As Chinese companies look to make more overseas acquisitions, Chinese banks are finding themselves short of cross-border M&A expertise.
But because poaching from global investment banks is often too expensive, Chinese banks are now tapping another source of M&A talent: the Big Four consultancies in Hong Kong.
Chinese companies continue to expand overseas on the back of Shuanghui's landmark $4.7 billion acquisition of Smithfield Foods in the US last year. The number of China-outbound M&A deals reached a record 110 in the year to April, while volumes reached $27.3 billion for the same period, also a record, according to Dealogic.
Moreover, in an easing of government regulations last month designed to speed up smaller foreign acquisitions, Chinese companies investing under $1 billion in an overseas company no longer have to seek a full review by the National Development and Reform Commission.
As outbound M&A flourishes, Chinese banks, led by Bank of China International, Citic Securities and China Securities International, are trying to hire more cross-border M&A professionals, according to an anonymous headhunter who works with these firms.
“Chinese banks are predominantly strong capital-markets platforms, but M&A expertise is an area they need to build up, in view of stronger recent M&A activities,” adds Stanley Soh, regional director of Asian financial services at search firm Global Sage in Hong Kong.
Chinese investment banks, however, generally aren’t opening up their cheque books to hire rainmakers from the likes of Goldman Sachs and Morgan Stanley. “Clients in China aren’t so accustomed to paying high M&A fees to banks, so cost is important when hiring and bulge-bracket bankers’ expectations need to be adjusted to today’s market realities,” says Rafael Brana, a consultant at search firm Bo Le associates in Hong Kong.
Deloitte, EY, PwC and KPMG in Hong Kong have been advising Chinese banks for several years and that now makes their M&A staff prime poaching targets. “They have the mid-market M&A skills that Chinese banks are after – and crucially, they are affordable,” says Brana.
“While the compensation of Big Four candidates is lower, the rigorous nature of their training and their client exposure allows them to perform M&A roles at Chinese banks,” says Soh from Global Sage.
Not every Big Four M&A consultant is an ideal fit for a Chinese bank, however. For starters, you need cross-border, not just domestic Chinese, M&A advisory experience, says Soh. “And this means you must be fluent in both Mandarin and English,” adds Brana. “I’m also seeing more job mandates this year where a third Asian or European language is an extra advantage – Spanish to help Chinese companies in South America, for example.”
It also helps if you’re a mainland Chinese national working for the Big Four in Hong Kong rather than a local. As we’ve highlighted recently, the bureaucratic culture of Chinese banks can make some new recruits quit after just a few months in the role. “Hong Kong nationals, especially those from Western firms, often find it difficult to cope in mainland organisations. Chinese find it easier,” says Brana.
Chinese Big Four employees with a Western education and alumni contacts within potential acquisition companies overseas are in particular demand, he adds.
Put simply, if you’re a Big Four consultant, joining a Chinese bank may be your only avenue into front-office investment banking. “Headcounts are still tight in the global banks in Hong Kong,” says Soh. “Recent Big Four recruits to Chinese banks have mentioned better pay, a strong client base, accelerated career progression and opportunities to tap the Chinese market as reasons for moving.”