The Discussion On Financial Risk Control In Oversea Merger & Acquisition Of Chinese Bank Industry

In recent years, a tide of transnational M&A of Chinese enterprises is surging all around China. More and more Chinese enterprises take an active and important part in the tide. Meanwhile, in the wave of economic globalization, mergers and acquisitions, the financial industry is also on the way to a new period of development of internationalization and integration. Oversea Merger & Acquisition is the only way of the Chinese banks' internationalization, and it's also important global strategy of the bank operation under the globalization background. Overseas M&A activity of Chinese Banks have got some success in recent years, and become part of their global strategy. Through overseas acquisitions, banking industry of china could acquire international experience from management, risk control, product innovation and internationalization level.Also it could shorten the gap between world-class banks, improve the overall international competitiveness. After the subprime crisis of the United States, some international financial institutions fell into the liquidity dilemma. With the great enhancement of the asset size and financial strength after the stock market reform, Chinese commercial banks should take advantage of this opportunity and choose a number of promising banks to carry out M&A, realize the strategic vision for overseas distribution.But overseas M&A is full of risks, especially in the increasingly competitive financial industry. Banking Overseas M&A is a high risk of economic activities. With the promotion of financial globalization and liberalization, China's banking industry is facing great challenges of the international financial. From macro perspective, overseas Banking M&A contain the legal risks, the political risk, the market risk, etc. From micro perspective, overseas Banking M&A contain the decision risk, financial risk, pricing risk and the risk of M&A integration. In M&A, Overseas Chinese Banking M&A strategic plans are although reasonable, however, in human resources, M&A path, due diligence, and the means of payment there still exist many risks. The failure M&A case of Minsheng Bank, give risk warning to China's banking industry. While M&A, we should prevent the macro-level and micro-level risk, such as the legal risk, policy risk, market risk and strategic risk, financial risk, pricing risk, integration risk. And we may obtain the international experience. This is the significance of this thesis. Specifically, the full text is divided into following four parts.The first chapter introduces the concept of risk and oversea M&A risk. And explain the theoretical basis of the overseas banking from the efficiency theory and risk management theory.The second chapter introduces the purpose and significance of the risk research for oversea M&A of banks, and reviews the research situation of risk about the domestic and cross-border M&A. Then it points out that in the current economic situation, the study of oversea M&A of banks has far-reaching significance. China's banking M&A has its own characteristics. On one hand, oversea M&A is an effective way to expand the scale and enhance the competitiveness for Chinese banks, but on the other hand, there are also many risks such as international politics, markets, operation, and industry in our country and researches the relationship and transfer among the risk.The third chapter analyzes a failure case, China Minsheng Bank acquired 20% stake in Union Bank of the United States in three steps, but it ended with sufferance of 1 billion yuan. By analysis of the Minsheng Bank in the acquisition of the various risks arising in the course, we could acquire some revelation. First, political risk of target enterprises triggered by the host country laws and regulations should be alerted. Second, proper strategic is necessary in success overseas M&A. Third, the investigation extent of the target company determine the pricing of risks. Fourth, financial statements can not reveal the target company's financial risk completely. The M&A case of Minsheng played a certain warning to other commercial banks.The fourth chapter, we put forward measures and proposals to guard against the risk. From macro perspective, overseas M&A need analysis and prevention the risk of law, policy and market. The government should formulate sound policies and regulations, construct a reasonable system of systems, create a market setting to support oversea M&A in banking industry. From micro perspective, the decision risk, financial risk, pricing risk and the risk of M&A integration should be prevented. In the current financial crisis, we hope to give certain guide to the banks in China to evade and guard risk in oversea M&A.