Chinese enterprises in overseas mergers and acquisitions trend growing (2)

Performance of China’s private enterprises stands out in the overseas merge and acquisition cases surpassing state-owned enterprises in quantitative term, which trend is believed stronger. The main reasons for that are: First, little opportunity of private companies’ merge and acquisition in domestic market. Private enterprises have less obstacles in foreign countries purchasing market; Second, Geely Auto’s bid for Volvo has set a good example for private companies; Third, government provides convenient conditions and strong support for private enterprises that venture out.

Currently, China’s economy mode is at the transition period from the resources-relied extensive growth to innovative-led intensive growth. Overseas purchasing will accumulate energy for Chinese economic transition.

In the short run, operational difficulties of western companies will still continue. There will translate into more opportunities for merger and acquisition, which shows the characteristics of buyer market.

According to a research released by German private equity SBC-AG, more than 110,000 medium-sized and small enterprises need buyers in Germany from 2012 to 2016.

As the continuous expansion of overseas merger and acquisition in quantity and scale, risks and difficulties of China’s enterprises are increasing. A monitoring report on global investment trend released by United Nations Conference on Trade and Development revealed that the percentage of investment restrictive policies in some countries has increased from 3 or 5 percent in 1990s to 30 percent. Some countries have picked up protections towards China’s investment.

In addition, different cultures, legal system, social system and operational principals will put China’s buyers to the test. A report about China's investment outside the EU issued by the Chamber of Commerce of the European Union in China showed that 78 percent of the Chinese enterprises that invested in the EU have faced operational problems.

Meanwhile, factors like lack of international operation talents and scarce capability of building successful business model have blocked the overseas merger and acquisition of Chinese enterprises.