There are two things that M&A bankers hate: protectionism and uncertainty.
Donald Trump's unprecedented election win delivered both, and has the potential to slash the number of Chinese companies snapping up American assets.
It took Chinese acquirers years after a 2005 bid for oil producer Unocal Corp. failed on national security grounds to summon up the courage to wade in again. Beyond post-credit-crisis rescues like China Investment Corp. buying a stake in Blackstone Group LP, it wasn't until 2012, when billionaire Wang Jianlin's Dalian Wanda Group Co. bought theater chain AMC Entertainment Holdings Inc., that aggressive buying of U.S. assets really took off.
This year has been especially busy, with Chinese firms making a play for everything from hotels to home-appliance businesses.
It's also been the year, however, when national security concerns have contributed to the collapse of many China-led deals. Anbang Insurance Group Co. never did buy Starwood Hotels & Resorts Worldwide Inc., whose St. Regis Washington D.C. hotel is just blocks from the White House.
Trump's protectionist rhetoric is no secret, so it stands to reason that U.S. rejections of Chinese transactions will probably increase. He's said he plans to slap a 45 percent tariff on imports from China and has long labeled Beijing a currency manipulator.
That openly hostile view isn't good news for deals that come under review by competition watchdog CFIUS, although HNA Group Co.'s $6 billion offer for computer hardware distributor Ingram Micro Inc. did win approval recently. U.S. lawmakers are also railing against a Chinese aluminum entrepreneur's plans to buy Cleveland-based Aleris Corp.
Concern has also been expressed about so-called soft-power acquisitions, as Gadfly has detailed previously. That won't help Wanda's Wang as he searches for growth amid lackluster box-office sales at home.
Futures on the S&P 500 plunged as much as 5 percent after Trump's victory, before recouping those losses and closing higher once U.S. trading opened. The gauge added 0.2 percent on Thursday, bringing gains for the week to almost 4 percent. Asset-price volatility is the enemy of M&A. Activity dried up after the global financial crisis even though valuations plunged.
For now, Europe could be a better answer to China's hunger for offshore purchases. China National Chemical Corp.'s $43 billion takeover of Switzerland's Syngenta AG has received the green light from CFIUS and is awaiting European regulators' blessing.
Cutting off access to assets in America also removes a huge pool of technology and well-known brands, not to mention some 325 million potential consumers. Faced with slowing economic growth at home, that won't be terribly palatable to Chinese companies with international ambitions. But with Trump as leader of the free world, they may have no choice.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
(An earlier version of this story was corrected to show that HNA's planned purchase of Ingram Micro did receive CFIUS approval.)
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