September 26, 2017

THE ACQUISITION OF CHINESE SMES IS GETTING POPULAR AMONGST FRENCH COMPANIES

VVR International’s CEO Camille Verchery speaks for Classe Export

Since 2013, a susbstantial number of French firms of a certain size have been willing to acquire Chinese SMEs or ISEs (Intermediate-Sized Enterprises), whose turnover is between 5 and 50 million Euros. This trend is creating a basis of a true bilateral evolution of the market. On the one hand, French managers are now understanding the limits of Joint-Ventures and WOFEs (Wholly Owned Foreign Enterprises). On the other hand, Chinese SME entrepreneurs are questioning their management approaches, which were based, until now, on the perspective of a promising future. From the 1990s to the 2000s, Chinese State companies, which became collective, encouraged their managers to be richer by becoming the owners of their own factories. The results turned out to be quite disastrous. In the next decade, managers gave their employees the opportunity to benefit from shares in their companies, or to split profits. But from 2010 to 2015, profit redistribution remained quite opaque.

Today, Chinese SMEs promise additional compensation for to stock exchange valuations reaching 5 to 10 times turnover, which is becoming unreachable. This is due to their company size itself, but also due to employees’ lack of tech-savvy knowledge and management ability. The only solution these companies have is to play the globalization game and accept to be re-acquired by international firms. But the international firms must face their own challenges (i.e. identifying these SMEs or ISEs, and persuading them to collaborate). This is the mission of VVR International/BNP PARIBAS TRADE DEVELOPMENT.

Download here the full version of this article in French.

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