While overall ”global M&A activity is down 15% from last year, Chinese and Japanese firms, [on the other hand], have [been on a buying spree] — [having] bought a record number of overseas companies… mostly in the oil and gas sector” according to a CNN report published last week.  Indeed, ”$222.6 billion of deals in the oil and gas sector were completed during the first three quarters of 2012, up 12% from last year”, the report continued.

Hong Kong, Tokyo in the spotlight

As the primary conduits for Chinese and Japanese foreign direct investment (FDI) respectively, the importance of Hong Kong and Tokyo, and the law firms, investment banks and other intermediaries who help process the bulk of these investments — cannot be understated.

Hong Kong acts as a transshipment point for almost two-thirds of Chinese foreign investment.  Tokyo is both the financial and political capital of Japan.

The US is the main destination

According to Deloitte, the number-one focus of Japanese M&A activity in both volume and value has been the United States, according to statistics through the first quarter of 2012. During the the first half of 2012, foreign investment by China climbed more strongly than in 2011, and the U.S. led all countries in receiving that new Chinese investment, according to a recent report by the Heritage Foundation.

Recent China/Japan Energy Deals

A consortium of Japanese financial institutions invested $1.5 billion in Venezuela’s national oil company, Petroleos de Venezuela (PDVSA) in 2011, as Asian Legal Business reported earlier this year.

One of the largest Chinese deals this year is CNOOC’s $15 billion proposed acquisition of Canadian oil and gas exploration firm Nexen, but that still needs to be approved by Canadian regulators, as CNN reported.

Professional services firms:  The opportunity

The focus of Chinese and Japanese record-breaking foreign direct investment has two main focuses: Energy and the United States.

US professional services firms

US professional services providers with an ability to help facilitate investment activity should establish and maintain a  laser-like focus on generating deal activity with intermediaries in Tokyo and Hong Kong.

Energy-rich region professional services firms

Professional services providers in energy rich regions including the Middle East, South America, Canada, Mexico, Eastern Europe and North Africa – with an ability to facility energy-related deals – should also be focused squarely on Tokyo and Hong Kong.

Activate and follow a well-organized plan

I’ve written extensively about the steps professional services providers can take to forge the alliances necessary to participate and generate revenue from China and Japan’s current investment boom.  Firms who take it upon themselves to initiate and see these efforts through – will generate substantial new revenue from those efforts.

Posted by John Grimley

John Grimley edits and publishes Asia Law Portal and is the author of A Comprehensive Guide to the Asia-Pacific Legal Markets. He specializes in providing writing, editing, research and strategy services to the corporate and professional services sectors. Between 2002 and 2008, he established and directed the European representative business development office of US AmLaw 100 law and public policy firm Patton Boggs LLP. At the inception of his career, he served as a writer to the President of the United States in the White House. A licensed American lawyer, he holds a Juris Doctor from the University of San Diego School of Law.

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