Chinese companies' overseas M&A adversity heats up

"As far as I know, many Chinese companies have successfully landed in the EU market through mergers and acquisitions of European companies this year. I personally predict that this trend will become more obvious in the future." David, the chairman of the European Union Chamber of Commerce in China, said in an interview with our reporter.

The latest statistics from Zero2IPO Research Center, a well-known venture capital and private equity research institution in Greater China, also confirm David's statement.

The survey showed that in the first half of this year, Chinese companies' overseas M&A reached a new high, with a total of 60 overseas M&A transactions completed, a year-on-year increase of 22.4%; the amount involved was 19.42 billion US dollars, a year-on-year increase of 23.8%. Among them, the energy and mining industries are particularly prominent, with 13 mergers and acquisitions completed, involving a total of 13.416 billion US dollars, accounting for 69.1% of the total overseas mergers and acquisitions.

The success rate is higher than the global level

Compared with domestic mergers and acquisitions, overseas mergers and acquisitions have been singing all the way. According to Yang Bin, deputy general manager of Shanghai Pudong Development Bank's corporate and investment bank headquarters, it is not surprising that the number and amount of overseas mergers and acquisitions by enterprises rose against the market.

"The fall in asset prices triggered by the global financial crisis has created good opportunities for Chinese companies to invest overseas. We expect that overseas companies in energy, industrial technology-intensive, and management channels are becoming the main targets of Chinese companies' overseas M&A. It is important to note that the Chinese government is guiding the mechanism, promoting policies, and optimizing the environment to vigorously promote the healthy development of the M&A market.” Yang Bin said.

Research by the Institute of Foreign Investment and Cooperation of the Ministry of Commerce Research Institute shows that up to now, the overall success rate of Chinese companies' overseas mergers and acquisitions is about 40%, higher than the global average of 25%. Zero2IPO Research Center believes that this signifies that Chinese companies have achieved a "strategic upgrade" after continuously summing up successful experiences and failures in the tide of overseas mergers and acquisitions.

The overall success rate of overseas mergers and acquisitions of Chinese companies is higher than the global level. The main reason is that: Chinese companies are generally more cautious, have fewer targets and do not easily initiate acquisitions, so the success rate of the first stage can reach about 70% of the target projects. ; Most mergers and acquisitions occurred after the financial crisis in 2008, the cost of mergers and acquisitions was relatively low, and the integration after delivery was generally smooth.

The financial crisis is indeed a good opportunity for Chinese companies to initiate overseas mergers and acquisitions, but the hidden risks cannot be underestimated. Some people in the legal profession remind Chinese companies that they must do their homework before proposing mergers and acquisitions, and do full due diligence on the target of the merger, especially the company’s debt situation. If the company is rushed, even if the merger is successful, it will be in the future business process There is a risk of being dragged down by debt. In addition, it is necessary to clarify the legal system and cultural environment of the country where the acquisition target is located.