Are Chinese Companies Buying Up Bargain Basement British Assets?
The UK has always been a very open trading nation. British companies have often bought overseas rivals and overseas companies have bought into the UK without restriction - so long as monopoly hurdles are cleared. But I have recently started wondering if the rules are changing. There seems to be an unprecedented number of British brands that are now under overseas control, particularly in markets such as retail and particularly with Chinese investment.
Consider some of these examples:
- Chinese conglomerate Fosun now owns a 5% stake in holiday firm Thomas Cook
- Fosun also bought out the very traditional pram company Silver Cross
- Tommee Tippee, the baby bottles company, has been bought by a Chinese insurance company
- Bright Foods from Shanghai owns Weetabix
- Hony Capital owns Pizza Express
- Chinese footwear company C.banner owns the famous Hamley’s toy store in London’s Regent Street
- Nanjing Cenbest owns 89% of House of Fraser
In most cases nobody would know that a change of ownership has taken place - for now. The High Street looks the same. Any customer walking into a House of Fraser store would see no difference and I don’t personally believe there is anything wrong with foreign capital, but it does seem to be an increasing trend.
Last year, $11.3bn was spent by Chinese companies on British assets, with almost $50bn spent in the past decade. The weak sterling since the Brexit referendum has helped to make British companies appear cheaper to foreign investors and the British government remains open to foreign investment, provided there are no security risks.
However, are we allowing a problem to develop? Companies that receive private equity investment know how cost control and extracting more revenue become priorities. In many of the Chinese investments we can see a company from one sector investing in a company from a completely different sector. My own concern as I see this happen more and more is that we will see less of a focus on delighting the customer with a fantastic experience and a more intense focus on the bottom line.
A venture capital company owning a restaurant is not likely to be focused on the customer experience, just the spreadsheets. A good news story in this case will be how to reduce the olives used in a salad without the customer noticing.
I understand that foreign takeovers have been happening since companies everywhere first started trading, but with the pound devalued since June last year are we at risk of several great British brands losing sight of the fact that their relationship with customers should be their number one strategic priority?
What do you think? Is the capital flowing into the UK good news for business or does it potentially create a situation where the owners may demand change that is difficult to deliver without affecting the CX?
Reach out to LISA on LinkedIn to further the discussion.
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