Chinese Acquisitions in Developed Countries

The past fifteen years have seen a major breakthrough for Chinese Multinationals. Today, a fifth of the Fortune Global 500 companies are from China. Their rise is reminiscent of the emergence of U.S. companies post-World War II. Today, Chinese companies account for more than half of the top five firms across the Banking, Automobile, Crude Oil Production, Engineering and Construction, Logistics, Metals, Mining, Petroleum Refining and Telecom sectors. Yet, their behavior differs from that of traditional multinationals. While for American companies the priority has been the optimization of shareholder-value, Chinese companies have prioritized growth over profits. This expansion has moved beyond natural markets to advanced economies, particularly in service-based, consumer-related or other “new” industries such as renewable energies. Likewise, the increased involvement in global Mergers and Acquisitions (M&As) is one illustration of this ascent. The competitive advantages are diverse. First, Chinese MNCs have lower production costs compared to their counterparts in advanced economies. Second, they follow a strategy in which revenues are maximized at the expense of gross margins. Third, since a majority of customers in China still yield low purchasing power, Chinese companies are prone to design products/services in more cost-effective ways.

In this chapter, we propose an exploratory analysis of the Chinese acquisition of foreigner companies by state-owned enterprises during the last ten years (2008–2017). Cross-border merger and acquisition (M&A) carried out by Chinese companies have shown strong growth, and have gradually emerged as the dominant vehicle for Chinese outward investment. Our aim is to understand the main dynamics underling the phenomenon of Chinese state-owned enterprises acquisitions in advanced countries. For this purpose, in our analysis we target only mergers and acquisition of companies in western countries in the last ten years. Our data collection returned a sample of around 150 cases. We use both quantitative and qualitative data to get insights about the main patterns of acquisition, industry choice, and country location. Moreover, we try to fill the gap related to the understanding of the rationalities for such strategic-asset-seeking M&A. Our conclusion contributes to the literature on international M&A and supports the business-oriented strategy of state-owned enterprises in dealing with cross border acquisitions.

Since the end of Great Recession about a decade ago, the 20 biggest emerging market economies have become the drivers for global outward foreign direct investments (OFDI) (Casanova and Miroux in Emerging Market Multinational Report, 2017), and these capital outflows are increasingly directed toward developed countries in form of international mergers and acquisitions (Thomson Reuters in Mergers and acquisition review, 2018; UNCTAD in World investment report: investment and new industrial policies. United Nations 646 Publications, New York, 2018). Particularly China has become a key player in the global market for corporate takeovers since the turn of the century. The country already constitutes the world’s second largest economy (and largest emerging economy) for OFDI through international mergers and acquisitions, second only to the United States. In fact, the total transaction value of outbound international mergers and acquisitions of emerging market multinational corporations (EMNCs) from China amounted to nearly US$256 billion in 2016, with particular focus on target companies in developed economies (Casanova and Miroux in Emerging Market Multinational Report, 2017). Due to the significant capabilities gap between EMNCs from China and developed market companies, however, international acquisitions of the latter by the former require a unique post-acquisition integration approach that differs from those prescribed by extant research. In addition, due to the unique institutional environment of China, which is characterized by a considerable oversight and influence of the central government on the foreign market entry and location decisions by Chinese companies that are conducting outward foreign direct investments, a better understanding about the specific institutional demands and legitimacy pressures is needed for this context. This chapter aims to address these issues by examining the unique institutional environment of China in the context of the internationalization strategies of indigenous firms through acquisitions in developed markets, and the related, context-specific integration approaches Chinese EMNCs employ for these transactions.

This paper aims to shed light on the intricate post-merger integration process between German and Chinese firms. The findings of this paper suggest that, while Chinese companies try to use more sensitive and cultural aligned methods for in their integration phase, German firms make use of faster and more aggressive modes. The reasons for this can be derived from cultural and knowledge influence, which affect integration mode decisions on various levels. In line with well-known theoretical models two in-depth cases studies are performed to compare Chinese with German integration peculiarities. This paper underlines the importance of careful integration efforts in cultural different and complicated merger situations to prevent problems and at the same time stresses the collaboration, communication as well as trust as main success factors for the integration phase.

This paper explores the challenge of general lack of specific interest displayed by the Chinese in the context of co-operation, trade and inward investment facilitation in Finland. The paper is mainly based on data obtained from interviewing individuals working for local governments in Finland and one of the state agencies responsible for attracting foreign investment. The study uses Speech Codes Theory (Philipsen in Developing communication theories. State University of New York Press, Albany, pp. 119–156, 1997) when analyzing the cultural aspects of expectations regarding communication between Chinese and Finns. Finnish expectations regarding this type of communication are that it should be direct and task-oriented, because they feel pressure to yield real results quickly and efficiently. According to interviewees, lack of serious interest, vague government guidelines, the longer time needed to build relationship, and involvement of intermediaries all contribute to the difficulty to move the discussions to a more specific level of focus. The paper addresses challenges and opportunities associated with possible Chinese acquisitions in developed countries, adopting a case study approach regarding Finland.