XUE, Junlin
(2016)
Cross-border Mergers and Acquisitions by Chinese Firms: an Analysis of Performances.
[Dissertation (University of Nottingham only)]
Abstract
With the booming of the world economy, globalisation seems to have become an unavoidable trend, making each part of the world interrelated and interactive. During the past few decades, a large quantity of firms seeking growth and expansion have chosen merger and acquisition (M&A) as one of their main strategies. The United Nations Conference on Trade and Development (UNCTAD) states in 2000 that the amount of cross-border mergers has been on the rise and cross-border mergers have become the fasted means for those companies pursuing global expansion. Erel et al. (2012) stand for this point that the amount of international takeovers have dramatically increased from 23 percent in 1997 to 45 percent in 2002, and the majority of transactions are cross-border ones in developed country.
However, even there being some wealth effects that acquirers can make positive although small abnormal returns upon merger deals (Fuller et al., 2002), several scholars come up with opponent views. Both Aw and Chatterjee (2004) and Moeller and Schlingemann (2005) find that the cross-border takeovers create lower returns than the domestic ones. It is agreed by both that cross-border deals have higher potential gains along with higher potential risks. The potential gains include greater market shares, high-quality resources and increased economies of scale while the potential risks include geography distances, cultural distances and political opposition.
Despite this, as a matter of fact, many developing countries have realised the benefits of cross-border deals. China is a good example, which has been proved to surpass South Korea and Japan with respect to cross-border merger investments (UNCTAD, 2005).
On one hand, for the purpose of integrating into the world competition, many Chinese firms have begun to create their global strategies, such as to acquire brand, advanced technologies and managerial expertise. A typical example can be the acquisition between Lenovo and IBM in 2005. On the other hand, Chinese government acts as a wise leader to encourage its entrepreneurs to engage in the global competition by investing overseas. The decisions such as the Open-door policy in 1978, the Go-out policy in 1999 and the WTO accession in 2001 all have offer chances for Chinese firms to be involved in the world trend of cross-border merger activities. In return, these firms can contribute to the high-level growth of Chinese economy. Apart from these, more details will be discussed in the section of Literature Review.
Although the growth of Chinese acquirers can be achieved through cross-border deals, many of them are struggling to realise their synergies and obtain positive returns. Thus it still remains to be seen that whether most of the Chinese firms can benefit from cross-border mergers. Therefore, the aim of this dissertation is to conduct empirical studies on the performances of the Chinese acquirers and examine the possible determinants for them to achieve positive results.
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