Research On The Risks Of Overseas Mergers And Acquisitions Of Chinese Enterprises

In the1990s, the fifth wave of mergers and acquisitions swept across the whole world, and the impact of economic globalization was more and more profound. Against this background, Chinese enterprises began to participate in global competition. As China officially joined the world trade organization(WTO) in2001and the strategy of "going out" was put forward by Chinese government, the overseas mergers and acquisitions of Chinese enterprises was becoming more and more active, which started to play an important role in the international M&A market. In recent years, a common shrinkage of foreign enterprises’ asset resulted from the financial crisis in2008, together with an appreciating RMB and a rising foreign exchange reserves in our country provide a favorable opportunity for Chinese enterprises to conduct overseas mergers and acquisitions. Although the global overseas M&A transactions encountered a trough in recent years, Chinese enterprises took this opportunity to be a main buyer in the international M&A market. However, Due to the lack of experience, talent and risk awareness, Chinese enterprises also paid a heavy price in its overseas expansion.This article is mainly about overseas M&A risk, and the content can be roughly divided into four parts. The first part introduces the relevant theories about overseas M&A and its risk, which provides a theory basis for the case analysis. The second part is about the current background of Chinese enterprises’overseas M&A. The third part gives a summary and analysis of risk factors, and then focuses on the case studies. Finally, according to the theory analysis and case studies, the risk prevention strategies are put forward.According to the analysis, Chinese enterprises enjoy a favorable macro environment to conduct overseas mergers and acquisitions now. However, some problems like the ambiguous property rights of state-owned enterprises, difficult financing situation of private enterprises, and the lack of specialized intermediary agencies are the main barriers for Chinese enterprises to conduct overseas mergers and acquisitions.In recent years, the acquired enterprises in Chinese enterprises’M&A mainly located in western developed countries and the industry focuses on resources, oil and gas, finance, chemical industry, public utilities and other fields, of which the mergers and acquisitions in the energy and mineral resources industry are remarkable. In the article the overseas M&A risk is divided into systemic risk, unsystematic risk. Through the case analysis, the author finds that political risks, legal risks and information asymmetry of systemic risk and financial risks, integration risks of unsystematic risk are the main risks for current Chinese enterprises. According to the analysis of the theory and the case, this paper puts forward some suggestions about risk prevention in the end. Risk prevention measures is put forward from the perspective of enterprise, which including the general strategies and specific measures. To reduce overseas M&A risks requires not only enterprises’ efforts, also needs the government and society to participate in. The government should improve the M&A legislation and standardize capital market, while the society foster a large number of professional intermediaries. For these problems, this paper involves few, which deserves further research later.