Analysis On Motivation And Effect Of Overseas M&A

Since China joined the WTO,the internationalization of China’s economy has deepened,and the pace of Chinese enterprises going global has also accelerated.The past ten years witnessed the rapid expansion of the scale of overseas mergers and acquisitions of Chinese enterprises.As the main method of overseas investment,overseas mergers and acquisitions have become an important strategy for enterprises to expand overseas market and go global.The classic cases of overseas mergers and acquisitions such as Lenovo’s acquisition of IBM’s computer business and Geely’s acquisition of Volvo,have triggered extensive attention and discussion.Refinitiv data quoted by Reuters shows that China’s overseas M&A reached a scale of 41 billion US dollars in 2019.The reasons of overseas mergers and acquisitions expanding rapidly have two aspects.For one thing,due to the impact of the international financial crisis and the European debt crisis,some European and American companies fell into operating difficulties.Their corporate value was underestimated.For another,due to the strengthening of Chinese enterprises power,the desire for resources such as technology,market channels and management experience is stronger.Overseas M&A is always the hot topic in academic study.There are rich study results on topics such as M&A motivations and performance affecting factors.However,M&A failures and risk factors emerge in succession in the practice world,which has also led people to study whether M&A can improve performance and how to create value for company.Based on the focus of the above question,this article selects the case of Joyson Electronics’ multiple M&A and attempts to analyze the effects of overseas M&A.It can contributes to enrich the case study results and guide M&A practice of enterprises.This article sorts out the process of Joyson Electronics’ overseas M&A from 2011 to 2019,and summarizes the three main reasons for it: the development of international markets,the enhancement of innovation-driven capabilities,and the use of resource synergy.Then,the event study method was used to analyze the short-term performance of mergers and acquisitions.The result is that,as a whole,continuous mergers and acquisitions can boost market performance in the short term,promote stock price increase,and accumulate abnormal return.And then,based on the analysis of M&A motivation,this article studies the effect of the realization of motives from three aspects.According to the analysis,firstly,enterprises have increased their international influence and internationalization,obtained overseas sales channels,and effectively expanded customer resources.Secondly,enterprises have absorbed leading patented technologies from the M&A targets,and continuously increased their R&D investment to accumulate technical advantages of core products.Thirdly,the company has enriched product types and developed high value-added businesses,but the synergies have not been fully realized,especially for asset operation capabilities,overall profitability,and return on assets.In addition,mergers and acquisitions have increased the financial risks of enterprises and weakened the solvency of principal and interest.Through comprehensive analysis,this article concludes that,from the perspective of market value increasing,market expansion,and increasing growth,Joyson Electronics’ multiple mergers and acquisitions create value for the firm.Considering that the company’s products have core competitiveness and the management will take effort in the integration of mergers and acquisitions,we believe that the synergy effect of the company will gradually appear,and the company can successfully control its financial risk,which can ultimately increase the value of the enterprise as a whole.Meanwhile,this article also divides Joyson Electronics’ merger and acquisition process into three stages.It discusses the synergistic value creation path of mergers and acquisitions in the three stages.Based on the resource orchestration theory,the article analyzes the company’s M&A strategic orientation,and the principal of synergy creating in the process.This article thinks that previous M&A events were not independent events.In contrast,the acquisition and integration of M&A resources is a cyclical process.The resources accumulated in the previous stage of M&A can leverage the next round of M&A.Continuous resource orchestration will ultimately help improve the corporate value.The characteristic of this article is that,the analysis process of M&A effect is different from general performance analysis.The evaluation system fully combines the actual motives of M&A and business types of the company.The degree of realization of the three drivers was analyzed.At the same time,the article also uses many financial indicators and non-financial indicators,utilizes quantitative analysis and qualitative analysis,and combines horizontal and vertical comparisons,which can enhance the persuasiveness of analysis results.However,because the recent mergers and acquisitions are still in the integration period,the time window after mergers and acquisitions is not long,which may affect the evaluation of the merger and acquisition effect,and follow-up study is still needed.