Research On "china Premium" In Overseas Mergers And Acquisitions Of Chinese Resource Enterprises

Under the background of economic globalization,Chinese companies' willingness to “go global” has skyrocketed.Overseas mergers and acquisitions are one of the important ways to “go global”.In recent years,the number and amount of overseas mergers and acquisitions by Chinese companies has apparently risen.However,under the background of prosperity,the "Chinese premium" phenomenon of Chinese companies' overseas mergers and acquisitions has frequently appeared."China premium" means that the price of mergers and acquisitions made by Chinese companies in overseas mergers and acquisitions is far higher than the market price of the merged companies.The part that exceeds the market price is "China premium." The phenomenon of “China premium” is particularly evident in the overseas mergers and acquisitions of resource companies in China.This article examines the phenomenon of “Chinese premium” in overseas mergers and acquisitions of Chinese resource companies and hopes to find out the factors that lead to the emergence of “China premium”,and try to give relevant policy recommendations.This article summarizes the overseas merger and acquisition process of Chinese resource companies and summarizes the characteristics of overseas mergers and acquisitions of resource companies,and on this basis,understands the phenomenon of “China premium”.Through the analysis of the case of “CNPC acquired Nexen” and “CHALCO acquired Rio Tinto”,the effect of “China Premium” on mergers and acquisitions was deeply analyzed.Through the above research,we have given the following reasons for the frequent occurrence of “Chinese premium” phenomenon in overseas mergers and acquisitions of resource companies: 1)Due to resource companies are mostly state-owned enterprises,and targets are mostly Non-renewable sensitive resources like energy,mineral resources,so overseas mergers and acquisitions of resource companies are always affected by political factors;2)Resource companies have insufficient knowledge of acquired companies before issuing merger and acquisition offers;3)Differences in ideology between both parties resulting in insufficient trust and mutual caution are also important factors leading to the frequent occurrence of “China premium” phenomenon.After understanding the causes of the “China Premium” phenomenon,we have also tried to give corresponding recommendations which could help companies to reduce the premium rate : 1)Try to avoid the interference of government factors on mergers and acquisitions;2)Adopt appropriate model to accurately estimate the value of the acquired company,establish a reasonable bidding range,and strictly enforce the bidding range to prevent excessive premium;3)To increase the overseas M&A experience and related capabilities of resource companies.