On the oversea Merger and Acquisition of China Company Essays

On the oversea Merger and Acquisition of China Company On the oversea Merger and Acquisition of China Company 1. Introduction The global economic integration and global economic liberalization has promoted the fast growth of international merger & acquisition (M&A). With the deep development of global economy, M&A is booming like rising wind and scudding cloud, which has became one of the most important impetus of foreign direct investment (FDI) theories and global economic development. Therefore, comprehensive analyses of relevant theories and practices as well as relevant summaries of experience and lessons in these activities are of big significance. Especially in China, all of those will do much favor in the aspect of improving Chinese enterprises' proficiency in the worldwide competition. Despite of some limitations, the features of this dissertation can be summarized as follows: On the basis of related theories of international M&A, this paper chooses some innovative but important problems in oversea M&A activities such as financial strategic issues, financial risks and performance appraisal, which are rarely covered in existing literatures on this subject. The study on the financial problems of Chinese oversea M&A is closely according to both successful and failed cases of Chinese enterprises which show a scientific attitude of this dissertation towards this subject. This dissertation has filled in some blank arrears in this subject and hence it has preferable value to helping Chinese enterprises to improve multinational operation and build up global competitiveness in the world. 1.1Research background Stigler G. J. (1993) has conducted an investigation on the American large enterprises and pointed out that almost all the large enterprises researched were beneficial from the manner of M&A to some extent and almost all the American large enterprises did not depend mainly on internal expansion to make a difference. Despite the American large enterprises, historically speaking, the development of all the international enterprises across the world had demonstrated this argument and in some degree the history of international enterprises is the history of international M&A. So far there have existed five significant M&A waves in the history since 1870s. The first one occurred in 1870s and the period from 1898 to 1903 was the highlight of it. The first one was focused on the M&A in homogeneous industries which was actually horizontal M&A. The second one, on the contrary, was vertical which happened among enterprises of different levels in homogeneous industry. It existed from about 1916 to 1929. Moreover monopolies also appeared in several industries during the second period. From 1950s to the end of 1960s, the third M&A stream happened and it featured M&A diversification among different industries rather than homogeneous industry. From the middle of 1970s to 1980s, it was the time of the fourth one and it was characteristic of hostile takeover and leverage buyout through wide use of financial instrument. With the fast development of globalization, investment liberalization, international trade liberalization and capital market integration, a new highlight happened from the middle of 1990s till now. Compared with the former ones, the latest has many special characteristics. Firstly the scale of it is rather large. From the year of 1990 to the year of 2004, the number of M&A cases across the world has increased from 9000 to 20000 and the money used in relevant fields of M&A has also rose from 290 billion dollars to 1844 billion dollars. According the data from Dealogic which serves as the supplier of global financial data, the total money spend on M&A across the world in 2005 reached 2900 billion dollars which increased by 40% compared with that in 2004 and ranked number one during the period from the year of 2000 till now. Moreover, the money spent on single M&A case has also reached the top of its history. For example, in 2000 American Online purchased Time Warner at the cost of 155 billion dollars. In 1999, Pfizer spent 82.4 billion dollar on the purchase of Warner-Lambert. Exxon took over Mobil at the cost of 8.14 billion dollar in 1998. Then the second characteristic is that the horizontal type of M&A captures the predominant position. Most of the existing M&A events have adopted horizontal manner, namely M&A among homogeneous industry and took place on a large scale. Furthermore, these M&A events have