Research On The Strategic M&A’s Motivation System For China Enterprises

Mergers&Acquisitions (M&A), as an experiment in the reform and opening of China, emerged in the middle of1980s. With the development of market economy, Chinese M&A market has been gradually developed and continuously improved, and the M&A transaction amount has also continuously increased. In recent years, with the background of strong economic development and M&A support policies, restructuring of the Central State-owned Enterprises (SOEs) and resource-related enterprises are extremely active, and the size of deals has kept increasing. At the same time, the global fianancial crisis has also forced Chinese companies to accelerate the pace of overseas expansion, domestic industry distribution shift and domestic M&A. However, there are a lot of repeated industrial development in China, which lead to low industry concentration and weak market competitveness. Although the government published a series of policies and regulations to promote the restructuring of the incompetitive industries, M&A activity is still not active. Why in some periods M&A activity is more active than the other? Why certain industry has more M&A than other industries? In other words, what are the driving forces for corporate M&A?The M&A motivation literature has been fruitful, and has formed many mature theories. However, the existing M&A theories are just concerned about single motivations of M&A and are only from the perspective of acquirers. As multiple dimensions of motivation usually coexist, no single theory is sufficient to explain the driving force of enterprise M&As. In addition, as an emerging-transitioning market-based economy, China has a special socio-economic system, and thus Chinese enterprises’strategic driving forces should be distinct. Therefore, understanding the Chinese enterprises’strategic driving forces from the perspectives of both acquirers and sellers is our research theme.This dissertation comprises of seven chapters.In chapter1, firstly, the relevant background and significance of the research are introduced; secondly, some important concepts are defined; thirdly, the research method and framework are confirmed; finally, the main conclusions and innovations are summarized.In chapter2, the paper reviews previous literature about M&A motives, and points out the deficiencies, then puts forward the fields needs to be researched. In chapter3, from the views of Stockholders, Behavioral Psychology and Systems Theory, the paper presents a model of Strategic M&A Motives of Chinese companies, which can be applied to analyze how the drivers and changes in the environment (both internal and external) affect M&A motivation.In chapter4-7, the paper uses many case studies to analyze the drivers and enabling factors of various stakeholders in Chinese strategic M&As, and tests the theoretical framework proposed in this paper about motivation of strategic M&As of Chinese companies.In chapter8, we conclude with the main views and the innovation points of this dissertation, and indicate the defficiencies and future research directions.The main contributions of this dissertation include:Firstly, The existing studies of M&A driving forces can be genernally divided into two categories. One is the traditional acquisition motivation theory, which explains M&A based on characteristics of acquirer’s shareholders or managers. The other is the merger wave theory, which explains M&A based on characteristics of the enterprises’ external environment. Though M&A motivaton system theory has been developed to integrate the two theories into a unified framework, which has payed much more attention to the acquirers’stakeholders than to the targets’stakeholders. All related stockholders’motivations are important for the success of M&A transaction. In particular, the main stakeholders are especially influential. The dissertation will focus on the influences of stockholders related to both acquirers and targets on M&A transaction. It is a new research perspective.Secondly, the dissertation presents a driving force framework for Chinese enterprise’strategic M&A. Based on stockholder theory and China’s socio-economic background, the paper defines Chinese enterprises’related stockholders. In China, the main stakeholders usually include shareholders, managers and local governments of both sides, and their M&A motivations are the main motivations. The relative unimportant stakeholders’motivations can sometimes become important, and vice versa. Based on behavioral psychology, stockholders’motivations have different directions and strength. These motivations together determine the M&A motivation, and all the main stockholders’motivation form the M&A motivation.Thirdly, based on the theory of behavioral psychology, the paper divided motivations of M&A into three types:requirements of stakeholders, internal factors and external factors. Internal factors have push-like effects, while external factors, especially the ones related to the target, have pull-like effects.Fourthly, Based on the cases study on M&A transactions in China, the dissertation sets up the theoretical framework for Chinese companies’M&A motivation system. The close of M&A deals depends upon motivations on three sides:seller, acquirer and government. Seller and acquirer’s motivations are affected by factors related to the external and internal environment. Government’s motivation is affected by the external macro environment and national needs related to economic and industrial policies, as well as national security.Main conclusions of this dissertation include:Firstly, Chinese strategic M&As are driven by motivations related to both acquirers and targets. Seller and acquirer are equally important in M&As. The strength and direction of the M&A motivation of each of them have deterministic effect on the achievement of M&A deals.Second, strategic M&As involve many stakeholders, but only the main stakeholders have deterministic influence on the achievement of M&A deals. In Chinese M&As, the shareholders, managers, employees, debtor and local government are the main stakeholders in M&As. Their motivations sum up as the motivation for the M&As.Thirdly, the M&A motivation is usually determined by the main motivations. The main motivations could change as the environment changes. The main motivations can become minor, while the minor ones can become important. The needs and intention of stakeholders and internal factors have push-like effects on M&A, while external factors have pull-like effects. Both types are indispensable.Forth, case studies show that, if the motivations of various stakeholders are in the same direction, the total motivation will be stronger, and thus the achievement of M&A deals will be easier. On the contrary, if the motivations of various stakeholders are in opposite directions, the total motivation will be weaker. In addition, if the factors have negative influence, the achievement of M&A deals will be more difficult.