Empirical Research On The Resource Enterprises Cross-border M&A In China

World’s economy has been seriously damaged at global financial crisis whichtriggered by the U.S. subprime2008. Chinese enterprises had to face internationalcompetition directly by then. They have taken the chance to get into the stage of theworld economy, and to started the journey of Chinese enterprises’ oversea mergers andacquisitions.Cross-border mergers and acquisitions as a form of foreign direct investment (FDI)is an important way for enterprises to implement global business strategy. There is awealth of fairly mature theory about M&A. Chinese enterprises will have to learn howto apply the theories to practice. How to act on it? How to improve the chance toaccomplish M&A successfully? These subjects are what we will discuss in thispaper.This paper studies Cross-border M&A cases of Chinese enterprises conducted inrecent years, especially the resource companies, through empirical analysis of thewhole process from the beginning to the post-acquisition summed up.we lessoned andlearned, and we try to find out more suitable for Chinese resource enterprises to goabroad.Firstly, we learn the existing cross-border M&A theories, based them,we comparecross-border M&A of enterprises in China with which in foreign countries, in order tofind out the particularity about Chinese enterprises cross-border M&A,and expectingwhat it will be in the future. Then a detailed study on all the layout of cross-borderM&A conducted by Jien Nickel Industry in recent years, find out experiences andlessons from the whole process.and we did some additional analysis of othercases,such as COSL offer to buy Norwegian AWO company, China Aluminuminjection Australian Rio Tinto and Sinochem Group acquired Canadian potash.Welearned general process of Chinese enterprises cross-border M&A from these moretypical cases,and summed up the reasons for failure and cooperation model suitable forChinese enterprises. Finally, we come up with some advices which could upper theratio of success for enterprises and the government respectivly. Success of M&A can bring benefits for enterprises, post-merger integration(PMI)also determines whether it’s a success or not.The effect of PMI also determines the fateof M&A in a large extent. From the cases we found out that Jien Nickel Industry dida good job in PMI,most work had been done very properly, Jien Nickel developedmanagement system including operation management, resource management, mergerintegration, capital and marketing, and optimize the company’s economic structure, sothat the opponents involved could merge strategy, systems, mechanisms, organizationand culture work together to enhance the company’s core capabilities to achieveoptimal allocation of resources and etc. more smoothly and maximized the efficiency.After the M&A, COSL complete its own equipment quickly, the overall age of the fleetstructure has been effectively improved, the number of offshore drilling andoperational capabilities enhance nearly doubled, and got the sea500meters to1,500meters deep operational capability.Of course we also concluded the reasons of failure, for example, Rio Tinto case’sfailure reflects that cultural differences play a significant role in economic activities.Sinochem acquisition of Canadian potash failed, because lack of preparation and notstrong enough intention. We conclude that the obstacles of cross-border M&A in Chinaare: government management contain each other, the current project approval system isimperfect, excessive intervention in administrative bodies of the enterprise, theenterprises’ information channel is too narrow, the acquisition of state-ownedenterprises have greater resistance, poor environment for the growth of privateresources enterprises,the current financial and credit system constraints tomuch,disorder competition within the enterprise, managers lack of strategic vision,inadequate ability to grasp the opportunity during M&A.Therefore, we have found out several cooperative modes for Chinese resourcesenterprises attempting M&A, such as joint development model, equity acquisitionmodel, risk exploration mode, buying capacity mode, leasing business model, modelengineering for resources, strategic alliances mode.To improve the ratio of success, we came out with some recommendations forenterprises and governments correspondingly. For enterprises,when it’s before themerger,managers should remain calm and be aware of the strategic motivations,then todefine reasonable value of target companies,make sure to do a feasibility analysisbefore all the work is started.When it is during the process,managers should adjust to any possible changes,go deep into due diligence,improve negotiation skills.When it’safter the merger,managers shouldn’t look down upon PMI,pay more attention tocultural integration,manage the costs flexiblly,all this could promote the advantage ofPMI.Government agencies should do as follows:improve the policies and oversightmechanisms,widen financing channels for enterprises,share some risks,ecourageChinese enterprises to communicate more with which in foreign countries and etc.When governments do their job in a macro way, competitiveness of Chineseenterprises will be uppered to a higher level.After viewing the history of Chinese enterprises’ cross-border M&A, and goingthrough some typical cases, we come to the conclusion: Overseas merger andacquisition is an inevitable trend, Chinese enterprises go in the right way to participateactively; post-merger Integration plays a very important role in how to integrate allaspects of the enterprises from different countries; misunderstandings about Chineseenterprises still exist among the western countries; Chinese enterprises still need tolearn in practice continuously and to accumulate more experience.