Another reason is that too often, there is the belief that asset deals or bankrupt companies are "better" bargains because they are cheaper. But turning a company around, especially in Europe's low-growth environment, is particularly challenging and way more difficult than accelerating the growth of well-run businesses.

In addition, in some business circles, Chinese buyers, with some noteworthy exceptions, have not yet convinced that they can prevail in a competitive bidding process mainly because of complex processes that require a subtle mix of well-formatted step-by-step diligence, acceleration and quick decisions when needed, and subtle lobbying with targeted messages to each stakeholder which requires strong local understanding.

Last but not least, European companies, employees and government are often worried whether a Chinese shareholder would really leave the management in power, respect their social engagements and support their deeply rooted local implementation. It is to be noted that the worries would probably be the same if a deal was to take place in China.

To succeed in the global markets, China's leading companies will have to bolster trust with interest groups and stakeholders at large, work closely with European or US investors - which also know how Chinese groups are working. They have to look for local knowledge more than big names, spend quality money on quality advisers - and see it as an investment rather than a cost aimed at reducing uncertainties and risks.

They will have to possibly start with a minority stake, in particular, to win people's hearts by working together, with proprietary deals rather than with global auctions, and empower investment teams internally to enhance decision-making processes within an agreed price and legal framework. And they have to target the firms in which integration risks are limited rather than lame ducks, and go for firms that have a strategic interest to grow in China.

As always, true win-win situations can overcome any misconception. Just like in private equity, alignment of interests is the best recipe for success.

While China is growing and changing, the world gaining a better understanding of China. Deng Xiaoping's words describing China's reform path as touching the stones while crossing the river are well known. And they have a European version: "Step by step is beautiful."

The author is managing partner, A-CAPITAL, European Private Equity firm based in Beijing.

(China Daily 04/07/2011 page9)