European Robotic Company Receives Investments from China

Transaction Overview

A listed Chinese company has completed a transaction in the European robotic sector. European robotics and advanced manufacturing technologies stark increasing interest in Chinese companies. Saimo Electric Co., Ltd. (a Chinese A-share listed Company) recently closed the transaction to join the capital of Italian automation equipment manufacturer EPISTOLIO S.r.l., as a minority player. As part of the agreement, both parties will contribute capital to establish a JV in China to tap into the Asian market.

Seta Capital was engaged as the exclusive sell-side financial advisor in this transaction.

SME Strategy

Headquartered in Varese, Italy, Epistolio S.r.l is a local, family-run European SME (Small-Medium-Enterprise) with impressive potential for expansion. Its main products include 6-axis painting robots, gravimetric dosing systems and other automation equipment and components. The company has an extensive Research and Development department, which lead to core technologies in the design and manufacturing of robots, as well as gravimetric dosing systems. Its products are widely used in automotive, aerospace, furniture, construction materials and other industrial sectors. Clients of Epistolio include Airbus, Fiat, Costa Crociere and Ferretti, amongst many other prestigious names.

Strategy of the Buy-side

Saimo Electric’s strategic goal of transaction is to strengthen its capability in order to provide 360 degree intelligent manufacturing solutions to its clients, and to increase market presence in automotive and consumer electronics. Saimo’s strategy is to establish a global footprint. Saimo will invest alongside the seller to establish a JV company in China in order to create synergies leveraging on resources and advantages of each. This strategic collaboration will boost Saimo’s business in intelligent manufacturing, as well as provide access to the international market.

Review of Chinese outbound investment in robotics

Many Chinese companies have adopted the strategy to globalize and to enhance their technological competitiveness by joining forces with companies oversea. In 2013, the Chinese market has become the largest robotics industry in the world, and since then we have witnessed multiple investments of robotics companies by Chinese firms. The list below is a summary of robotics companies that have allowed Chinese investors in their capital in the recent years.

Target	Buyer	Date	Transaction Value	Main products of the target
Epistolio (Italy)	Saimo Electric Co., Ltd.	June 2017	Undisclosed	Painting robot & gravimetric dosing system
RR Robotica (Italy)	Shanghai Turin Robot	October 2016	Undisclosed	Palletizing Robot
Gimatic (Italy)	AGIC Capital	June 2016	Around EUR 100M	Robot arm Equipment
KUKA (Germany)	Midea Group	May 2016	EUR 4.5B	Industrial robot
Evolut (Italy)	EFORT Intelligent Equipment Co., Ltd.	March 2016	Undisclosed	Welding Robots
SMD (UK)	CSR Corporation Limited	April 2015	Undisclosed	Deep-sea operation robot
DMW (USA)	Hubei Huachangda	February 2015	USD 53.5M	Logistic robot
Scape (Denmark)	Shenzhen Maxonic	January 2015	DKK 6.5M	Automation Equipment
SIR (Italy)	Wolong Electric Group Co., Ltd	December 2014	EUR 17.8M	Industrial robot
CMA (Italy)	EFORT Intelligent Equipment Co., Ltd.	November 2014	Undisclosed	Painting robot

Europe is the forerunner in the advanced manufacturing sector and home to many small to medium size companies with innovative and competitive technologies. Northern Italy is a traditional manufacturing power house in the region and has proven to be more open towards collaborating with Chinese companies in the past few years compared to its European peers, such as Germany, Switzerland and France. In fact, Italy has seen one largest capital inflows from China in Europe, and is ranked first in terms of transactions regarding robotics companies, as shown in the table above.

Outbound investment + JV in China

Establishing a Joint Venture in China following an outbound investment is a tactical strategy. For both parties it is a concrete manifestation and practical vehicle to achieve their strategic goals. Many European family businesses realize the importance of the Chinese market, however, the lack of financial strength as well as human resources prevents them from entering the market. By establishing a Joint Venture alongside allowing Chinese investors in the company’s equity, they are in the position to rely on the local resources of the Chinese partner, therefore able to create synergies more effectively. On the other hand, such an arrangement creates a deeper bond between the two parties of the transaction by providing an implied option for the seller to benefit from the future growth, thus better aligning the interests of both parties.

About Seta Capital

Seta Capital has been engaged by the Italian company as its exclusive advisor in this transaction. Seta Capital has assisted the seller in setting its strategy, identifying and selecting suitable potential investors, arranging and coordinating due diligence, negotiating transaction terms and conditions, and assisting in the closing procedures. Seta Capital specializes in cross-border corporate investments, M&A, partnerships, and corporate strategy between Europe and China. Based in Milan, Shanghai, Hong Kong and Munich, Seta Capital has proven execution capabilities and has an extensive network to bridge Asian and European markets. Along with its financial advisory capabilities, Seta Capital's team of engineers constantly monitor manufacturing and industrial sector developments in Europe and China. The team’s objective is to to detect every opportunity as it arises, while supporting companies and entrepreneurs to leverage their own technology.

Seta Capital speaks about recent cross border M&A transaction at Promos and Invest Conference

Seta Capital was requested to attend an exclusive conference held by Studio Gianni, Origoni, Grippo, Cappelli & Partners and organized by Promos and Invest in Lombardy to discuss the advantages of cross border M&A in Asia. The conference took place on July 19th at the Palazzo Affari ai Giureconsulti in Milan, Italy.

The purpose of the conference was to host an open panel discussion with companies that have strong business partnerships in the emerging Asian markets. Seta Capital was honored to be one of the selected guest speakers to discuss their involvement in foreign markets.

Alberto Bonetta, a current partner at Seta Capital discussed their most recent transaction with Pentabot, a robotics and automation company based in Italy. The transaction consisted of the acquisition of Pentabot by a third-party Chinese investor.

During the cross border M&A transaction, Seta Capital functioned as the exclusive sell-side advisor for their client Pentabot. Mr. Bonetta explained Seta Capital’s involvement in the transaction between these two companies. This involvement consisted of advising clients on discovering an ideal buyer along with creating a joint venture in China. 

Interview with our new partner, Mr. Alberto Bonetta

About Mr. Alberto Bonetta:

Mr. Bonetta has 18 years of experience in the automotive industry. Prior to joining Seta Capital, Alberto was a Deputy General Manager of a Sino-Italian JV in China (IVECO in Nanjing, also NAVECO). Before this role, he was in charge of Business Development and Operation Management for IVECO in Middle East and Africa where he also served as Board Director. Alberto holds an MBA from London Business School (UK), Columbia Business School (USA), Hong Kong University (China) and a Master degree in Economic and Management engineering from the Polytechnic of Turin (Italy). 

Interview: 

Q1: Why did you decide to join Seta Capital after working for the Automotive industry for more than a decade?

A1: The team’s diversity and the exciting business itself are the reasons.

Regarding team diversity, our team has five different types of nationalities, namely Italian, Chinese, American, German, Lithuanian. Each team member has valuable studying and working experiences abroad in countries like the United States., UK, Germany, France, Italy, China, South Africa, Czech Republic etc..

As for the business, Seta capital offers me a much broader platform to make my own contributions to the Sino-Italian business cooperation beyond just the automotive industry. What attracts me most is the opportunity that I can become a “designer” and create a win-win deal structure benefiting both parties in Europe and in China.

Q2: What is your expertise field?

A2: As an experienced commercial director, my expertise mainly focuses on business development in intercultural context. I had experience before, designing and implementing an Industrial Cooperation Agreement for IVECO’s assembly plant in Kenya and Morocco. I also made a business plan for IVECO’s expansion to Libya and Saudi Arabia. During my 3-year term from 2008 to 2011 as the deputy general manager of commercial division at IVECO in China, our market share increased by 9% yearly and sales increased by 13% yearly.

Q3: What’s your story with China?

A3: My story with China started with a one-week trip to China in 2007. During that trip, I was attracted by the complexity of doing business in China, as I am that kind of person who is eager to embrace challenges. During my four year work there, I made lots of Chinese friends who made me feel at home. Embracing the culture was a challenge at first, but after further immersing myself I began to appreciate and admire the Chinese culture.

Q4: How do you see the future about Sino-Italian Cooperation?

A4: In the advanced manufacturing field, the top brands and top technology from Italy will be interesting for Chinese investors for a long time. Apart from this, I also see a huge potential for cooperation in food production, creative industry at firm level in the future.

Another point which most Italian businessmen care about is the Intellectual Property Rights Protection. This has got much attention from Chinese governments at different levels, and the situation in China is improving constantly. Therefore, it’s much easier to do business in China now compared to ten years ago.

Q5: How does your new life look like at Seta Capital now?

A5: I feel super motivated and satisfied about my new life. The first week, I focused on getting familiar with the business of Seta Capital as fast as possible. I arranged a personal meeting with each teammate, listening to them and learning from them. I also attended meetings with our clients. My first week at Seta Capital has surpassed my expectations.

Q6: What’s your vision about Seta Capital’s future growth story?

A6: I believe deeply that our firm will transform from a young company into an industry leader very soon. I will witness the team expansion and become a “manager” again in the near future!

Seta insights about Current Restrictions on Chinese Outbound M&A

Tanya Wen, Managing Partner at Seta Capital, spoke about the current skyrocketing Chinese outbound M&A activity in the Bocconi Event "The Modern Silk Road". She offered insightful analysis on the current trends and shared transaction case studies that sparked great interest from the audience.

Tanya highlighted two key aspects concerning this trend. Firstly, although lately the Chinese government has been clamping down on outbound M&A activities, yet the focus of the increased scrutiny is on irrational capital outflows, speculative or downright fake transactions. Secondly, will continue to see a lot of activities in the sectors that have been spelled out by the Chinese government as strategic growth areas for the country, in line with China’s Five-Year Plan announced in 2016.

When asked whether she sees a change in the targeted sectors, Ms Wen underlined the fact that China is now in a catch-up period and has to acquire oversea the technology that it has not developed in-house. In particular, she expects that the activities going on in the robotics sector is likely to fade in a couple of years.

Although there is strong demand from Chinese investors for European assets, there are a number of issues that investors and sellers alike face when carrying out a deal. Ms Wen, a veteran of cross-border M&As, PE acquisitions and investment management, regrets saying that failure from both sides to acknowledge a different cultural and business settings, as well as the non-familiarity with foreign policies and rules, can pose threats to the transaction and the post-merger integration.

Ms Candice Young, M&A lawyer at Gianni, Origoni, Grippo, Cappelli & Partners, also spoke at the event. Supporting Ms Wen’s view, she explained that in contrast to US managers, European managers casually approach business meetings and therefore they tend to leave some unexploited profit on the negotiation table. Truely, Chinese investors tend to pay a higher valuation for the targets, but a good manager should also leverage on his strengths and consciously approach any deal proposal. Ms Candice attributes this to the organizational framework of the Italian and, more generally, European mid-cap companies who are usually family-owned or family-inherited enterprises.

The same thing however holds true for Chinese firms and the Chinese financial sector, where, as Ms Young puts it, competent financial advisors are a scarce —yet precious —resource.

This is why Seta Capital, relying on its insights in the Chinese and European market, as well as on the competencies and well-rounded expertise of its team, brings value to companies who want to unlock growth and profit potential in both regions. 

Seta Capital and Sinolink Securities strike a partnership for cross border M&A

Seta Capital and Sinolink Securities have striken a strategic partnership to better serve their clients in Europe and in Asia. Sinolink is a full fledged securities firm with more than 2300 employees and his Crossborder M&A team ranks among the best in Asia.

Thanks to this partnership Seta Capital will be able to access the tremendous network of Sinolink in Asia while Sinolink will be able to leverage the experienced team of Seta Capital in Italy, Germany and the UK.

"We are very proud to announce this partnership", says Tanya Wen, Managing Partner of Seta Capital, "This partnership formalizes our long lasting cooperation with Sinolink's strong M&A team, and will foster the international growth of both companies".

Tommaso Lazzari, managing partner of Seta Capital adds: "This partnership is creating a great deal of synergies between the two companies, not only it creates a win-win relationship between the two firms but also it delivers a massive added value to our clients".

Seth Wu, the Executive Director of International M&A team in Sinolink in a press release has applauded the partnership as a considerable step forward to better serve Chinese investors. He says: The major clients of Sinolink are the listing companies in China with rich financing channels and strong M&A desire. Through Seta Capital, we have confidence to serve clients better by providing high quality investment opportunities in Europe.

Seta Capital advised the acquisition of a leading European manufacturer of electric components by a large listed company in China

Dandong Xintai Electric ltd.co, a leading Chinese electric component manufacturer, listed in the Shenzen Stock Exchange, announced on October 15th, 2015 that it has made an offer to acquire the fixed assets of TMC Italia SpA, a European leader in electric transformers with advanced technology and worldwide sales network.

Seta Capital, based in Milan, is the lead advisor in this transaction. Seta Capital provided preliminary due diligence services, negotiated key transaction documents and assisted in the debt negotiations to its client. In addition, Seta Capital will be providing post transaction management support for the Chinese buyer including managing its European company incorporation, monitoring of target company performance, local directorship services and assistance in driving group-wide strategies for the client across China and Europe.