Hongfu Industrial Development Co., Corporation M & A Analysis

By reviewing the business mergers throughout the world and the development of compound phosphate fertilizers industry in China, this paper describes some of the theories on merging and gives explanations and comments on the motives and purposes of the merging activities by Hongfu. Analysis is given to three cases of merging by Hongfu( i.e. Daxin Beidoushan phosphate Mine, Shuangshanping Co. and Ganshu Hongfu Co.). Following the procedures of background study, guidelines, decision-making, implementation and merging, the author comes up with a more appropriate and reasonable approach based on Hongfu's own unique characteristics.Any merger by Hongfu should be in accordance with the company's strategies. In other words, priority should be given to resource-oriented, phosphate fine chemicals and high concentration compound fertilizers businesses. Caution should be aroused when trying to approach other fields. In accordance with Hongfu's strategy, certain companies were sorted out before final decisions were made on merging procedures.1.Sort out target companies, gather and verify relevant information.2.Chose the right company based on the analysis of all the information related. '3.Chose the right time. Timing is of vital importance in merging and, to a certain extent, can affect the cost and final result in merging.4.Analyze the risk that might occur. Merging is a matter of entire system and covers many aspects. Consideration should be given to analysis of risks and additional plans should be made before merging proceeds.5.To set the price of a target company, evaluation is to be made according to the Assets Assessment Management Regulations. Other considerations are technology, human resources and market.6.Financial support: by means of bank loans, bonds, loans as well as capital of the company. Cost and feasibility should be studied.7.Chose the right approach of merging, i.e., purchase or other means of transaction like assets and share holding, depending on the company's financial status.8.Negotiation. Business negotiation is a very critical task and requires skill, experiences, knowledge and even reputation.9.Approval by government authorities. Hongfu is a state company and any merger shouldbe carried out according to the Assets Assessment Management Regulations.10. After contract is signed, transfer of ownership should be made in local bureau of industry and commerce.11. Public announcement. When completed, the merger should be broadcast to the public. This can increase the publicity of the company as well as its products.12. Re-structuring after merging: including assets, management, organization, human resources and culture.With the globalization of China and the growth of market economy, Hongfu has to face challenges from all over the world. Merger shall be more common. By analyzing the practice of merging by Hongfu, some problems are found in the previous merging process. In this paper, the author intends to design a more appropriate merging process for Hongfu, thus offering a guideline to future merging activities.