Beijing’s Buying Spree

From the Times of India:

With Chinese companies trying to gobble up western firms and brands (like Hummer) by taking advantage of the global financial crisis, there are many who wonder if China will some day dominate the western corporate world.

This fear of Chinese companies driving world stock prices in future has been partly triggered by Beijing, which is pushing local companies to buy up assets overseas. The government has also set aside $200 billion for buying foreign corporate assets. .. Should this fear exist? Perhaps not. A less publicized fact is that 70 per cent of acquisition attempts made by Chinese firms on foreign soil have come a cropper. Experts at a recent CEO Forum in Beijing pointed out several reasons for such failures. The perception of China in the West and the narrow worldview of Chinese firms – nursed as they are in a controlled economy – are two important reasons.

Most experts in mergers and acquisition think it is difficult to make a merger successful if it is driven merely by the low price of shares of the target company. Speakers at the forum advised Chinese companies to first consider whether they were ready to handle the cultural transition, technological upgrades and the new market environment before they struck share purchase deals.

See also this past CDT post on Sichuan Tengzhong Heavy Industrial Machinery’s acquisition from General Motors of Hummer from GM.

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