Alberto Forchielli: Incredible Evaluation Arbitrage Opportunities Exist Between China And Europe

Summary: In this episode of China Money Podcast, guest Alberto Forchielli discusses China-Europe cross-border deals, the challenges Chinese companies face when expanding overseas, and the mistakes he has made but never regretted. In his own words: - There are great valuation arbitrage opportunities between Europe and China. We have never bought companies at more than seven times EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). We were even able to buy companies at as low as 3.2 times EBITDA. But in China, valuations are likely 20 times or 30 times, sometimes as high as 40 times EBITDA. - Chinese companies face many challenges when doing overseas M&A. They are still not insiders and often do not have access to deals. Getting the required approvals from Chinese government also takes time and hurts their competitiveness. - We were able to achieve our accomplishments because we have made all the mistakes possible. One pitfall is working with people who are interested to gain insights from you, rather than doing a real deal. Another is co-investing with Chinese companies that dragged down the whole deal process. We also stay clear from pre-IPO deals now after learning a lesson. - We are just in the beginning of an enormous trend where Chinese companies will become more and more dominate in overseas investment. As investors, we have to stay head of the pack. Our Guest Today Alberto Forchielli is managing partner at Mandarin Capital Partners, a private equity fund that focuses on investing in Chinese and European companies. Primarily, the fund invests in Chinese companies seeking overseas expansion and European companies in search of local presence in China. Among many previous positions, Forchielli was at the World Bank in Washington, D.C. for three years. He was also president for Asia Pacific at Italian industrial conglomerate, Finmeccanica S.p.A.