The Research On Industry Effects Of M&A On Chinese Steel Industry

Steel industry is an important industry in the economic development, but for a long period, Chinese steel industry is facing the problem of low concentration, which prevents the steel industry from gain more international competitiveness. To enhance the competitiveness of Chinese steel industry, the government has developed policies to promote mergers and acquisition of steel industry. As a result, there are many steel enterprises involved in consolidation and reorganization for the past six years under the support of local government. The purpose of this paper is to evaluate current M&A from the industry perspective of whether M&A is conductive to the enterprise.In 2002, researchers in AT Kearney proposed the industry evolution curve, indicating that the success of any enterprise depends on its evolution along the curve, which is realized mainly through mergers and acquisitions. Any industry in on the different position of the curve and the position determines the industry motivation that must be achieved to make a success M&A. Based on the theory of industry evolution curve, this paper analyzed characteristics of different stages of the curve to locate Chinese steel industry on the curve, and then found the particular industry motivation underlying M&A. After determined the industry motivation, this paper use data envelopment analysis and the empirical method of paired sample test to examine whether the M&As happened for the past years are helpful for enterprise to develop along the industry evolution curve.The empirical results show that Chinese steel enterprise only achieved a small part of its industry motivation through the M&A action, but in general, the M&As are not conductive to business development of enterprise along the industry evolution curve. Based on the findings of empirical study, this paper summarizes the problems that Chinese steel industry is facing while involving in M&A and come up with some proposals respectively, hoping that they will helpful in guiding future M&A of Chinese steel industry.