Value Creation after Chinese Firms Acquire Financially Distressed Overseas Firms: Viva’s Acquisition of Clarks Group

Abstract

Purpose - In recent years, overseas mergers and acquisitions have become a crucial means for many enterprises to enter foreign markets, achieve diversification of corporate brands, expand business scope, increase transaction amounts, and rapidly scale corporate operations. This study aims to investigate value creation by acquirers and potential influencing factors to determine whether companies facing financial difficulties through overseas mergers can generate effective value.
 Design/Methodology/Approach - This study examines post-acquisition value creation by companies through literature review and analysis of financial data from the last three years. It adopts a case study approach, focusing on Viva Goods Company Limited’s acquisition of Clarks in the UK under LionRock. The goal is to explore value creation and influencing factors in this specific context.
 Findings - The study reveals that the issues of target companies in financial distress are concentrated on working capital, while historical advantages and market value do not decline synchronously. Therefore, when facing distressed target companies, the acquiring party can not only revitalize the target company through capital injection to quickly restore operational status, expand market share, and form new competitive strength but also help its own company achieve short-term and long-term stock price increases, thereby gaining profits.
 Research Implications - This study explores factors in value creation, assessing target companies pre-merger, and analyzing post-merger integration for value growth. It focuses on risks and value in financially distressed target companies, aiding enterprises in acquiring distressed overseas firms, serving as a market research case for multinational corporate mergers.