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Overseas M&As challenging
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CHINESE corporations face multiple challenges as they attempt to seek expansion through mergers and acquisitions overseas, Bain & Co said in a report released yesterday.
The report highlighted challenges in unexpected macro risks overseas such as government resistance and exchange rate, improperly executed diligence, and ineffective integration of cultural and governance issues.
“Chinese companies have been gaining experience in M&A activities both domestically and internationally,” said Philip Leung, head of Bain’s M&A Practice in Asia-Pacific.
“While all signs suggest Chinese players have the potential to evolve into a major force in the global M&A market, there are some valuable lessons they can learn, given the complexities of the global market.”
Bain suggested four key factors that these companies might consider to ensure their M&A success such as having a clearly articulated and differentiated M&A strategy, deals that could withstand strict scrutiny, rigorous diligence process and proactive and disciplined integration process.
China’s outbound transactions are led by private enterprises by both value and number of deals although state-owned enterprises are still the dominant players in mega-deals.
Last year, there were 405 overseas M&A deals involving Chinese corporations worth US$79 billion, the report said.
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