Chinese companies are showing more interest in overseas acquisitions now that the United States subprime mortgage crisis has provided some bargain opportunities, industry experts said at a forum in Shanghai.
Experts said Chinese companies see the benefits of diversifying into other markets.
However, Chinese companies should pay attention to integration after any merger and be aware of risk control, they said.
"To conduct mergers and acquisitions is the quickest and easiest way to penetrate a new market, boost core competitiveness such as building a brand, obtaining technology or establishing distribution networks," said Zhou Qingtong, vice president of Lenovo Group, at the CFO Leadership Forum concluded yesterday.
"Also, it is a requirement for Chinese companies to expand quickly and fend off challenges from rivals both at home and aboard."
Lenovo Group completed the purchase of IBM's personal computer business for US$1.25 billion in 2005 and became a pioneer in overseas acquisitions for Chinese companies.
According to the Ministry of Commerce, China's overseas investment rose to US$33 billion last year from US$21.2 billion in 2006. It was the first time that flow of capital leaving the country was bigger than the inflow.
A survey by CFO China, a magazine under the Economist Group, also suggested more Chinese companies have plans to acquire foreign companies.
It showed that around 47.5 percent of Chinese companies responding to the survey had the will to conduct M&As abroad in March, compared with 36 percent in December.
"The timing is good to buy a foreign company when the US subprime mortgage crisis forces revaluations. Also, the demand to diversify and globalize drives Chinese companies to conduct overseas M&As," said Wu Chen, editorial director of CFO China.
"But many Chinese companies encounter obstacles due to protectionism or political motives. Also, after the deal is done, many find it harder to achieve real integration, especially when the core gain in the acquisition is a brand or its customers," said Wu.
He suggested Chinese companies pay more attention to balancing the investment impulse with risk control and take it as a learning process at the moment when conducting overseas M&As.
(Shanghai Daily May 30, 2008)
