The Research For Overseas Acquisition Strategy Of Resource Company

In the context of global economic integration, multinational corporations is the normal existence of the business. In order to expand operations and enhance strength, many companies are exploring how to grow into internationally competitive multinational companies. Because of the lack of global resources goods and increased demand for resources commodities, all countries in the world pay high attention to the overseas resources exploration and development. The case of cross-border M&A by resource-based enterprises are increasing. But from the current situation of the look, more and more resource-based enterprises try to attempt cross-border M&A. Some did not reach a deal, although some make deals but ran into difficulties; only a few enterprises achieved the expected goals. Zhongjin Lingnan Nonfemet Company acquired PEM of Australia in February2009, was a weak company acquires strong business. Zhongjin Lingnan Nonfemet Company become the first nonferrous metals enterprise in China who absolutely purchase resource-based enterprises in developed countries. The case has happend three years, the two companies are running very well, thus it is worth for us to explore.This article use Zhongjin Lingnan Nonfemet Company’s acquisition of Australia PEM’s case as a starting point, seriously analysis the entire process of Zhongjin Lingnan Nonfemet Company’s acquisition, include the preparation of pre-merger, negotiation and completion of the transaction. And then this article analysis the risks and strategy what resource-based enterprises may meet when they try to attempt cross-border M&A through this case. In the end, This paper summarizes the successful case strategies and provides reference for the following rescoure acquisitions.This article has six chapters; the main contents of each chapter are as follows:Chapter1:Introduction. This chapter describes the background and significance, the ideas and framework and purpose of this research and methods. This article combines with theory and practice to expound the process of M&A and summarizes successful strategies. Qualitative research and quantitative research are both used with charts to increase persuasion.Chapter2:Literature review. Because of there are little researchs which are aimed at resources industry’s cross-border M&A, this paper mainly reference common cross-border M&A related research theories. The foreign part mainly includes the compared of international market entry modes、the reasons and risks of cross-border M&A and the choices of strategies. Research of cross-border M&A by Chinese scholars start later. But with the deepening of China’s economic globalization, many experts has started this topic research. Research results mainly include the reasons and risk of cross-border M&A、the problems of China enterprise in M&A and the choices of strategies.Chapter3:The theory of Mergers&Acquisitions. This chapter expounds basic theories of enterprise M&A including:the concept of resource-based enterprises、the concept and classification of M&A and the concept of strategy. These theories can make the next analysis of Zhongjin Lingnan Nonfemet Company easy. According to different criteria, overseas acquisition models have many kinds of classification methods:①According to the relationship between the merging enterprise and the merged enterprise, overseas acquisition models can be classified to horizontal merger、vertical merger and conglomerate merger. This case is horizontal merger.②According the attitude of merging enterprise, overseas acquisition models can be classified to goodwill merger and hostile merger. This case is goodwill merger.③According to whether both sides have direct contacting, overseas acquisition models can be classified to direct merger and indirect merger. This case is indirect merger. Except this three classification methods, there are some other methods. The fourth chapter will mention another classification method according to payment. In the end this chapter expounds China’s M&A wave of resource-based enterprises. In1979-2002for the first stage, not many Chinese resource-based enterprises attempted cross-border M&A and the scale was small. In2003-2007for the second stage, with the development of our national economy、the domestic enterprise improved and the support of national strategies, more and more companies began to try to cross-border M&A. But in this period the success rate of acquisition was low. So far in2008for the third stage, the world economic impacted by financial crisis is great. But the impact on the Chinese economy is relatively small. With the appreciation of RMB, many Chinese resource-based enterprises join the cross-border M&A tide.Chapter4:The process of Zhongjin Lingnan Nonfemet Company’ s acquisition. Firstly this chapter analyses the background of this two companies. Secondly this chapter summarizes the reason of this case including natural resource demand、save costing and international demand. Thirdly, this chapter analyses the process and strategies of Zhongjin Lingnan Nonfemet Company’s acquisition. Every steps in this case show the Zhongjin Lingnan Nonfemet Company’s superb strategic decisions:①Zhongjin indpendent completed this M&A case whitout intermediary agent’s help.②Zhongjin carried out actively pr lobbying to avoid political heat.③Zhongjin choiced cash payment strategy.④Zhongjin choiced indirect merger model to set up subsidiary company in Hong Kong.The results is showed by chart in the end.Chapter5:Integration analysis of Zhongjin Lingnan Nonfemet Company’s acquisition of PEM. Expounds the theories of M&A integration first. Then quantitative analysis and qualitative analysis phase combined to analyses post-merger integration.Chapter6:Skills summary. This chapter is the full text of the key. Firstly, this chapter analyses the present situation what transnational M&A resource-based enterprises faced and the characteristics of Chinese resource-based enterprises in cross-border M&A. And then this chapter analyses the common risks and special risks what Chinese resource-based enterprises faced. Common risks include: strategic decision-making errors、not being prepared、money pressure and integration risk. Special risks include:political risk、environment risk and safety risk. Next this chapter summarizes several strategic measures useful for Chinese enterprises especially Chinese resource enterprises through Zhongjin’s case. Common strategies include:①Clear purposes and choos the right time. Zhongjin’s targets are very clear:lead and zinc resources and internationalization. Timing is also important. Financial crisis and appreciation of RMB give Zhongjin a chance.②Know the situation of mergered enterprise and complete cross-border M&A rapidly. Zhongjin indpendent completed this M&A case whitout intermediary agent’s help. Fast is the characteristic of this M&A case and one of the reasons for the success.③Analyze the target enterprise needs choose appropriate payment. Because of huge losses, PEM need cash to solve enterprise’s survival and development problems. Zhongjin analysed the target enterprise needs and chose Cash payment model. This is undoubtedly a key element of success.④Pay attention to the cultural integration after the merger. Zhongjin and PEM sent some administrative staff and outstanding staff to each other enterprise. Zhongjin keeps the PEM management team stable to avoid enterprise unrest caused by personnel changes. Special strategies include:①Carry out actively pr lobbying to avoid political heat.②Pay attention to environmental issues. The company records all environmental incidents and corrective actions taken in consultation with the local community and environmental protection agency.③The improved safety performance is being driven by leaders who have been engaged and motivated by safety interventions and leadership development programmes. Not only are the Board and Management involved in regular safety reviews and interaction with employees but structured safety interventions have been targeted at the operational leadership groups down to supervisor level.The main contribution of this paper:For the cross-border mergers and acquisitions, more research is theoretical,a few of studies through specific case, and most cases are brief. There are little researches aimming at resource-based enterprises of foreign acquisitions. This case chose Zhongjin Lingnan Nonfemet Company acquired PEM of Australia, although the time from acquisition to the present soon, it is believed that it was a successful acquisition case. This paper analyzed the success stories theoretically, in the hope of playing a reference role for the future overseas M&A.Of course,there are several shortcomings in this thesis,such as limitations of empirical data,time chosen and variables chosen.The objective elements mentioned above dominate my further discuss in my thesis,deficiency will be expected developed in my future study.