Deals

David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

You know, I used to think you Chinese were all about just killing us on trade. But I know a good dealmaker when I see one.

Anbang Insurance, ever heard of them? Very big, very impressive, do a lot of insurance business in China. And their founder Wu Xiaohui, he's doing some massive deals. Bought the Waldorf-Astoria a couple years back for $2 billion. Now he's turning it into condos.

Anyway this guy, you know I think we can work together. We have a lot in common. He's a dealmaker. Just bought most of Strategic Hotels, $6.5 billion. Some very luxurious properties in there. But that Starwood thing earlier this year, walking away from a $14 billion buy, that didn't look so good. I'm a smart guy, so I figure he could use some advice:

Think Big

So Anbang doesn't publish its accounts and lots of people think that looks strange. So what?

The China Daily -- an excellent newspaper and very loyal to your president -- quoted the company as saying it had 700 billion yuan ($105 billion) in total assets in February last year. Now it's got 1.97 trillion yuan, and of course people are griping about how in 18 months it managed to increase its base by a size equivalent to the total assets of Wal-Mart, or AB InBev, or Softbank.

We Are the Champions
The assets Anbang has added since February 2015 are worth almost as much as many blue chips' asset bases
Source: Bloomberg
Note: Red bar shows difference between Anbang's reported 1.97 trillion in total assets at present and reported 700 billion in total assets in February 2015.

Well I say, ignore them. People get so obsessed with whether I'm worth $10 billion or, I don't know, maybe $100 billion, but the truth is that any billionaire's net worth goes up and down with markets and with attitudes and with feelings. Don't give them an inch. I'm a builder, and I know if you're building something great you can't get too caught up in the numbers. You just have to think big.

It's Not What You Know, It's Who You Know

When you're a businessman, you've got to do whatever it takes. Before I ran for the presidency, I would give money to everybody. Democrat, Republican, it didn't matter. When they call, I give. And when I need something from them three years later, I call them, and they're there for me.

Politics, business, it's like that. There's nothing wrong with having a few connections to powerful people. In fact they can open a lot of doors. Your wife is the granddaughter of Deng Xiaoping and there are connections to the families of revolutionary hero Chen Yi and former Premier Zhu Rongji, according to Caixin Online, a local magazine.

That's a smart move. These guys are the best people, and they can help you get money to invest in the business. "Wu's political connection has helped Anbang attract massive amounts of capital from its shareholders, which supported the company's investment and acquisitions at home and abroad," according to that China Daily article. That's a solid foundation if you're going to go for this big IPO in Hong Kong next year.

Use Your Leverage

A great dealmaker always picks his moment, and this is a great time for you Chinese guys to go shopping overseas.

Normally the big banks like to check where the money comes from and that everyone is who they claim to be. If they get the impression that shareholders with a $12 billion stake in your company are actually relatives-of-friends in some obscure village in China, they may think that doesn't look so good. Believe me, these guys can be as bad as the IRS.

We're Not Gonna Take It
Chinese banks are overtaking Wall Street in terms of the value of Asia-Pacific M&A deals advised on
Source: Bloomberg
Note: Shows ranking of leading three U.S. investment banks and leading three Chinese banks, based on deal value from 2011 through 2015.

But all that money Wall Street likes to make from investment banking advice? It's down 20 percent in the first half in Asia excluding Japan. 20 percent! And I've heard a lot of people are saying, maybe even 200 percent. That means you have them where you want them.

Goldman Sachs just cut a quarter of their investment banking staff in Asia. UBS, Nomura, Macquarie, they're all sacking people. They can't get enough money in the door. They're desperate right now, desperate.

So Morgan Stanley -- who by the way are total losers -- decide not to work on that IPO. So what? There are lots of other fish in the sea.

Know Your Market

Right now, Western businesses want cash. Look at the return on equity of the big stock indexes. It's a total disaster. As bad as it's been since the financial crisis. These dummies don't know how to make money. So everyone's making deals because that's the only way they can keep their shareholders happy.

You Can't Always Get What You Want
The returns on equity of major Western stock indexes have fallen to their lowest levels since the 2008 financial crisis
Source: Bloomberg

In China, you have a different problem. The economy's growing but you're drowning in debt, and everyone worries they're going to lose their property if they get on the wrong side of the government. About 45 percent of the market cap of Hong Kong's Hang Seng Index is in companies with registered offices in the Cayman Islands and Bermuda.

Now business is a beautiful thing. It's about bringing two groups of people together, and getting rich in the process. You can do well from just getting those two groups to shake hands, and I'd love to help you out with it. And by the way, I have a few hotels that might interest you, and I could do with some advice on China. Let's make a deal.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story:
Paul Sillitoe at psillitoe@bloomberg.net