Multinational Companies In China M & A On The Impact Of China's Industrial Development

There have been 6 merger waves occured in American history, and each wave except the fifth one is followed by serious depression. Thus the phenomenon took place not just by accident, but some kind of implications. Among literatures about mergers and acquisition(M&A), most of them are from the micro-level perspective to study the acquiring firm's obtainable strenth and additional profit created by M&A. And some are from the macro-level perspective to study the impact on economic security and market stucture by M&A. However, few of them are from the industry-level perspective to study the impact of cross-border M&A in China(acquisitions that initiated by multinational firms in China). In recent years, M&A in our country is extraordinary frequent, including the cross-border M&A. It's necessary to make a thorough study of the influence on industrial development by M&A, especially cross-border M&A. Under the circumstances of our country's mainstream economy and our governments' inviting investments from oversea, it's extremely important to have a more comprehensive analysis of long-term effects on industrial development, which is influenced by cross-border M&A in China.First of all, this paper reviews the theories of M&A and the empirical studies of M&A, compares the post-merger performance of theoretical and empirical, finds out they are inconsistent, and the empirical studies show that the performance is more likely to not meet the expected goal. It indicates the paradox between theoretical and empirical. And the paper figures the main reasons which drive the paradox are: (1) While the theory of M&A emphasizes cost reduction and synergy, it disregards the expense of plan arrangement and department coordination increasing. (2) The empirical studies of M&A are mostly based on listed companies, whose asset sizes are generally large. And the sizes may become even much larger after mergers, thus the post-merger integration cost may exceed the value created by M&A. (3) Goals in M&A are various, some kind of objectives cannot be measured quantitatively just by accounting ratios. However, most of the empirical studies in M&A just measure them based on accounting. Secondly, to the phenomenon of "each merger wave would be followed by serious depression", this paper will make a more comprehensive analysis and then interpret it. In case of dividing the economic system into industry system and non-industry system, we could discover that the industry system creats social wealth directly, while the non-industry system just accumulates and plunders social wealth. Financial capital, especially capital extracted from industrial production, tends to be used in M&A which is a tool of gathering social wealth. Once M&A activities become more and more frequent, a great quantity of social wealth would not be applied in industrial production. The required capital for economic growth is reduced, thus it will reduce the social wealth that can be created. On the other side, the accumulation and plunderage of social wealth would reduce the part that can be consumed, thus inhibit the consumption and let the market shrinking. Therefore, after merger wave, the depression is inevitable.Thirdly, this paper makes an analysis of industrial operational mechanism based on the theory of complex network, and concludes that: (1) The industrial chain is decomposed and becomes longer while vertical specialization, and it is broader while horizontal competition, imitation and learning. Enterprises in one industrial chain are penetrating to other industrial chains constantly, the industrial economy has its own self-growth mechanism. Specialization, competition, imitation and learning enhance the technical progress and industrial upgrading. (2) M&A, especially of large firms, ruins the self-growth mechanism and technical upgrading, thus distorts the direction of industrial development and industrial structure. (3) The accumulation and plunderage of social wealth caused by M&A would exacerbate social polarization and impede the harmonious development of society.Fourthly, this paper summarizes three typical cross-boader M&A in China: market power squeeze-out merger, technique squeeze-out merger and brand squeeze-out merger. With a further study, it finds out that: (1) Market power squeeze-out merger may let the core resources and the sticking point of industrial development dominated by multinational firms, thus our country's industry is just a "big shop" for their global strategy arrangement. (2) Technique squeeze-out merger may make the self-growth mechanism for industrial development destroyed, and let the upgrading of industrial technology and the direction of industrial development dominated by multinational firms, thus the technology of our country's industry is "peripheral". (3) Brand squeeze-out merger may result in the market that full of international brands rather than our own core brands, thus our country's industry is "marginalized" by their brand dominating. Therefore, the above three type of squeeze-out mergers could lead to our losing dominant positions in resource allocation, technology development and market power. And in times of economic depression, multinational firms' global arrangements may exacerbate economic hardship of our own.In summary, the long-term consequence of cross-border M&A in China has side effects. Government must strengthen management of M&A so as to enable our country's industry be in the external environment that can bring long-term stable development.Inovations of this paper concentrate on the following three aspects: (1)Based on a great deal of literature research on M&A, this paper not only figures out "paradox of M&A" (which is usually disregarded by studies at home or abroad in the long run), but also makes a more comprehensive analysis of the paradox generating and then gives the theoretical interpretation. (2)Dividing the economic system into industry system and non-industry system, grounding on the analysis of economic depression after merger wave in USA, this paper makes a thorough study, pointing out the non-industry system just accumulates and plunders social wealth through M&A, thus it has the side-effect of inhibiting industrial upgrading mechanism and destroying self-growth mechanism. Such research findings take the lead and also the pioneer in domestic research. (3) This paper makes a comprehensive and systematic study of effects and mechanism to industrial development by the three typical cross-boader M&A in China(market power squeeze-out merger, technique squeeze-out merger and brand squeeze-out merger), then brings forward the government Choice Theory to M&A and the related countermeasures accordingly.