Chinese Outbound Mergers and Acquisitions
How have Chinese firms expanded through mergers and
acquisitions with European firms over the last years and what
are the prime reasons for this expansion?
by Ole Clement
Ole Clement Bachelor’s Thesis Seminar Student ID: 10047581 Academic year: 2013-2014 Supervisor: dr. G.T. Vinig Semester 2, periods 2 and 3 Submitted: June 28th 2014 Amsterdam Business School
Abstract
The purpose of this study is to provide overview on Chinese mergers and acquisitions with European firms over the last years and to identify what the underlying reasons for this expansion are. By way of including the relevant cases of Chinese mergers and acquisitions in Europe and identifying the underlying motives, a pattern is developed and conclusions are being drawn. The research question reads: ‘’How have Chinese firms expanded through mergers and acquisitions with European firms over the last years and what are the prime reasons for this expansion?’’.
There are several reasons for conducting research on this subject; Chinese firms have moved along with national economic growth and are of great influence on global trading. Through M&A that influence is imposed onto firms from other parts of the world, such as European ones. The fact that Chinese-European M&A activities – conclusions will show this – have steadily increased over the past three decades gives rise to the question what the exact underlying motives for this expansion are. The greater reason for research on this subject, therefore, is that it provides insights that’ll be applicable in real-world trading and usable to European and Chinese firms who may engage in mergers or acquisitions in the future.
As is addressed in the second chapter, this study is being conducted by qualitative research in the form of a literature review. Sources such as webpages and corporate reports are also being used and in fact found to be very useful. A set of real-life Chinese-European M&A transactions is also being incurred. To this set of data certain criteria apply; obviously M&A transactions must have occurred between a Chinese acquiring party and European acquired party. Also this transaction must have featured a minimum deal value of US$1.000.000,-. Finally, in order to guarantee relatively recent data, the transaction must have occurred between the year 2000 and the present.
motives are being investigated. Subsequently, the fourth chapter features analysis of the literature research in order to gather and list results.
The fifth chapter features the final conclusions that emerge from their respective sections in the literature study and the results chapters. The main conclusions coming forth from the literature research are being addressed in the first paragraph:
* Chinese-European M&A activities have consistently expanded and elaborated since 1978.
* Chinese-European M&A activities have proven themselves to be relatively unaffected by macro-economic decline.
* Strategic asset-seeking is a key driver for Chinese firms to engage in M&A activities.
* Government control is a key driver for Chinese firms to engage in M&A activities. * Ownership advantages present a key driver for Chinese firms to engage in M&A activities.
* Resource related advantages presents a key driver for Chinese firms to engage in M&A activities.
Secondary conclusions are being drawn in the second paragraph:
* Reaching far-away consumers is a supporting motive for engaging in foreign M&A activities.
* Gaining competitive advantages in domestic markets is a supporting motive for engaging in foreign M&A activities.
The sixth and final chapter features a discussion and evaluation on the findings of this study. Also the implications that apply to Chinese and European firms who are active in this field are being pointed out and discussed. Furthermore, the limitations that this research has had to cope with are being discussed. Limitations include for instance a limited timeframe and the gathering of reliable data. In the final paragraph the suggestions for further research are made. Any supporting information and relevant data are being provided in the appendix section.
Table of contents
Abstract ………... 2
1. Introduction ……… 5
2. Methodology ……… 7
2.1 Sources of information ……….. 7
2.2 Research design advantages and limitations ……….. 8
3. Literature research ……… 9
3.1 Overall Chinese M&A development ………. 10
3.2 Relevant cases of Chinese M&A ……….. 13
3.3 Underlying motives ……….. 16
4. Results ………... ……... 21
4.1 Overall M&A development ……….. 21
4.2 Results on sampled cases ………..………. 23
5. Conclusion ………... 26
5.1 Conclusions regarding research question……...……….. 26
5.2 Secondary conclusions .………. 28
6. Discussion ……… 30
6.1 Results evaluation ………... 30
6.2 Implications …….……….. 31
6.3 Research limitations ……….. 33
6.4 Suggestions for future research ……….. 34
Bibliography ……… ……... 37
Appendix ………. 40
Paragraph 1 – Full ING Chinese M&A Transaction list ……….. 40
1. - Introduction
One of the greater characteristics of the people of China is the fact that not that long ago, all 1.351 billion of them were being hidden behind the so-called ‘Bamboo Curtain’. At that time the communistically oriented Chinese government deemed it unsafe and unprofitable for the people of China to interact with the outside world in any way or form, much like North Korea today. All of that changed significantly after the death of communistic dictator Mao Zedong in 1976 (Shang Dynasty - the first Chinese 2014;). China’s interaction with the outside world has increased since in multiple ways; whether it entailed military contributions, treaty frameworks, or their firms starting to compete in global economics.
Especially the latter of the three is extremely important. China has developed itself into an economic powerhouse over the years and is therefore of great influence on global trading and economics. Not only in the sense that it is a great source of cheap labor in the world, but also that its firms impose great influence on global economics. In existing literature, the concept of rapid expansion by Chinese firms is mentioned and supported quite often. For instance, a study by Rui and Yip (2008) found that Chinese firms expand because of the same strategic goal, which is to gain competitive advantages. Rarely, this is being thoroughly investigated to find out what the exact reasons for this expansion are. Why, if it has been the usual way of doing things in China for so long, this sudden rapid expansion towards the global market? What are the specific reasons for that?
An article by Deng (2009) tried to answer similar questions; why do Chinese firms tend to acquire strategic assets in international expansion? One could say this subject is greatly inspired by this article. In this study though, the focus will lie specifically on Chinese mergers and acquisitions in Europe. Which narrows down the field of study, and should reveal the deeper reasons and motives for these mergers and acquisitions.
An article by Child and Rodrigues (2005) argued that Chinese firms form an example to for instance Brazilian firms in competing globally, does the same conclusion apply
when it comes to European firms? An article by Very et al. (1997) states that a potential ‘culture-clash’ may really hurt a merger or acquisition. Does this possibility apply to a potential Chinese-European merger or acquisition? How significant is the influence of the Chinese government in these transactions, as is suggested by Chen and Young (2009)? These are questions that can be asked.
So the concept of Chinese expansion in Europe is where the focus will be on in this study. Chinese firms form a powerhouse in global economics and in this study it is evaluated how they have increasingly expanded in foreign European countries over the last years and what the prime reasons for this rapid expansion are. More
specifically, this study will try to answer the following research question: ’How have Chinese firms expanded through mergers and acquisitions with European firms over the last years and what are the prime reasons for this expansion?’.
As one may observe, the greater goal of this study is to identify at which pace and using what ways Chinese firms have expanded through mergers and acquisitions with European firms, and subsequently, identify what specific underlying reasons and motives may be. This thesis should primarily form an addition to existing literature on this, and should be applicable and usable to European and Chinese firms who may engage in mergers or acquisitions in the future.
2. - Methodology
This study will be conducted through qualitative research. That is because of several reasons. First of all, the answer to the research question lies primarily in mergers and acquisitions by Chinese firms that have already occurred in the past. Literature on this topic and other supportive sources of information should therefore be sufficient to answer the research question. It is a way more valid method of conducting research to gather previous literature on this topic and reaching conclusions based upon that literature, as opposed to conducting empirical research. Of course empirical research could provide statistical information and support, but that is not of any real value to this topic; the facts upon which the conclusions of this thesis will be based are all being provided by the analyzed literature, any further statistical support is not critical to the reliability and validity of this study.
As is suggested by the introduction, the level of analysis is an international as well as intercontinental level. When built and finished, the conceptual model should be applicable to primarily European and Chinese firms. It should be of good use to firms from both sides when it comes to future mergers and acquisitions or any other form of interaction or cooperation.
2.1 – Sources of information
As said earlier, the study will be conducted by qualitative research. Therefore it is absolutely critical that a large and valid base of existing literature is available and put to good use. The prime way of collecting relevant papers and other literature is through digital instruments like JSTOR, Mendeley, Google Scholar, and the thesis database of the University of Amsterdam, containing previously written theses by other students. Supported by analogue sources such as the Library of the University of Amsterdam, these will be the prime sources of literature, which will form the
conceptual model and therefore the base of this study.
It is difficult to make distinctions in the validity of different journals in which relevant papers may be published. To secure the validity of the used literature and therefore
this study itself, this will be assessed by looking at the number of times each article is referenced to in addition to the so-called ‘impact factor’ of the paper, which is a sort of grade of the paper’s relevance and quality provided by the ISI Web of Knowledge. Furthermore, the overall reliability and validity of the used literature can be easily improved by using different journals in which the papers are being published. This causes a greater difference in insights and points of view provided by the literature and therefore, a more ‘real-world’ view of the greater subject.
2.2 – Research design advantages and limitations
Of course, there are certain limitations to this way of conducting research. Apart from the fact that this study has a relatively limited timeframe to cope with, – the date of submission of the final draft is set for June 30th
2014 – the exclusion of an empirical research component has its disadvantages. Primarily since it potentially provides quite recent and valid information, but also because it can be a ‘checkup’ for existing literature that is used. It answers the question as to whether the existing literature corresponds with more ‘real-world’ information. Unfortunately, as said earlier in the introduction, there is not really a feasible way of including this empirical component in this study, since this study is based primarily on previous events.
The main advantage of this type of research though, is that it is a very feasible type of research design. Once a sufficient amount of literature is gathered and used, it is very easy to assess the literatures validity and reliability, by ways as described earlier. Also, it seems that this subject lends itself really well for this type of research, since it builds upon previous events (see introduction), making that a real subject-related advantage.
Continuing on the feasibility of this project, judging by the preliminary literature ‘research’ that was conducted, there shouldn’t be any problems in the sufficiency of available literature. As said, the timeframe is very limited, but proper planning and execution should make sure that it is possible to collect proper literature within this given timeframe. Of course it is a necessity to set up a proper plan, which should
3. - Literature study
As pointed out earlier, the key to answering the research question is conducting a qualitative research in the form of literature research. For the sake of keeping this study clear and structured it is critical to have a clear view of the boundaries in which the research is conducted and the way the research is composed.
The first paragraph of the literature study addresses the way Chinese M&A as a whole has developed since its beginnings. Without engaging in research on specific cases (which will follow later on), an overall view of the way Chinese M&A has developed is given. This will form the basis of the rest of the literature research and should provide some insight into the basic concept of Chinese mergers and acquisitions. One may think of this paragraph as a preliminary theoretical framework.
In the second paragraph we elaborate on the previous paragraph, by identifying the relevant cases of Chinese outbound mergers and/or acquisitions in Europe, which together will form the basis upon which results will be gathered and conclusions will be drawn. There are of course criteria that apply to these cases, in order to keep the ‘sample’ of cases that are included in the study valid and representative. First of all, obviously, a transaction must have occurred between a buying Chinese firm and a selling European firm. Secondly, in order to keep the data relatively recent, this transaction must have occurred between the present and the year 2000. Thirdly, a transaction must have entailed a total deal value of no less than US$1.000.000,-. This criterion should narrow down the eligible cases and should make sure that the cases representing smaller mergers and/or acquisitions are not being included. In this study it is the objective to identify motives for M&A among larger firms, large being defined as being able to engage in mergers and/or acquisitions with a value of at least US$1.000.000,-.
In the third paragraph the analysis of the included cases of mergers and/or
acquisitions of paragraph two will be conducted; what are the specific motives of the sampled cases? This paragraph should provide the first insights in the answer to our prime research question. Also the notable differences and similarities between
motives for engaging in mergers and/or acquisitions are being identified. Think of types of motives such as political, financial, differences or similarities between a merger and an acquisition, or between certain countries in which the transaction has taken place, and so on. As is the case in the second paragraph, this paragraph will build further upon the previous one.
3.1 – Overall Chinese M&A development
Europe is viewed as a safe place for investment by Chinese investors (Robinson, A. 2013). In order to understand why that is, it is important to start with an overall idea of the way Chinese-European mergers and acquisitions have behaved over the years. As pointed out in the introduction, it wasn’t until the year 1978 that China started its interaction with the rest of the world (Shang Dynasty - the first Chinese 2014;), and thereby its engagement in mergers and acquisitions. So what have been the major developments in that field from that point onward?
It all started in 1978. After a few decades in which China’s interaction with the outside world was extremely limited, it rejoined the world economy (Chen, C. 1995;). This new policy, well known as the ‘’Open Door’’-policy was introduced by Mao Zedong’s successor; Deng Xiao-Ping. He championed numerous reasons for economic reform, one of which claiming the immense financial opportunities for China (Chen, C. 1995;). During a session of the Chinese Congress in 1979 the ‘’Law of the People’s Republic of China on Joint Ventures Using Chinese and Foreign Investment’’ was signed and adopted, officially declaring legal foreign investments for Chinese enterprises (Chen, C. 1995;). This event is critical in many ways, because it portrays the drastic change in Chinese culture. This event forms the very basis of modern Chinese economics.
This first rather drastic change of policy in China’s economic landscape wouldn’t be the last one. On the contrary, it would mean the start of a series of changes ranging from the year 1978 to the present. It would, however, take some time before this first ‘start shot’ resulted into actual foreign activity by Chinese enterprises. According to
(Cross-Border Mergers and Acquisitions) before the 1980’s. Moreover, the pioneer firms that first carefully acquainted themselves with CBMA and eventually engaged in it, were still largely controlled by the Chinese government (Chen, Y.Y. 2009;).
During the early 80’s though, internationalization became more and more significant in Chinese trading. Up until 1985, the first Chinese firms commenced their
international operations and the Chinese government started to cautiously facilitate opportunities for foreign investments. By 1985, 189 projects were approved by the Chinese State Economic and Trade Commission, amounting to a total deal value of around US$197.000.000,- (Buckley, P.J. 2007;).
During the second half of that decade, from 1986, the Chinese government rapidly liberalized it’s policies on foreign investment and encouraged firms to establish international relations. Some criteria to international partner firms still applied, for instance that they should have sufficient capital, sufficient know-how on operations and overall suitability to be a foreign partner. Approved projects rose incredibly quick from 189 in 1985 to 891 in 1991, totaling a deal value of around US$1.200.000.000,- (Buckley, P.J. 2007;).
During the 90’s, this trend would continue to develop the way it had during the previous decade. The Asian crisis of 1997 and the consequent collapse of some major enterprises would certainly have it’s impact on the pace at which the development took place, but internationalization in the form of mergers and acquisitions was still widely promoted and facilitated (Buckley, P.J. 2007;). Also, a new breakthrough would shortly follow in 1999.
The fact that the vast majority of Chinese firms were under control by the Chinese government of course stems from the pre-1976 communistic era. This concept took some more time to diminish. So-called SOE’s (State-Owned Enterprises) formed a common business model in pre-1976 China. Slowly, this started to change along with other major economic changes as described earlier. In 1999 this development went on a major takeoff when the Chinese government introduced the so-called ‘Go Global’-policy (Chen, Y.Y. 2009;). This Global’-policy’s aim was to promote international
competitiveness of Chinese firms by reducing, and sometimes eliminating, any obstacles or difficulties for Chinese firms to overseas investment (Buckley, P.J. 2007;). Quickly afterwards, in 2001, China made its entrance into the World Trade Organization (WTO). These two events would drastically alter the M&A behavior of Chinese firms compared to their M&A behavior from before these events (Chen, Y.Y. 2009;). Examples of this were: a rise in the scale and the speed at which deals were completed (the majority of deals comprised values exceeding US$100.000.000,-), a larger diversity in firms that were acquired, a larger diversity in countries where the acquired firms were settled, and a rise in horizontal acquisitions (the acquired firms operating in the same branch of industry as the acquiring firm) (Chen, Y.Y. 2009;). Additionally, the target industry moved from manufacturing to high technology (Liao, Y. 2006;).
Chinese M&A continued to expand rapidly. In 2006 alone, 2263 new deals by
Chinese companies were announced. It is estimated that the total deal value amounted to more than 100 billion US dollars (Brandt, L. 2008;). And even though global M&A transactions hit the lowest level since the start of the 2008 financial crisis in 2012 (Clifford Chance, 2012;), ever since the implementation of the ‘Go Global’-policy and the entry into the World Trade Organization, Chinese cross-border mergers and acquisitions have increased year by year (Perkowski, J. 2013;).
The present situation of Chinese cross-border mergers and acquisitions continues its development the way it has done so during the previous decades. An article by Forbes stated that it is likely that it will continue to be an increasing trend for the foreseeable future (Perkowski, J. 2013;). This prediction was supported by an article by
Armstrong (2013), stating that Chinese M&A deals amounted to a total value of 43.7 billion US dollars over the year 2013. Apparently, this amount had more than doubled over the previous five years (Armstrong, A. 2013;). Regarding the future, Bloomberg announced it’s expectation that China, among others, would be engaging in
3.2 – Relevant cases of Chinese M&A
Now that the previous paragraph has provided a background of the field of study in which this subject lies, it is now time for a more specific analysis of some relevant cases of Chinese M&A in Europe. What will follow shortly is a table containing the major Chinese mergers and acquisitions in Europe from the second half-year of 2013. This information is gathered from the Sino-Europe Outbound M&A Review of 2013, provided by the ING Bank. There are two reasons this specific information is used; Firstly, it is that it’s relatively recent: all the transactions occurred within the last two fiscal quarters of 2013, making these transactions very representative. Secondly, the ING Bank is well integrated in Chinese financial markets, as it has nearly 25 years of experience in Chinese trading (Poon, J.;), securing the reliability of the provided information. Trades with an undisclosed deal value or an undisclosed acquiring party are not taken into account. The following terms are used:
Acquiring party: The ‘buyers’ (Chinese) Acquired party: The ‘sellers’ (European)
Date: Date the deal was announced (following: dd/mm/yy) Stakes Sought: Percentage of shares that were sold
Deal value: Total amount acquiring party paid the acquired Firm Type: State-owned (SOE) or privately-owned firm (POE)
X: firm type is not disclosed by the report
Deal values are expressed in millions of US Dollars ($47.9M = $47.900.000,- USD).
Acquiring Party Acquired Party Date Stakes Sought
Deal Value
Firm Type
Zoomlion M-Tec (GER) 20/12/13 100% $47.9M X
CSR ZF Friedrichshafen (GER) 11/12/13 100% $398.9M SOE
Snowkey RefComp (ITA) 09/11/13 100% $11.0M X
CIMC Ziegler (GER) 09/11/13 100% $73.7M X
General Nice & China Minmetal
IRC Limited (RUS) 04/10/13 21% $134.7M POE /
SOE
SANY Palfinger (AUS) 30/09/13 10% $146.1M X
Sovereign Wealth Fund
Uralkali (RUS) 24/09/13 13% $2,000M X
Sundrido Holding San Lorenzo (ITA) 18/09/13 22% $26.7M X
Sinoma Hazemag Group (GER) 30/08/13 59% $137.2M SOE
Zhongrun
International Minig
Vatukoula Gold Mines (UK)
12/08/13 55% $17.6M X
Yongtai Covpress Holdings (UK) 25/07/13 70% $46.1M POE
Shanghai International Group
Mobileye (NED) 07/07/13 27% $400.0M SOE
SANY Putzmeister Holding
(GER)
01/07/13 10% $54.9M X
ASM DEK International (SUI) X/12/13 100% $200.0M X
Hanergy Solibro (SWE) 02/09/13 100% $13.1M X
Hainan Zhenghe Industrial Group
Maten Petroleum (KAZ) 04/12/13 95% $557.4M X
Chint Group ACV (ROM) 30/10/13 100% $9.0M POE
Haier Fagor (POL) 05/09/13 51% $39.8M X
Meisheng Culture & Creative Corp.
Handelsmaatschappij Scheepers (NED)
04/09/13 85% $19.8M X
Hainan Traffic Control
NH Hoteles (SPA) 06/11/13 4% $70.9M SOE
Knight Dragon Ltd.
Greenwich Peninsula (UK)
04/11/13 40% $296.2M POE
Kang Family Fota Island Resort (IRE) 02/08/13 100% $27.0M POE
Ping An Property Portfolio (UK) 08/07/13 100% $387.0M SOE
GF Securities Natixis (UK) 25/07/13 100% $22.7M X
All of the information above is gathered from the ING Sino-Europe Outbound M&A Review (2013). The full list is added to the appendix.
Obviously, not only cases of mergers and acquisitions of the past months are eligible to be taken into consideration. Moreover, it would be way more reliable if cases from previous years would also be taken into account. Less recent examples of Chinese M&A in Europe are provided by Burghart and Rossi (2009), who published a journal article in 2009 on China’s Overseas Direct Investment in the UK (2009). Major acquisitions by Chinese companies in the United Kingdom are listed, along with their motivation to do so. The original table is enclosed in the appendix.
Acquiring Party
Acquired Party
Industry Deal Value Year Motivation
Greencool Technology
Lelyland Product Developments
Automobile Undisclosed 2004 Strategic
asset-seeking Shanghai Automobile Industry Corp MG Rover blueprints
Automobile $67.5M 2004 Strategic
asset-seeking China Zhenhua Oil Ltd. Amlon Trading Ltd.
Oil and Gas Undisclosed 2005 Strategic asset-seeking Nanjing
Automobile
MG Rover Automobile $50.0M 2005 Strategic
asset-seeking Huaxiang Group Lawrence Automotive Interiors
Automobile $6.7M 2006 Strategic
asset-seeking
In other literature, similar examples are presented as well: In 2004, Lenovo acquired IBM’s PC division, and TCL acquired the cell-phone division of Alcatel (Chen, Y.Y. 2009;). Similar to the reasons for the transactions given above by Burghart and Rossi (2009), these deals also emerged from the need for knowledge and skills, as well as the entry into a host market through transactions like these (Chen, Y.Y. 2009;). But the analysis of types of motives will follow within this chapter later on.
For now, the cases as described above will form the sample of relevant cases of Chinese M&A in Europe on which the analysis will take place. They all suffice the pre-set criteria (post-2000 Chinese-European transactions with a minimum deal value of US$1.000.000,-), and therefore form a group of cases which should be
representative for the way Chinese mergers and acquisitions have been developing in Europe the last years.
3.3 – Underlying motives
Now that the critical boundaries are set by discussing the theoretical background in paragraph 3.1 and identifying the relevant cases in paragraph 3.2, a rather vital
component will now ensue: the identification of the critical underlying motives for the M&A cases described earlier.
When it comes to the examples provided by Burghart and Rossi (2009), things are relatively clear. All cases share the same foundation in the sense that they emerged from the necessity for, what Burghart and Rossi call, strategic assets. The acquiring of strategic assets is described by examples: management skills, access to specific industry knowledge, and brands in order to improve the firm’s performance, profile, and competitiveness in the future (Burghart, N. 2009;). It basically comes down to a Chinese firm trying to expand by broadening the range of tangible and intangible assets as the ones described, and thereby securing its future market position. As said this forms the foundation for all the transactions of these five cases, but a distinction is made between the types of assets that the acquiring party purchased. This turns out to be quite a wide range (Burghart, N. 2009;):
Acquiring Party Specific Asset
Greencool Technology Vehicle design expertise Shanghai Automobile Industry Corp. Technology, R&D
China Zhenhua Oil Ltd. Oil fields in Kazakhstan Nanjing Automobile R&D, Technology, Brand
Huaxiang Group Customer network
So there is a difference in the specific type of assets the acquiring party prefers, however it can still be put under the same name; the gains from obtaining strategic assets is clearly a key motivation for Chinese firms to engage in mergers and
acquisitions. This study by Burghart and Rossi is not the only one coming up with this conclusion. Also Athreye and Kapur (2009) conclude that Chinese firms often engage in overseas M&A in order to acquire strategic assets. These assets can be categorized; a lot of cases include the acquiring of assets like new technology, brands, but also raw materials and distribution networks (Athreye, S. 2009;). So their conclusions are
confirms this conclusion as well. Buckley et al. (2007) also argues that asset-seeking is a key motivation for the engagement in overseas M&A by Chinese firms. Buckley et al. further elaborate on this by stating that it is most likely that this principle goes especially for the post-2001 period, when the ‘Go Global’-policy was fully
implemented and acted upon by Chinese firms (Buckley, P.J. 2007;). So when it comes to this part of the sample provided by Burghart and Rossi, it seems to be aligned with the conclusions of other literature, making it safe to state that strategic asset-seeking is a key motivation for Chinese foreign M&A.
Things become more complicated when considering the more recent cases of Chinese M&A in Europe provided by the ING report (2014). Despite being quite elaborate on its statements and findings, the report does not feature a direct motivation per
transaction between the acquirer and the acquired. Still, some patterns are becoming clear when taking a closer look at the overview. First of all, the vast majority of cases involve an acquiring firm that is still under the Chinese governments’ control. As pointed out in paragraph 3.1, SOE’s (State-Owned Enterprises) made for a great portion of existing businesses in China in the past, and still do to this day
(PriceWaterhouseCoopers, 2012;). That raises the question: to what extent is the Chinese government of influence on foreign mergers and acquisitions policies of SOE’s? An article by Chen and Young (2009) tried to come up with an answer to a similar question. Their conclusion, among others, stated that the majority of overseas M&A transactions involved acquiring firms with the Chinese government being the largest shareholder. This results in the problem that private investors may be
unsatisfied with cross-border mergers and acquisitions deals when the government holds the majority of shares (Chen, Y.Y. 2009;). This underlines the fact that governmental influence is a key motive for Chinese cross-border mergers and
acquisitions, but how does this speak from the most recent section of our sample? For starters, the very same ING report features a statement that M&A activities in Eastern and Central Europe are picking up because of the encouragement of the Chinese government (2014). This implies another side of governmental influence; it potentially causes dissatisfaction among other stakeholders, but it is also strong enough to move firms towards overseas M&A activity.
When it comes to our sample, a figure provided by the same report mentions that 38% of all acquiring firms of 2013 were private firms, another 31% were public firms, 17% were State-Owned Enterprises, 12% were mixed between public and SOE controlled, and 2% were mixed between private and SOE controlled. In other words: only 38% of Chinese-European M&A transactions in 2013 featured no governmental influence whatsoever. The other 62% of transactions all included some form of governmental influence (ING, 2014). These numbers align with the theoretical conclusion from Chen and Young (2009), stating that governmental influence is very much present in Chinese M&A, and forms a key driver for engaging in cross-border M&A.
Looking at our sampled cases, so far it has been established that strategic asset-seeking and governmental influence are two key factors in Chinese M&A. But perhaps there are more factors that are not necessarily expressed by our sampled cases. What are other plausible reasons that previous studies have come up with?
The article by Athreye and Kapur (2009) features a few important concepts. First of all they argue that the relatively simple idea of gaining proximity to overseas markets is a motivation to Chinese firms. The thought that China and Europe are literally on the other side of the world from one another is something that in this day and age (the ‘small world’-era, as it’s called) may sometimes be overlooked. When technologies that enable a firm to communicate with its consumer base are not sufficient anymore, and at some point that probably will be the case for most of them, they will need to resort to physical expansion. That is why to many Chinese firms, this is an important motivator for overseas mergers and acquisitions (Athreye, S. 2009;).
The same article points out a rather unusual key motivator, one that is not really linked to any of the ones described earlier. A small group of firms apparently take on foreign mergers and acquisitions opportunities in order to create competitive
advantage over rival firms in their own homeland (Athreye, S. 2009;). When executed properly, firms believe that foreign M&A activities will synergize with domestic activities and therefore will be of value to their domestic chapters as well (Athreye, S.
A rather significant principal is provided by numerous studies. The so-called OLI model is a theoretical model, proclaiming that in principle, foreign M&A activities of so-called MNC’s (multinational corporations) all stem from the advantages that
ownership includes, such as access to production technology or brand names by
acquiring them. Such advantages are gained by using locational advantages, such as lower cost inputs and the ability to serve local markets. Ultimately all of these gains must be internalized by integrating cross-border activities into the firm (Athreye, S. 2009), hence the abbreviation OLI. This principle is also used and described by Child and Rodrigues (2005), stating that this perspective has been very influential and that it is a key motivator for firm internationalization.
This OLI model is also mentioned in a study by Matthews (2006), he argued though that it does not fully account for all cross-border M&A activities and therefore introduced an alternative model: the so-called Linkage, Leverage and Learning-model. Whereas the OLI theory applies to firms that engaged in internationalization from the very beginning, this theory especially applies to what are called latecomer and newcomer firms. Together they form the group of firms that did not participate in internationalization activities by firms during the 1980’s because they either waited (latecomers), or didn’t exist yet (newcomers), and therefore form the ‘’second wave’’ of internationalizing firms. The key point of it is, that international expansion
originates from resource linkage, resource leverage, and resource learning (Matthews, J. A. 2006;). Resource linkage, in this context, means that internationalization offers opportunity for the creation of larger networks, and the linking of a firm’s resources to such networks, enabling that firm to benefit from resources extracted from that network (Matthews, J. A. 2006;). Leverage is closely related, as this portrays the possibility for firms to potentially leverage their own resources (Matthews, J. A. 2006;). Finally, learning portrays the possibility that firms who repeatedly engage in Linkage and Leverage, will eventually learn to perform these activities in a more effective way (Matthews, J. A. 2006;). This model is also mentioned by Athreye and Kapur (2009), they reckon that from this perspective, internationalization contributes to the creation of ownership advantages, rather than just being the outcome of existing advantages. The key difference then, among others, is that the OLI model goes from
the perspective of self-proprietary resources, whereas the LLL model works with resources accessed through linkage with external firms (Matthews, J. A. 2006;). In other words: the first focuses on what resources already are obtained before engaging in internationalization, the second on what resources can be obtained by
4. - Results
In this chapter the critical findings are extracted from the previous chapter and summarized. The first paragraph will provide a summarized overview of the results from paragraph 3.1 on overall M&A development. Afterwards, in paragraph 4.2, the specific results on the sampled cases are provided and discussed (with regard to paragraphs 3.2 to 3.3).
4.1 – Overall M&A development
As you may recall, this study started with an overview of overall Chinese M&A developments, in order to create insights into the concept of Chinese M&A as a whole, thereby creating a theoretical background for readers that may not be acquainted with this subject very well. Literature provided a lot of information on these developments and in the end Chinese M&A developments were narrowed down to a couple of very significant events ranging from 1978 up to the present.
Findings of paragraph 3.1 show that the ‘birth’ of Chinese overseas mergers and acquisitions activities was in the year 1978, when Mao Zedong’s successor Deng Xiao-Ping implemented numerous types of economic reform, among which the so-called ‘Open Door’-policy (Chen, C. 1995;). This event gave way to later
developments in Chinese overseas M&A and would form its very foundations.
From that point on, during the early 1980’s, globalization and internationalization became more integrated in Chinese economics and business. The Chinese government started to more actively facilitate the opportunities for foreign investments by Chinese firms, who gladly took these opportunities and commenced their first operations in 1985 (Buckley, P.J. 2007;). During the second half of that decade, liberalization of policies on foreign investments occurred rapidly and approved foreign projects more than quadrupled over the period of 1986 up to 1991 Buckley, P.J. 2007;).
This upward trend would continue steadily through the 1990’s. It took a bit of a hit during the Asian crisis of 1997, but still found itself widely supported and facilitated
by government (Buckley, P.J. 2007;), thereby continuing it’s positive development without major issues. The next major milestone in overall Chinese M&A
developments took place in 1999, when the ‘Go Global’-policy was introduced by the Chinese government. The goal Chinese policymakers had attached to this policy was to even further reduce and eliminate obstacles and/or difficulties for Chinese overseas investments (Buckley, P.J. 2007;). Needless to say, this policy positively left its marks on Chinese M&A development, as foreign investments started and kept on rising significantly. The fact that this event was shortly followed by China’s entrance into the World Trade Organization caused for M&A developments to flourish more than ever. The scale and speed at which deals were made as well as diversity in host countries and diversity in target sectors increased greatly (Chen, Y.Y. 2009;).
Also during the 2000’s M&A activities kept on expanding and developing. They even proved themselves able to survive the financial crisis that originated in 2008. Even though it was reported in 2012 by Clifford Chance (2012) that global M&A transactions were on their lowest level since 2008, Chinese cross-border M&A activities had still increased every year (Perkowski, J. 2013;). Unsurprisingly, it is estimated hat that the upward trend will keep on going for the coming years (Perkowski, J. 2013;).
What this tells us is relatively simple; overall Chinese M&A activities have simply kept on increasing in size, as well as volume, ever since the foundations for it were laid in 1978. Developments such as larger diversity in host countries and larger diversity in sectors in which target firms operated, rose along with size and volume. In short: Chinese overseas M&A has increased and professionalized staggeringly fast since the beginning.
Something else significant that comes forward out of our findings is that Chinese M&A activities have also proven themselves to be rather immune to unprofitable macro-economic situations. As you may recall, it is reported that both during the Asian crisis of 1997 as well as the 2008 financial crisis, Chinese M&A activities (even though little stagnation occurred) still kept on rising and developing. That
seem to be affected so severely by the current economic situation than what may be found usual in the macro-economic sector, such as real-estate, banking, private equity investments and other related investment opportunities.
4.2 – Results on sampled cases
In this paragraph we continue the results chapter, with regard to the sampled cases that were featured in paragraphs 3.2 and 3.3. As pointed out, our total sample of post-2000 Chinese-European M&A cases consisted of cases that portrayed the most recent situation, provided by the ING Chinese M&A report (2014), as well as cases that portrayed the situation during the early 2000’s, provided by Burghart and Rossi (2009), and Chen (2009). This way a balanced set of samples was created, which should safeguard reliability.
In paragraph 3.3, a key part of the literature study is featured. The set of samples is examined and based upon it, the first key motives for engaging in M&A by Chinese firms are extracted. The case examples from Burghart and Rossi (2009) all share a common ground; they all featured an acquiring firm in need of, what are called, strategic assets. What this means is that Chinese firms simply feel the need to expand on their assets (tangible as well as intangible), and try to do so by engaging in foreign mergers and acquisitions. Despite some differences in types of assets that are sought, it becomes clear that strategic-asset seeking is a key motivator for Chinese firms to engage in overseas M&A. This is confirmed by other literature as well.
The most recent part of the sample set, provided by ING (2014), shows another interesting outcome. As it appears, a majority of Chinese firms that engaged in mergers and acquisitions in late 2013 is still to some degree under the control of the Chinese government. Moreover, it is stated that Chinese M&A activities in Europe are rising due to encouragement of the Chinese government (ING, 2014), which tells us governmental influence is sufficient to make firms engage in foreign M&A
activities. Our sample confirms this, as 38% of all acquiring firms were private firms, and the other 62% of firms all involve some kind of governmental influence, ranging from total SOE control, to mixes between privately-owned and state-owned firms.
The concept that governmental influence is still very much present, and forms a key motivation for foreign M&A activities is also confirmed by other literature, such as the article by Chen (2009), stating that governments may ‘push’ their firms towards M&A activities, even when it may cause dissatisfaction among other major firm stakeholders. So as it appears, governmental influence is a key motivator for firms to engage in M&A.
Apart from these insights that were drawn from the sample set, some other theoretical motivators that did not necessarily pertain to our sample set were featured as well. Two important theoretical models were discussed, as well as some smaller, yet significant, theories. The article by Athreye and Kapur (2009) primarily discussed a widely adopted model: the OLI model, proclaiming the ownership advantages are a key motivator for foreign M&A activities through ownership, locational advantages, and internalization. This model’s validity is supported by for instance Child and Rodrigues (2005).
The second model, also widely adopted, is called the LLL model and developed by Matthews (2006). It especially pertained to ‘’second wave’’ firms, and based its motives for M&A activities on resource linkage, resource, leverage, and resource learning. Apart from the difference in the sense that LLL especially applies to second wave firms, whereas OLI is a universal concept, they key difference is best described as OLI focusing on what resources already are obtained before internationalization, whereas LLL focuses on can be obtained by internationalization. Still both of them are widely adopted and therefore are key motivators for engaging in foreign M&A.
Apart from these models the literature featured other reasons that were deemed significant: first of all there was the simple thought that firms may need to resort to foreign M&A just as a way of reaching a consumer base in other countries (Athreye, S. 2009;). A rather unusual, but in my personal opinion very bright, insight was provided by the same article; stating that some firms engage in foreign M&A possibilities in order to gain competitive advantages in their domestic markets
Considering all of this, there is a two-legged distribution between insights gained from the literature study, the ones provided by theory, and the ones provided by theory that are being backed by our sampled cases. In the following chapter this distinction will be made and the final conclusions will follow.
5. - Conclusion
This chapter will cover all of the final conclusions of this study. With regard to the gathered results, conclusions will be formed in the shape of short statements with a small explanation attached. The overall chapter will be divided into two paragraphs, of which the first covers the conclusions regarding the research question, and the second will address the secondary conclusions, that not necessarily pertain to the research question as directly as the main conclusions do, but are very relevant with regard to supporting the main conclusions.
5.1 – Conclusions regarding research question
As you may recall from chapter one, the research question was formulated as follows: ‘How have Chinese firms expanded through mergers and acquisitions with European firms over the last years and what are the prime reasons for this expansion?’. Since the research question is two-parted, the answer to it must also be two-parted. A total of six main conclusions are drawn regarding this research question. To ensure that it is clarified which conclusions are the most important and relevant they are listed in order from 1.1 (most important/relevant) to 1.2 (‘’least’’ important/relevant) in the first section, and from 2.1 to 2.4 in the second section of the first paragraph. The first two of them, regarding the way Chinese firms have expanded over the last years, are as follows:
1.1 Chinese-European M&A activities have consistently expanded and elaborated since 1978.
As pointed out in paragraph 4.1, Chinese M&A activities have gone through the past three decades following an upward trend that hasn’t let off or declined. European firms form important targets for M&A transactions and are likely to remain so. This is the most important conclusion of the two because it was a prime goal of this research to identify how Chinese M&A has expanded over the years. The conclusion that these activities have consistently expanded directly provides an answer to this part of the research question.
1.2 Chinese-European M&A activities have proven themselves to be relatively unaffected by macro-economic decline.
From that same paragraph, showing from the literature, Chinese-European M&A activities turn out to be rather unaffected by macro-economic downfall. During the crises of 1997 and 2008 Chinese M&A numbers kept on rising. The reason this conclusion is subordinate to conclusion 1.1 is that it does not relate to the prime research question as directly as the first conclusion does. It is more of a byproduct that has come forward out of the studied literature. Having that said, its still of great importance, since it’s a finding that’s potentially of great value to real-world firms that are active in this field of trading.
Now regarding the second of the two parts, we draw the final four conclusions on our results from the sampled cases. Note that these are also formed as main conclusions (as opposed to secondary conclusions, see the following paragraph). Again, they are listed in order of importance and relevance.
2.1 Strategic asset-seeking is a key driver for Chinese firms to engage in European M&A activities.
The samples from the earlier post-2000 years explicitly show a pattern that the need for strategic assets, among which great diversity exists, is a key motivation for
Chinese firms to engage in M&A activities. This conclusion definitely tops the others in this section, since nearly all of the literature acknowledges to some degree that strategic asset-seeking is a key motivator for Chinese M&A activity, whether that is the prime motivator or a secondary one; strategic asset-seeking is a present motivator in a lot of sampled transactions.
2.2. Government control is a key driver for Chinese firms to engage in European M&A activities.
As is shown by the more recent the samples from late 2013, the majority of firms engaging in Chinese-European M&A are still, to different extents, under control of the Chinese government, making that government a key driver for engaging in M&A activities. While government control is an evident motivator, it comes forward that, through deregulation and other events that have become clear from the literature
research, government control over Chinese firms as a whole seems to be less severe compared to the situation in 1978. Government control is still present and a key factor in Chinese-European M&A, but while strategic asset-seeking remains at level,
government control seems to be declining, making it a slightly less relevant conclusion.
2.3. Ownership advantages present a key driver for Chinese firms to engage in European M&A activities.
As is shown by literature, the OLI concept is widely embraced by MNE’s. It
proclaims that ownership advantages are the key motivation for engaging in foreign M&A. While this model is mentioned to be a key driver, it is definitely not mentioned as frequent in the used literature as the influence of government control or strategic asset-seeking. Therefore it ranks below those two conclusions. The fact though that it’s a universal principle that goes for all types MNE’s (in this sense it differs from the following and final conclusion) makes it a very relevant conclusion.
2.4. Resource related advantages presents a key driver for Chinese firms to engage in European M&A activities.
Again, as is shown by literature, the accepted LLL concept proclaims that the linkage, leverage, and learning of and from resources presents a key motivation to second wave firms to engage in foreign M&A activities. The reason this conclusion is ranked last is that it applies to second wave firms only, making it less widely applicable and therefore somewhat less relevant. That does not mean, however, that it is an irrelevant conclusion. Second wave firms are a very large group of firms, if not the majority of all, so this conclusion is still very much applicable.
5.2 – Secondary conclusions
These six main conclusions of this study have now been formed, but they do not represent all of the findings this study has come up with. In this paragraph, the secondary conclusions are included. Such secondary conclusions do not necessarily pertain to the research question directly, but definitely form an addition to the main
clarity on the main conclusions. Contrary to the preceding conclusions, these do not carry any real reason for one to be considered more important than the other. They are ranked in name only.
3.1 Reaching far-away consumers is a supporting motive for engaging in foreign M&A activities.
As shows from the literature review paragraphs, firms do not always possess the sufficient means to reach far-away consumers from their homelands, which raises the need for foreign M&A.
3.2 Gaining competitive advantages in domestic markets is a supporting motive for engaging in foreign M&A activities.
As stated in the final parts of paragraph 4.2, foreign activities potentially synergize with domestic activities, making that an unusual, but potentially high motivator to engage in foreign M&A activities.
6. - Discussion
In this final chapter the found results and conclusions are discussed, as well as other final subjects that need to be addressed. In paragraph 6.1 the found results and conclusions will be discussed. Paragraph 6.2 will feature some of the theoretical implications that these conclusions bring along. Paragraph 6.3 will address the
limitations that this study has had to cope with. Finally, paragraph 6.4 will feature the suggestions for future research, which may be done with this study as part of its foundations.
6.1 – Results evaluation
Now that the results were gathered and conclusions were drawn, the following step should be to evaluate our findings. What are its upsides and what are its pitfalls?
First of all, the two separate ‘parts’ that the research question featured were both addressed in the results and conclusions section, and were both being reviewed using multiple sources of information. Obviously, the research question was formulated broadly, making it discussable what results to include and what results not to include. However in my view the most significant ones of them were included in this study.
There is a difference between the grounds and foundations on which the results are gathered and the conclusions are being drawn. Of our six main conclusions out of paragraph 5.1, the first, third and the fourth (on general M&A development, strategic asset-seeking and government control being key drivers, respectively) are the ones that were extracted from the gathered data points presented in paragraph 3.2, as well as used literature. The others were extracted from literature alone. Personally I would say that conclusions that are being backed by raw data generally are more valid, as they confirm the theories provided by literature in real-life.
However there is a distinction to be made here. Primarily since not all results and conclusions of this study lend themselves for data analysis. Think of our fifth main
findings on data points like the ones that produced conclusions three and four, or is it better to base it on the theories provided by literature, describing logically how these concepts are built and how it’s advantageous? In case of this conclusion I would say the latter. Having that said, and this goes for all of the gathered results that are based on literature alone, all of them are backed by multiple sources, increasing their validity and thereby making it safe to adopt them as conclusions.
6.2 – Implications
Real-life implications were mentioned earlier in the second chapter. A key part of a study like this is the way its results and conclusions are applicable to firms who are active in the field of mergers and acquisitions with Chinese firms.
As the subject of this study covers motivations for Chinese firms to engage in mergers and acquisitions, the conclusions are especially of good use to European firms.
Should a European firm become target for a merger or acquisition by a Chinese firm, then these conclusions should provide them some insight into how that Chinese interest came to be, and perhaps allow them to use it to their advantage.
The findings on the general Chinese-European M&A development, which is primarily covered by conclusion 1, is not really of practical use, other than the overall idea of the concept. That becomes different with the second conclusion, stating that Chinese-European M&A activities have proven themselves to be relatively unaffected by macro-economic decline. During current times in which the global economy still has not fully recovered, partnerships among international may be regarded as a way of safeguarding a firm its position. The conclusion that Chinese foreign M&A activities do not react severely to worsening macro-economic situations, may be a key
argument for European firms to respond positively to any Chinese merger or
acquisition proposals, since a form of cooperation between a Chinese and European firm will not quickly be affected by economic decline and therefore is more likely to last longer. One could imagine that, specifically in times of recession or very little growth, this may be found desirable by European as well as Chinese firms.
When it comes to the remaining conclusions, the main ones as well as the secondary ones, they do not really provide a real-world implication in the way that the previous discussed conclusion does. However, they do provide insights in motivations for M&A and that could very well be a concept that firms could use to their advantage. Bringing back the pattern of motives for engaging in M&A to a smaller set of points as is the case in paragraph 5.1 and 5.2 should ease that.
An example of these potential advantages may be found in the way M&A deals are negotiated by the target firm. If such a firm would possess the knowledge that the acquiring party, for example, is in desperate need of the host country’s consumer base (conclusion 3.1), and has no other option then to engage in M&A, that enhances the target firm’s negotiating position. The possession of this knowledge therefore, may allow the target firm to negotiate a higher share price, or a better deal in terms of other deal points, such as division of power, retaining of brand name or other firm characteristics, and any other related terms that may be subject to negotiation.
Finally, a theoretical implication is present; As has come forward out of the results and conclusions, a great deal of Chinese M&A activity is done by state-owned enterprises. Even though the extent to which governmental control is present among different firms, as a whole its influence is very significant. That gives rise to the question as of whether this concept has any negative implications. For instance, could it result into unfair competition? One may think that it could, in the sense that
governmental bodies generally are more stable and in some ways more powerful than firms in the private sector. Think of the 2008 financial crisis for example. One of the prime reasons the economic decline eventually stagnated is governmental
intervention, by bailing out firms (banks, mostly), thereby saving jobs and preventing severe cutbacks by the private sector (Ferguson, C. 2010;). If governmental bodies are capable of that, don’t the Chinese state-owned enterprises possess an advantage of power over the acquired firms? In that sense one could recognize the potential
unfairness in M&A transactions with SOE’s. Then again, governmental bodies of host countries should be able diminish this threat by imposing regulation on M&A
the targeted firm is cleared for any M&A activity. Otherwise, the host country’s government could claim a ‘seat at the table’ when the deal is being negotiated, to ensure that the Chinese government is not imposing any terms the targeted private-sector firm shouldn’t be having to deal with.
6.3 – Research limitations
Of course there are some limitations that this study has had to deal with. First of all, I personally found it harder to cope with the limited amount of time in which the study had to be completed then expected. Of course the nature of a bachelor’s thesis is to complete it within a relatively small amount of time, but the way I experienced it, there is a relatively large amount of time that needs to be invested in the acquiring and reading of literature, compared to the actual output that is gained from it. That
principle causes that not all aspects of the subject can be covered, simply because the timeframe in which you find yourself doesn’t allow for it. The upside to that is of course that you are forced to specify on your research question and make clear, especially to yourself, on what parts to focus on. All considered though, the limited amount of time has definitely posed a research limitation. The literature review could be broadened if the timeframe were to be extended.
Another research limitation was formed by the limited set of samples that were included in the literature review. As mentioned earlier it adds to the reliability and validity when theory is backed by real-world cases such as presented in the sample. However, the gathering of these cases has not been as simple as it may have seemed up front. Not because there aren’t enough sources where similar data can be found, but because there are limited verified sources such as ING reporting these
transactions. Moreover, quite a few of the cases mentioned in that same ING report had to be excluded due to incomplete information. Sometimes the acquiring party wasn’t mentioned, but most of the cases didn’t include a disclosed deal value. Both of these items form, in my opinion, fundamental information that needs to be clarified, so this caused for quite some cases to be disregarded and thereby a smaller sample size.
Another limitation was also present, yet somewhat less significant. During the gathering of relevant literature, it occurred that quite a lot of what seemed to be very relevant articles and journals were somehow shielded by a China-based website. Since my knowledge of Mandarin is not particularly world-class, it was hard to trace the identity of the organization running this process. The UvA VPN-protocol couldn’t surpass this barrier, which solely applied to articles written by Chinese authors. Having that said though, remaining literature was more than sufficient to base the review on and gather results from. So this doesn’t necessarily qualify as a real research limitation, but it might have made a nice contribution to the included literature if such a barrier wouldn’t have been present.
Other than these points, there were no major limitations that applied to this thesis.
6.4 – Suggestions for future research
The limitations that pertained to this research extend to the final paragraph of this chapter and of this study: what are the missing features of this study and what are the sorts of sections that should be included when future research is done?
One of the bigger objects that is not featured in this study is an empirical component. This was discussed earlier in the methodology chapter, where it was stated that an empirical study was not found to be necessary. While that statement still stands, it might form an addition to existing literature and the forthcoming results to include an empirical study. This might be used to check whether the theories provided by the literature do actually align with the way respondents see it themselves. It answers the question of whether the given theories apply in the real world this way.
Furthermore, I reckon it would be of value if further research would include the literature that turned out inaccessible (see previous paragraph). The way this should be done is something the author should have to figure out, as it unfortunately hasn’t become clear in this study.
Another suggestion could be to alter the context in which the research is conducted. What that could entail is to change the continent or countries where the firms that are targeted for acquiring are located. I personally found it the most relevant to examine this in a Chinese-European context, but perhaps it could be of usefulness to alter this to for instance a Chinese-American context. These are the greater parts of this study on which can be extended in further research. There are also smaller parts of it that lend themselves very well to do so. There are two particular conclusions that this study has come up with of which I highly recommend that further research be done.
The first of them is conclusion two, stating Chinese-European M&A activities have proven themselves to be relatively unaffected by macro-economic decline. This is a concept that could be elaborated on very well, as it may be of great value to firms considering M&A activities. If this conclusion were to be further researched and elaborated on, it may even pose a great stimulator in itself for firms to engage in M&A, and therefore be widely applicable in real-world business and economics. The way I see it, further research on this could form an entire new subject in itself.
The second conclusion on which further research could be based, is conclusion 3.2, stating that gaining competitive advantages in domestic markets is a supporting motive for engaging in foreign M&A activities. An empirical research component would especially be fit here. If further research would elaborate on this subject by finding statistical evidence, it may cause for a great boost in M&A activity as a whole, as firms may not always be aware that synergy with domestic activities potentially exist, and that it may very well impose great profitability.
A ramification of the concept of domestic synergies could be to examine the motivators and drivers of domestic M&A activities, compared to foreign. Which of the drawn conclusions would apply to domestic mergers and acquisitions? What differences occur between different countries these activities occur in? Which conclusions would be altered or added? Research on this subject would form a great contribution in the sense that it provides a way to compare foreign M&A principles with domestic M&A principles. This should provide firms with the deeper insight into this field as a whole, and should help them to judge whether in their specific situation,
it is more apt to engage in foreign M&A or to engage in domestic M&A. A similar component is simply to wide to be added in a thesis like this, which addresses foreign activity only, but a new study could feature this subject and make some vital
comparisons.
Furthermore, as is discussed in paragraph 6.2, there is a potential threat of unfair trading because of Chinese governmental influence. While this is a subject that lends itself very much for theoretical discussion, the insights provided in that section are but thoughts. Therefore, a successive research subject could be to thoroughly investigate the possibility of unfair trading because of the apparent influence of the Chinese government in Chinese foreign M&A activities. If this hypothesis were to be backed by literature research, that could provide interesting outcomes.
Lastly, a suggestion for further research could be to further investigate the similarities and differences between state-owned enterprises and privately-owned enterprises when it comes to their M&A activities. The fact that governmental influence is a key factor in M&A activities is now being stated by this study, but what are the exact implications of governmental influence on the way M&A activities are conducted, and in what ways does it differ from the way these activities are being conducted by privately-owned enterprises?
If further research were to be done on one of the suggested subjects, it is important that the author clearly sets the boundaries for the study its subject, as this study has taken on a rather wide perspective, which does not make it particularly easy to judge what is apt to be included and what is not. Furthermore it is my hope that this study will turn out to be able to make its contributions to any further research on one of the suggested subjects, by way of its used literature in the review and drawn conclusions that have emerged from it.
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