The Analysis On Chinese Companies To Enhance Competitive Capabilities By Cross-Border Mergers And Acquisitions

Cross-border Mergers and Acquisitions has not only become an important method to broaden companies' scale but also one of the main approaches of international investment since recent years. Nowadays, cross-border M&A has shown six distinguishing characteristics.Early in the mid 1980th, some Chinese companies began participating in cross-border M&A. Until now, M&A has become an important form of China's foreign direct investment.It has been reported by Ministry of Commerce of PRB that there has been 30,000 companies which have launched cross-border M&A in about 149 regions and countries. Including Hong Kong, Macaco and North America, the target locations have also extended to Asia-Pacific area, Aferica and other developing and even developed countries. Owning to M&A, some Chinese enterprises have developed into multinational corporations with integrations of R&D, production, sales and service.Most of experts in China mainly focused on the meaning, financing and the motives of Chinese companies' cross-border M&A while I want to analyze whether cross-border M&A will help to enhance Chinese enterprises' competitive capabilities or not.My thesis is mainly based on the "New Theory of Transnational Corporations" put forward by American scholars—Munn and Roy in 1993 and 2001 to disclose the reason why developing countries would like to launch cross-border M&A. That is to obtain the ownership advantage, location advantage and internalization advantage.To illustrate the effect due to M&A in detail, I selected three Chinese listed companies which are Lenovo, Sinopec and TCL as examples. According to the index system which is used to estimate Chinese companies' competitive capabilities, I searched data in these companies' annual reports in the period from before M&A to after M&A.My conclusion is that cross-border M&A will do good to integrate companies' value chain, cut production cost and realize scale-effect and so on. Meanwhile, to make sure that the M&A will be successful, sufficient preparation (including target investigation, strategic plan clarification and cost-profit calculation) is necessary.