A Brave New World: The Climate For Chinese M&A Abroad

by Economist Intelligence Unit, 22 April 2010

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corporate strategy cross-border acquisition foreign investment M&A SOEs

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The EIU’s report finds that Chinese companies are planning to take a more cautious approach to foreign acquisitions, avoiding outright buyouts and seeking more partnerships and alliances.

China’s buying spree has raised a number of concerns, particularly where it has involved state-owned enterprises (SOEs). Chinese companies are discovering just how difficult it can be to get mergers and acquisitions (M&A) right, especially when they are crossborder deals—and so companies have lowered their ambitions.

Inside the report:

In-depth interviews with large Chinese companies with experience—both successful and failed—of investment abroad
Online survey of 110 Chinese executives
Interviews with several foreign participants and advisers in Chinese deals overseas
Analysis of available data on Chinese companies’ crossborder transactions over the past five years (focusing on deals worth more than US$50m)

Key Findings:

Chinese acquirers feel unprepared for cross-border acquisitions, and as a result, they are lowering their ambitions
Outbound M&A remains dominated by state owned enterprises (SOEs)
As economic conditions recover and competition for deals heats up, Chinese purchasers could be at a disadvantage
Lack of communication is a major obstacle to successful deals
Demands for reciprocity will grow

Orignal Author:

Economist Intelligence Unit

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