App transformed itself into important player by connecting financiers and entrepreneurs in China and Europe

When Shanghai company DealGlobe emerged in 2015, its sole product was an app, available free from Apple's App Store, that served to connect financiers and entrepreneurs in Europe and China and facilitate mergers and acquisitions.

In two years, Deal-Globe's app now has thousands of users and hundreds of potential M&A deals listed at any one time. Furthermore, it has built a team of M&A advisers to help conclude deals. The company has offices in Shanghai and London and is planning to open a German office soon.

It broke even last year, following the conclusion of three deals, including China's Lander Sports' acquisition of Southampton Football Club and video streaming company Baofeng and Everbright Securities' joint acquisition of UK sports media company MP& Silva Group.

The DealGlobe team and representatitves from its partner organizations celebrate the launch of an M&A report in London. Provided to China Daily

Growth has continued this year. The company is now advising on 10 deals, says chairman Andy Bell, who joined the startup after 25 years of cross-border M&A experience at banks, including Morgan Stanley, HSBC and Jefferies.

"The Chinese outbound market is likely to be a growing opportunity," he says. "A senior M&A banker in (a big investment bank) may spend 5 percent of their time on the Chinese market, whereas I'm speaking to Chinese colleagues and clients every day."

Bell estimates the company is advising on $2.4 billion worth of deals. According to data compiled by DealGlobe, the overall value of Chinese outbound cross-border deals in 2016 was $216 billion (183 billion euros; ￡164 billion), up from $87 billion in 2015. These values correspond to 438 Chinese outbound M&A deals last year, an increase of 20 percent on 2015 in terms of quantity.

DealGlobe has grown on the back of the expansion of the China outbound M&A market, especially in medium and small deals.

Most large Chinese outbound investments receive advice from large banks, such as HSBC and Goldman Sachs, but smaller advisers such as DealGlobe have emerged to assist private sector Chinese companies in smaller deals.

These claim to charge lower fees and be more flexible, which are attractive qualities when deal values are small.

For example, Lander's purchase of Southampton FC was estimated at ￡200 million, which is considered to be small. In 2016, there were 90 similar Chinese investments, totaling $14 billion, compared with 2006, when there were eight such deals, worth $1.15 billion.

Major investment banks continue to advise on the big deals, such as China National Chemical Corp's $43 billion purchase of Switzerland's Syngenta AG, where JP Morgan was one of the advisers. Big investment banks' advantages are their abundant cross-industry resources, global connectivity and the ability to provide large finance.

But on smaller deals, DealGlobe competes with many other China-focused advisory firms, including London-based Vermilion, which has been advising on such deals since 2005. Another example is the Chinese law firm Yingke, which has in recent years established 10 overseas M&A advisory offices to capture opportunities afforded by cross-border deals.

One advantage DealGlobe has over rival boutique advisory firms is its wide network reaching many buyers and sellers, enabled by its platform, Bell says.

The platform started with a simple model. In an attempt to bridge the information gap between Chinese acquirers looking for suitable targets and Western companies looking for investment, it simply allowed registered users to upload their information and needs.

But over the years the platform has developed. One example is software that allows DealGlobe to determine which documents each user has downloaded and how far they have gotten through them, which can indicate their level of interest in particular deals.

To improve its technology, Deal-Globe's platform plans to launch a content optimizing and translation service this month. It automatically selects the most relevant information for deal advisers based on their sector of interest and region, and translates content into different languages.

Alan Buxton, global chief operating officer at DealGlobe, says: "This technology will be able to select, summarize and translate information from other languages to Chinese, so that Chinese companies and advisers can view information in their own language."

DealGlobe's platform business helps identify potential clients, while most of its revenue comes from its M&A advisory side.

Perhaps what makes DealGlobe's M&A advisory service unique is its team's ability to identify opportunities for synergies for Chinese clients, and actively engage with the target companies and sell-side advisers to answer their questions. Such communication is key, especially in strategic acquisitions which it is important for the management team to feel assured that the Chinese acquirers have a coherent vision for the target's long-term growth prospects.

"We often advise our clients to invest time and effort getting to know the targets, becoming familiar with the management and building a relationship ahead of a potential deal," says Bell.

In putting together deals, Bell's team has also used its creativity and imagination to identify areas of potential synergy. For example, the DealGlobe team helped to identify synergies between the Chinese video content streaming business Baofeng and MP & Silva, which buys and sells sports rights.

"Baofeng would not have been a realistic potential acquirer that UBS, the sell-side adviser, would have had in mind, simply because it was not in the same industry as MP & Silva," Bell says.

But, in reality, synergy is abundant. "Baofeng was looking to increase the amount of sports content on its platform, so having MP & Silva would allow it to obtain more targeted sports content to share with the regular Baofeng audience. In addition, Baofeng's knowledge of sports rights distribution would help MP& Silva to further distribute its content," Bell says.

Another key contribution from DealGlobe to make the transaction possible is its efforts to coordinate Baofeng and China's Everbright Securities to jointly make the investment. Everbright Securities acted as a financial investor on the deal to provide some of the much-needed financing, while Baofeng focused on achieving strategic synergy from the deal.

As well as M&A advice, DealGlobe also helps Chinese companies participate in the capital-raising process for international technology companies, especially those that require investments in the $20 million to $50 million range. These are mostly startup tech companies that have already received one or two rounds of funding.

DealGlobe recently advised on China's Galaxy Internet's investment in the UK-based IP Group, which focuses on commercializing cutting-edge technologies originating in the UK.

"There may be synergies that can be achieved with Galaxy Internet by potentially using Chinese expertise in the commercializing process," Bell says.

Looking into the future, Bell is confident of DealGlobe's ability to capture more outbound investment and M&A opportunities.

"The Chinese outbound market is likely to be a growing opportunity. The market is growing and there is room for highly credible experts, even if they are relative newcomers."

Cecily.liu@mail.chinadailyuk.com