An Analytical Study On The Rationales Of Cross-border Mergers And Acquisitions By Chinese Enterprises

Globalization has led companies to think globally and act locally. Such a change in the business world has made the need to find partners around the world necessary, and even to merge with complementary companies in order to sustain the corporate growth. 1990s saw a wave of cross border mergers and acquisitions (M&As). Cross border M&As have in fact been the major factor for rapid increase of FDI. Although MNCs play the dominating role in cross border M&As, developing countries have begun to involve more since the late of 1990s.China has grown into a capital exporter and saw a steady growth of outward FDI. United Nations Conference on Trade and Development (UNCTD) revealed that China's overseas investment stock came to US$36 billion by the end of 2002. Cross border M&As have been flourishing among Chinese enterprises in recent years and continue to increase. The transaction volume amounted to US$1.04 billion in 2002 that represented over 20% of Chinese outward FDI. It is meaningful and realistic to analyze China's cross border M&As.The objective of this thesis is to integrate major mergers and acquisitions theories with the FDI theories (especially OLI paradigm) in order to assess the macroeconomic basis and enterprise motives of Chinese cross border M&As. The analysis will aim at giving a clear picture about what the Chinese enterprises can or expect to get from cross border M&As, and in the pre-acquisition process what they should take care of to avoid changing promising motives into failed implementation.The thesis is divided into 6 chapters. In chapter 1, the relative definitions and the current merger wave will be presented. Chapter 2 will discuss M&A theories and FDI theories. As a popular framework for the analysis of the determinants of FDI, the OLI (ownership advantage, location advantage and internalization advantage) paradigm provides a useful outline to explain the motives for cross border M&As.Chapter 3 will then deal with the applications of the theories discussed above to Chinese evidences. This part will analyze the macroeconomic basis and sum up the motives of the enterprises from four aspects: O-advantage, L-advantage, I-advantage and speed. The case study of TCL and Thomson is provided in the chapter 4. Then a few pitfalls will be pointed out in the process of planning of cross border M&As in chapter 5 for the reference of Chinese enterprises. And in the last chapter conclusion is presented.