The Discussion On Risks Of Cross-Border M&A By Chinese Enterprises

With the rapid development of world economy globalization and the interdependence of different countries since 1990s, Cross-Border Mergers &Acquisitions (CBM&A) has been of great importance and become main operation method of foreign direct investment. As the gradual integration of Chinese economy and the world economy, Chinese enterprises also begin to step off Nation's entrance and put into effect active buys strategy together while answering foreign capital's buy in the homeland. According to UNCTAD and Ministry of Commerce of the People's Republic of China, the number of M&A was averagely 261 million US dollars from 1988 to 1996 and the number gradually increased after 1997. The number of M&A was 4.771 billion US dollars in 2004 and 8.25 billion US dollars in 2006 accounting for almost 40% of then FDI. China exceeded Korea first in 2004, becoming the second buy marketplace in Asia next only to Japanese, if the number of transactions, China was ranked first. At present, CBM&A has become an important way of FDI by Chinese enterprises.M&A is a kind of market-oriented business practice, so there are potentially huge risks under the significant expected benefits. The targeted enterprise of M&A transaction is a complex integration of dynamic assets including technology, personnel, equipment and market. Furthermore, CBM&A will face many other external changes including political, economic, legal, and cultural differences and risks. China's transnational operations start late, so the experience and the scale of investment is far behind Europe and the United States and other developed countries, the risks are particularly outstanding. Some well-known international consulting firm data show that 60% to 70% of CBM&A by Chinese enterprises is a failure. Therefore, it has become a pressing task to analyze the possible risks happening during the CBM&A procedure, utilize the experience and skills of foreign M&As' risk prevention measures, and finally establish suitable required risk prevention mechanism for Chinese enterprises' overseas development. Now the academic circles spread out to the risks of CBM&A by Chinese enterprises, one batch of influential research results appear on the market one after another. But I thought there are many insufficiencies: The analysis of CBM&A by Chinese enterprises is qualitative, not quantitative; the analysis of main risks is not outstanding, keeping watch to risks prevention speaks generally, the pertinency is not strong and operatability is relatively poor.In view of this, this article utilizes the microscopic analysis and the macroscopic analysis unifies, the empirical analysis and the canonical parse unifies, qualitative and quantitative analysis unifies, the theory explanation and the case analysis unifies, takes the Chinese enterprises on initial M&A period as the standpoint, takes the risks of CBM&A as the object, carries on the elaboration from the following six parts.PartI: Introduction. The Part first explain the fundamental connotation of CBM&A, then introduce briefly the background and significance of writing, and describe the current research situation of CBM&A, finally explain the research method and the innovative point in this paper.PartII: The current situation, motivation and effect of CBM&A by Chinese enterprises. On the basis of current situation, the Part analyzes the motivation and effect of CBM&A by Chinese enterprises. Since 1980's, CBM&A by Chinese enterprises have experienced two stages in general: the starting phase before 2000 and the first step after 2001, every stage has different characteristic. CBM&A by Chinese enterprises have many causes.PartⅢ: The qualitative analysis of CBM&A by Chinese enterprises. On the basis of risk concept, characteristic and Categories, the part has carried out qualitative analysis. For Chinese enterprises, there are many risks in CBM&A procedure: Political risk, law risk, target enterprise fixed price risk, financing risk and integrate risk.PartⅣ: The quantitative analysis of CBM&A by Chinese enterprises. The part utilizes Fuzzy Comprehensive Evaluation to analyze the risks of CBM&A by Chinese enterprises which can make blurred risk concept limpid, enterprises have a comparatively limpid rational knowledge.PartⅤ: The enlightenment from CBM&A by foreign enterprises. On the basis of history of CBM&A by foreign enterprises, The part carry out the main characteristics of CBM&A by foreign enterprises on buying industry , buying way, buying range , buying motivation aspects, and from this, the enlightenment being acted in responses .PartⅥ: The prevention of risks of CBM&A by Chinese enterprises. The part set off from many angles specifically for analytical main risks of CBM&A by Chinese enterprises, discuss the concrete method keeping watch each risk. For example, building the political risk s advance warning mechanism , carrying out the government commerce the diplomacy to reduce political risk; Studying home and abroad laws and policies about CBM&A , working out and perfecting relevant laws and statutes to keep watch law risk; choosing Scientifically target enterprise to reduce target enterprise fixed price risk; Choosing right financing way , controlling exchange rate and interest rate risks , broadening a financing channel to reduce financing risk.