Chinese Acquisitions Research Articles

An Empirical Analysis of the Effects of Horizontal Mergers and Acquisitions on the Performance of Chinese Listed Companies - The Case of the 2008 Global Financial Crisis

(ProQuest: ... denotes formulae omitted.)1. IntroductionThe names of the top ten mergers and acquisitions (M & A) companies in China in any year are announced in January of the following year. The assessments of the mergers and acquisition companies to select the top ten is done by the All-China Federation of Industry & Commerce, the global Merger and Acquisition (M & A) Research Center and China M & A network. There are a variety of acquisitions types. According to the statistics database of CVSource, there were 2656 cases of Chinese mergers and acquisitions in 2010. In August of 2011, Google announced the purchase of Motorola with 12.5 billion US dollar. M & A is an important means to expand the scale of operation, reduce competition and enter new areas for companies around the word.M & A refers to the situation where a company takes control of other companies by property rights exchange to increase its competitive capability. It can be divided into mergers and acquisitions. M & A is a complex economic phenomenon. It is a product of the economy development. It is also the most influential corporate behavior in a company's business activities. The phenomena of M & A began in the early stage of the Western industrial economy. Since the 19th century, the world has experienced six M & A waves. Currently, as a result of economic globalization, M & A occurs more frequently in China. There are different types of M & A, namely: horizontal M & A, vertical M & A and mixed M & A (Becher, 2002; Kruse & Park, 2007; Chen, 2011; Li & Zhang, 2012). Currently, almost all of the M & A that occur around the word can be classified into these three categories or types. Different types of M & A result from different motivations. There are mainly two sources of motivations for M & A in China, namely: government promoted M & A and expanding the scale of operation promoted by companies.The sign of the recent global financial crisis began to be felt 2007. After the US Subprime mortgage crisis in 2006, investors began to lose faith in value of mortgage backed securities, which causes liquidity crisis in US. This crisis became out of control with the bankruptcy of Lehman Brothers in September 2009. After that, the global economic was in recession. During the 2008 financial crisis, companies yielded to be bankrupt. This situation led to some specific occurrences of M & A.The purpose of this paper is to analyze the performance of horizontal M & A in the 2008 financial crisis environment. It uses discriminant analysis to build a discriminant function. The function can be used to forecast the possibility of performance improvement of horizontal M & A. Section 2 describes some of the theories of mergers and acquisitions. The paper makes use of these theories in achieving its objectives. Section 3 presents the procedure for selecting samples and financial indicators. The paper will use 24 samples and 9 financial indicators for modelling and another 14 samples for testing. Section 4 presents the basic principles of the multivariate discriminant model and independent samples t-test. Section 5 describes the results of the empirical analysis. The conclusions drawn from the research are presented in section 6.2. Overview Of M & A Theory2.1.Horizontal M & AHorizontal M & A is the mergers and acquisitions between two or more companies that produce and sell the same or similar products, such as the case of Geely purchasing Volvo and Lenovo buying IBM Thinkpad. This type of mergers and acquisitions can help to strengthen the competitiveness of enterprises, reduce competition in the market, improve the industry structure, and expand the scale of operation. However, it destroys free competition and forms a high degree of monopoly. Due to the support of the government, horizontal mergers and acquisitions have developed very quickly in China. …

Selection and institutional shareholder activism in Chinese acquisitions

PurposeThis paper aims to investigate the role that institutional shareholders play in acquisition decisions using micro data in the Chinese stock market during 2003‐2008.Design/methodology/approachAcquisition decision is the selection and coordination process of shareholders as strategic alliances, which is determined by corporate acquisition ability, composition of institutional shareholders and concentration of tradable share (TS) in China. The paper uses the Heckman selection model to surmount the selection biases in acquisition decision.FindingsThe paper finds that institutional shareholders, including qualified foreign institutional investors (QFII), social security funds (SSF), security firms (SF) and security investment funds (SIF), as well as TS concentration, affect acquisition probability rather than annual acquisition scale. SSF, SIF and TS concentration can increase acquisition probability while QFII decreases it.Research limitations/implicationsThis paper suggests a strategic alliance model in which institutional shareholders choose whether to collaborate with controlling shareholders and management. However, detailed information of the selection and coordination process is unavailable in the authors' data. Future research need provide more evidence of this postulate.Originality/valueThe paper contributes to the published literature in three ways. First, it offers a model to understand the selection and coordination process of acquisition decision. Second, it investigates whether institutional shareholders could effectively monitor annual acquisition scale. Third, it identifies the Heckman selection problem that institutional shareholders could affect PLCs' acquisition decision on whether to acquire rather than how much to acquire.

Cross-border M&A and firm value: Evidence from Chinese acquisitions of Japanese firms

We study the effect of mergers and acquisitions by Chinese acquirers of Japanese targets (China-Japan M&As) on the firm value. Using the data on China-Japan M&As in 1990-2009, we find that China- Japan M&As show a greater positive effect on stock prices for the targets than for the acquirers. We also observe the following tendencies: 1) the lower the management efficiency of the target is, the greater the market reactions are; 2) a bailout M&A generates greater market reactions for targets than does a non-bailout M&A; 3) capital participation imparts greater market reactions for the target than occur with other forms of M&A; and 4) targets experience smaller market reactions from the subsidiary sales than occur with other forms of M&A.

Access to global market of China��s private firms in manufacturing: A multiple cases study of cross-border M&A

The research examines the issue of cross-border merger and acquisition (M&A) by firms from China in developed countries: an important phenomenon that has recently found increasing emphasis in international business study. In analyzing Chinese acquisitions of foreign firms in the different industry, the paper addresses the question of why firms from emerging countries are willing to acquire companies from industrialized economies, and what capabilities to support them to bid successful in the global market. Using cases study evidence and interview data, the paper finds explanations for the decision to finish the M&A action to both of Chinese firms and overseas target firms. The results show that foreign firms can gain substantially from the global ambitions of the Chinese private firms for the advantages of their own business objectives. This is due to complementarities in the motivations for engaging in the deals, as well as the underlying international development needs of both firms. Most importantly, in the context of smaller-scale firms in emerging countries acquiring advanced economy firms, motivations on both sides of the acquisitions appear to go beyond the commonly known goals such as technology transfer and market access, as the acquisitions provide the firms involved with conditions favorable to expansion into previously inaccessible market segments in home or host countries.

Macro Determinants of Chinese Cross-border Mergers and Acquisitions in Developed Markets

This paper investigates the factors determining the level of cross-border mergers and acquisitions (CBMA) by emerging market firms in developed markets. We draw on traditional economic and the orga...

Locational determinants of internationalization: A firm-level analysis of Chinese and Indian acquisitions

Summary On the basis of a global firm-level dataset of Chinese and Indian acquisitions, this paper analyzes how country-, industry- and firm-specific determinants affect their location choice. Using conditional logit models, the importance and impact of the market and institutional environment, and the natural resource and strategic asset endowment of host countries are assessed for acquisitions in different industries, in particular, the mining and high-tech sectors. While better rule of law, regulatory quality and control of corruption are found to be important for India’s although not for China’s acquisitions, political stability proves to be a negative estimator for both countries. Yet this counter-intuitive effect is fading when the deal is large, and the profitability of the target is high. However, in the mining industry, Chinese and Indian acquisitions are more likely to take place in resource-rich countries with unstable political environments, poor rule of law, and deficient control of corruption. This sends an alarming message that Chinese and Indian corporations invest in countries with poor legal systems and more corruption when acquiring assets abroad in the mining industry. This can be strategically motivated as these companies invest in countries that are similar to their own institutional background, such that they would have less competition and a better chance to succeed. This is also partly driven by the fact that some of their acquisitions in the mining sector in more developed countries have been blocked and they have been forced to direct their investments to less institutionally strong resource rich countries. Besides, these countries also prefer investments from emerging countries that are less inclined to attach conditionality. However, it remains to be seen whether these companies are apt to deal with these conditions. In this respect, companies from India have the advantage of more international experience as compared to their Chinese counterparts, although controlling for the acquiring firm’s experience does not yield any significant results. In more technological markets the results indicate that Indian firms prefer to acquire competitors in less competitive host countries, as indicated by patent and trademark endowments. However, patents and trademarks do attract Chinese acquisitions, but only in high-tech manufacturing sectors. Taken together, this result indicates that Chinese firms seem to be more aggressively targeting technological assets while Indian firms prefer competitors in less competitive markets. Indian firms are going out on the basis of their existing ownership advantages and acquiring firms in developing countries, while Chinese firms target more technologically advanced country firms.

Experience of Canadian and Chinese acquisitions in Kazakhstan

Our intention is to explore and describe the nature and the role of social integration mechanisms that moderate relationships between cultural distance and social integration. We followed one company, currently named KazOil, over 10 years and during two consecutive acquisitions by very different MNCs (Hurricane and CNPC) from two different national cultures (Canada and China, respectively). We found differences in the levels of post-acquisition social integration of the two acquisitions. Surprisingly, a more culturally distant MNC from a national culture perspective was more successful in achieving post-acquisition social integration than a culturally close one. We ascribe this to the fact that although both acquirers made extensive use of both formal and informal social integration mechanisms, they favored different types. We also specify other contextual variables which may explain the above findings.

Western ostracism and China’s presence in Africa

Viewed within the context of China’s history, development, and present conditions on the one hand and the geopolitical and economic situation on the other hand, this article argues that China’s increased presence in Africa is the result of China seizing opportunities which arose in the wake of ostracism by major developed countries in their response to Chinese acquisitions in the energy field, rather than a carefully planned policy programme on the part of the Chinese. The consequence of China turning its attention to Africa to gain access to natural resources has been an increase in overall Chinese investments, as the central government has come to realize the full potential of Africa as a business partner.

Gaining from the global ambitions of emerging economy enterprises: An analysis of the decision to sell a German firm to a Chinese acquirer

Abstract This paper examines the issue of cross-border acquisitions by companies from emerging economies in industrialised countries: an important phenomenon that has recently found increasing emphasis in international business research. In analysing Chinese acquisitions of German firms in the machinery and equipment industry, the paper addresses the question of why firms from industrialised countries are sold to companies from emerging economies. Several real and imagined reasons may induce the German side not to sell; nevertheless, this type of acquisition occurs with increasing frequency. Using case study evidence and interview data, the study finds explanations for the decision to sell to a Chinese company. The results show that German firms can gain substantially from the global ambitions of the Chinese firms for advancement of their own business objectives. This is due to complementarities in the motivations for engaging in the deals, as well as the underlying strategic needs of both firms. In addition, the specific nature of the cooperation between both firms instils in the German managers a sense of control and security—either real or merely perceived—creating conditions that are favourable to the selling decision. Most importantly, in the context of emerging economy enterprises acquiring advanced economy firms, motivations on both sides of the acquisitions appear to go beyond the commonly known goals such as capital transfer and additional market access, as the acquisitions provide the companies involved with conditions favourable to expansion into previously inaccessible market segments. The findings of this study provide useful guidance for the development of future strategic relationships between firms from industrialised and emerging economies.

Learning from Dragons who are Learning from Us:: Developmental Lessons from China's Global Companies

W hen Napoleon Bonaparte made this statement he may well have been envisioning the global economy in the 21st century. Since China opened its doors to the West thirty years ago, there has been a dramatic change in China’s economic fortune. The evolution of Chinese businesses from closed door isolation to internationalization, and even global integration for some, has been dramatic and swift. As these firms matured, there have been major shifts in corporate strategy, technology management, and human resource and talent management practices, especially among globally competitive, leading edge Chinese firms. Americans and Europeans are beginning to notice, and even fear, Chinesemultinationals. They have come to our attention primarily through high visibility media coverage of Haier’s bid to acquire Maytag, CNOOC’s bid to acquire Unocal, and Lenovo’s successful acquisition of IBMs’ computer business. This visibility is the tip of the iceberg regarding aggressive Chinese acquisitions of foreign companies, 62 percent of which are in Asia. Chinese energy companies have bought controlling stakes in oil fields from Indonesia to Sudan; China’s largest steel-maker, Baoshan Iron and Steel, has bought into iron ore mines in Brazil to ensure reliable supply, and is part of a consortium seeking control of Canada’s largest mining firm, Noranda. Acquisitions are one of many paths taken by Chinese multinationals’ as they grow toward global dominance in their industries. There is no doubt: the dragon has awakened. Conventional wisdom suggests that there are three principal reasons for Chinese companies to expand abroad.

Just How Capitalist is China?

In 2004, Lenovo, a computer maker based in China, acquired the manufacturing division of IBM. This event, coming off the heels of the news that China had contributed more than the United States to global GDP growth, took the world by storm. Richard McGregor (2004), a reporter for the Financial Times , captured a widespread sentiment when he wrote that the purchase was “a symbol of a new economic era, of how a fast-rising China had suddenly grown powerful enough to subsume an iconic American brand.” Princeton economist and New York Times columnist Paul Krugman (2005) had not been alarmed with Japanese acquisitions in the 1990s but he was about Chinese investments. He believed that the Chinese corporate acquisitions posed a great threat to the United States. There are even those who hailed the Lenovo acquisition as heralding a new world order with China at its center (Shenkar 2006). Business-school academics are particularly enamored with Lenovo. For them, Lenovo is proof positive of China's fertile entrepreneurial environment and rising competitiveness. In his book, The Chinese Century , Oded Shenkar, a professor at Ohio State University, rejects the notion that China lacks its own homegrown corporate giants. Lenovo, he argues, is just as homegrown as the best of the Indian corporations, such as Wipro or Infosys (Shenkar 2005). Lenovo is also featured prominently in Made in China: What Western Managers Can Learn from Trailblazing Chinese Entrepreneurs , a book by Donald Sull, a business professor at INSEAD (Sull 2005).

The economic impacts of Mergers and Acquisitions: modelling and application

This paper presents a dynamic Computable General Equilibrium (CGE) model for China by incorporating the scale economy and imperfect competition into the MCHUGE model. Based on the Cournot equation, we derive a link between the share weighted price-cost mark-up across all firms in industry and the absolute degree of concentration (CRn) index and Hirschman-Herfindahl Index (HHI). Using the extension model, this paper gives an empirical illustration to analyse the impacts of the Chinese steel industry's Mergers and Acquisitions (M&As) on China's macro economy and industries.

Determinants and directions for Chinese weapons imports

Abstract This article assesses and presents the determinants and directions of Chinese acquisitions of weapons and weapons technology from abroad, focusing on major conventional weapons and their relevant technologies. Following a brief development of historical themes which continue to affect Chinese military‐related imports today, the study considers the principal contemporary domestic and international determinants which contribute to shaping Chinese arms import policies, and the type of foreign arms acquisitions likely to result from those policies. In analysing past and current security policies, weapons development policies, foreign weapons procurement policies, the study reaches four main conclusions. First, a wide range of problems — including prohibitive cost, political and bureaucratic infighting, absorptive capacities, managerial and administrative roadblocks, and supplier controls — stand in the way of a Chinese military modernization strategy based on foreign procurement. Second, with the exc...