean energy, bio-pharmaceutics and life sciences, bulk commodity investment, traditional and internet finance, wireless communications and the “cultural industry”. 

What’s in store?

This is all about China moving from a country which primarily manufactured cheap electronics for producers around the world to one which consumes technology – and consumes on a massive scale. Many of the sub-categories on the list above are areas where China currently imports a lot of its tech. And Beijing isn’t too keen on that continuing. Witness the recent $23bn move by state-owned Tsinghua Unigroup for chip maker Micron Technology

The Wall Street Journal claimed that the GSR fund could be a boon for Western tech companies looking to partner with investors who can in turn help pacify an increasingly anti-foreign government. It could certainly be a short-term option to help them tap the huge domestic market of the PRC. But that’s exactly what it will be – a short-term gain. China is rightly famed for playing the long game – in business as well as geopolitics. And that game means domestic-owned companies assuming pre-eminence and autonomy from the West whether it involves buying foreign companies outright or partnering in a JV and then decoupling once enough IP has been ‘absorbed’.

The political will is certainly behind moves like GSR’s, even given the current parlous state of the Chinese stock market, so this could be the start of things to come. But let’s not also forget the political will in Washington is increasingly hostile towards this kind of thing. The Micron deal is already facing hurdles, and as politicians see foreign investors hoovering up ‘their’ IP, they’re going to feel increasingly compelled to step in.


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Phil Muncaster

Phil Muncaster has been writing about technology since joining IT Week as a reporter in 2005. After leaving his post as news editor of online site V3 in 2012, Phil spent over two years covering the Asian tech scene from his base in Hong Kong. Now back in London, he always has one eye on what's happening out East.

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