Who has the ultimate power in the M&A world?

If I ask you (an average finance professional) about who turns our world around every day, there is a probability that some part of the respondents’ answer is that in the PE world, it’s the largest firms, like Blackstone, KKR, Apollo, etc.  And I would actually say the same, until very recently. Well, how wrong was I…

My curiosity took me into the acquisition of Hologic, Inc. by the #1 on my list - Blackstone (in pair with TPG). I won’t judge here about the business model of the target, its clients’ advantages, deal parameters or the peak of the cycle in the US buyout market (~30x P/E price), or even the size of leverage (staggering $12B on $18.3B acquisition, which still is normal for an LBO) - all these we have seen before in one way or another in previous waves on the market (80s, 07/08s, etc.). But what struck me the most was a small detail: Blackstone and TPG had to get approval from the government for this deal… From the Chinese government!?!

Right, here is where the story appears to be wild. As you all know, Blackstone ($1.2T AUM) and TPG ($261B) (the acquirers) are American firms, and probably you have never thought about it, but Hologic is also an American company! So why did the 3 American companies (with one of them to be the largest private equity firm in the world) have to ask the Chinese for approval? Why not ask for approval from any other government, for example? 

Some could say, “Well, because Hologic had manufacturing facilities in China or partners over there”. And they would be correct. But still, with all my respect to Hologic’s Chinese assets - we are talking about the full acquisition of an American company by the American acquirer. 

I have been in multiple international M&A deals, and the only reason to even think of an approval is when a company is hugely important (some called strategic) to the country’s prosperity. The 2nd must-to-have condition is that the company is structured in a certain way, so that the local assets are considered to be fully local, even though at the shareholders’ level there may be an international mother company. 

Otherwise, Hologic could have much more emphasis on the Chinese market because of its products (mammography systems, molecular tests, etc.), which are on the rise in China. Or maybe because Blackstone years ago had Chinese backing their funds (could still be doing that - not sure), and it was simply a politeness move. But what if the Chinese government, due to the recent Trump administration’s voices, decides to block the deal? Will the deal fall apart? Which returns us to the beginning of my post - so who actually has the ultimate power in the M&A world? Thoughts? 

PS. If that was a smart move of the Chinese government years ago to allow foreign corporations to establish local units and facilities in China with the purpose to control M&A in 20-30 years (today) - wow, it’s literally one of the smartest moves I have ever envisioned! Great chess game!