Risk Analysis Based On CNOOC Acquiring Nexen

Since the1990’s, as the fifth tide of M&A spread worldwide, China, one of the fastest growing economies, has become the second largest country in the quantity and scale of cross-border M&As. Nevertheless, based on the relative statistics, the failure rate of China’s cross-border M&As was as high as50%, which indicates high involving risks besides the attracting benefits along with the M&A process. M&A is an activity of transaction with complex procedures from approval, appraisal, financing, payment to integration, and risks involved in every process is inneglectable.Firstly, the paper introduces the current developing trend and key features of Chinese enterprises’cross-border M&A, and explained four kinds of the most frequent risks:political risk, valuation risk, financing risk and integration risk, from the angle of definition, risk driver and types. Secondly, by adopting the qualitative analysis, valuation model and financial indicator, the paper analyzed the political risk, valuation risk, financing risk and integration risk involved in the case of CNOOC acquiring Nexen. At last, this article proposes countermeasures and suggestions from the perspective of both the government and the enterprise. The government should optimize the investment environment, carry forward the convergence of accounting standard and extend the financing channels to optimize the macro environment; simultaneously, the corporation should avoid relative risks by elimination of information asymmetry, conjunctive adoption of financial instruments and organismic integration immediately after the M&A process.