PR often crucial step in foreign M&A deals

Educating officials, public can mean difference between success, failure

Chinese companies are seeking mergers and acquisitions in virtually every corner of the world. Their successes—and a few high-profile failures, especially in developed economies—highlight the importance of public relations.

Executives of large Chinese companies, while having the wind at their backs in the domestic market, have struggled to win the hearts and minds of stakeholders abroad in environments where they are often out of their depth.

Jamie Moeller, who directs Ogilvy Public Relations' global public affairs practice, said the PR job can be as simple as it can be complicated. In the United States, where he has the most expertise, the basic principles can be summed up in a few sentences, but it is not always easy to put those principles into practice.

The environment in the US can be described relatively simply. First and foremost, policymakers there care about how transactions will affect local constituencies. Can jobs be kept or created? Is the deal good for the community and the local economy?

PR executives' role is to "communicate and educate" stakeholders about the benefits of a deal. Rational legislators and members of the public will not stand in the way if a transaction genuinely benefits them.

"It is important to be very factual, very transparent. Work with local partners, employees and the general public," Moeller said.

But Chinese businesses often find that things are not as straightforward as they may seem, and some conclude that the US is biased against Chinese investors.

For example, despite years of PR work, US regulators have still limited Huawei Technologies Co Ltd's access to the US market, citing "national security concerns".

Moeller said: "Sometimes perception lags reality. Sometimes perception among policymakers and influential parties gets set very early on, and it takes a while to educate people and change those perceptions.

"But I think it is important to continue to communicate, continue to tell the story, continue to be very factual and transparent."

How long does such a process take?

"It is very hard to say. The more effort you put into communicating, the less time it takes. That's an equation: more communication equals faster transformation," he said, laughing.

Then there is the Committee on Foreign Investment in the United States, an unavoidable name when talking about investing in the US.

It blocked Huawei's access one year ago, but just the other day, it approved the Lenovo Group Ltd's acquisition of IBM Corp's low-end server unit, adding more confusion over how the agency reviews and makes decisions.

In Moeller's eyes, there is nothing unusual going on. The key to dealing with the CFIUS, he said, is "to educate, explain and provide as many facts as possible".

"But you should also recognize that though it is a factual review, politics plays a role. I would advise Chinese companies that have to go through the CFIUS process to make sure they have the best local representation they can get, in terms of law firms, government relations firms, public affairs firms, and people who have the relationships, who know how the process works," he said.

He also noted that for companies, it is important to educate not only the CFIUS but also other stakeholders: members of Congress who may have an interest in the deal and local elected officials, like mayors in the city where they may do business. All those people have influence over the administration.

These efforts sometimes will not overcome the national security concerns, but they help frame the discussion in a more positive way for the CFIUS. And it is important to engage these people right away, according to Moeller.

For example, when it comes to visiting legislators, "do not be afraid to go to them and tell them a good story about what the company plans to do, because you don't want to wait until you get criticism to go to talk with them", he said.

There are positive changes, too. An affiliated company of Chinese equipment maker Sany Heavy Industry Co decided to sue the White House after US President Barack Obama barred its operations connected to wind farm projects. The victory in the US Court of Appeals raised eyebrows in both countries.

Ralls Corp, Sany's US affiliate, acquired four wind farm projects near a US naval facility in Oregon in early 2012. Obama then signed an order blocking the deal, citing national security concerns.

According to Moeller, the real significance of the ruling was "to create more transparency in the CFIUS review process", because the court said that any unclassified information the committee used to make a decision must be shared with the company involved. That was not the case previously.

"Now companies going before the CFIUS will have access to more information, and that will help companies prepare their CFIUS filings more accurately and effectively," he said.