| For the past few years,increase in Chinese cross-border investments have raised several questions regarding national security,unjustified high takeover-premiums,and sustainability of such investments.A critical part of every successful transaction is believed to be justifiable takeover premium and the right deal strategy and its execution.Traditionally,many types of research focus on aggregate data and fail to address the uniqueness of specific acquisition.To address these issues,research purpose of this thesis is to analyze valuation of Chinese Cross-Border M&A on the case study of Midea vs.KUKA in the strategically important industry of robotics and automation.This transaction is generating considerable interest regarding(1)staggering 60% takeover premium over the undisturbed share price and(2)successful deal strategy within the “national security interest” industry.As one of the few Chinese companies,Midea achieved to convince all internal and external stakeholders and gained the final approval.As a first step to analyze takeover premium,we have used three primary valuation methodologies:(1)Comparable Companies Valuation(2)Precedent Transaction Valuation(3)Discounted Cash Flow Valuation,with a particular emphasis on DCF valuation.Furthermore,considering the sensitivity of inputs,we have performed sensitivity on key valuation inputs for DCF and presented result from all three methodologies in a consistent manner.It is important to note that valuation is subject to a certain degree of subjectivity which is emphasized in our study.Strictly speaking,valuations result revealed,that Midea vs.KUKA M&A deal was overpriced.This conclusion can be supported by fairness opinions from four investment banks,which all concluded that price of EUR 115 per share is fair.On the other hand,high takeover premium can be justified considering the strategic importance of KUKA and future role of robotics and manufacturing automation.On the top of the valuation results,the ultimate implication of this study has to be explained in the context of the deal.It is an example of successful Chinese cross-border acquisition with very well executed strategy and consideration of all stakeholders.This study can serve as a great basis for further research after EU even enhanced its power to block deals in strategically important industries.Furthermore,the success of Midea shows the international ambitions of Chinese companies along with the strategic transformation of Chinese industry moving up the value chain. |
