Research On Chinese Enterprises' M & A Of Overseas Listed Enterprises

The 2008 world economic crisis had a big impact on many countries on the world, which led to Chinese companies adopting a strategy of "go out into the world," in order to capitalize on the opportunities that arose in the realm of international mergers and acquisitions. How to correctly capitalize on this situation, through merger arbitrage opportunities, is a very complicated question. At the heart of this issue is the probability of success or failure for any given cross border acquisition by a Chinese company.This paper analyzes 10 types of risk factors related to the success probability of Chinese cross border acquisitions. Afterwards, we uitilize K mean clustering, Adaboost clustering, and random forest classification on 200 sample Chinese cross border acquisition cases in order to build a success probability model. From this analysis we are able to identify the most important risk factors for Chinese cross border acquisition success or failure.According to the analysis performed in this paper, the Adaboost clustering acquisition success rate model is the most accurate, not only does the model show very little deviance in results between cases, but also it is able to accurately predict the probability of a Chinese cross border acquisition being successful or not. In addition, when used with two other models the Adaboost model does a good job of controlling investment risk related to merger arbitrage. The three main risk factors in Chinese cross border acquisitions as identified by the Adaboost model are the industry of the target company, the location of the target company, and the attitude of the target company’s management team. These three risk factors have a much greater impact on overall success rate of an acquisition than any others studied.It goes without saying that, due to the limitations of the work performed in this paper, more research is necessary in this area. For example, because there is not a long history of Chinese cross border M&A activity, there is not a large amount of scholarship or information to work with. Creating a model to accurately predict the success rate of a Chinese cross border transaction needs to be tested over time and improved by being applied to the ever changing market as it happens. Of course, other problems such as the accuracy of numbers reported by companies or whether or not there is information leakage prior to an acquisition announcement, and how that leakage may affect investment opportunities, are also areas needing more dedicated research.