The State-owned Enterprises’ Choice Between Native M&A And Cross-border M&A

The state-owned enterprises are the main force in the M&A activities especially the cross-border M&A in China. Recent years have witnessed the increasing scale and speed of transnational M&A activities conducted by state-owned enteiprises. but the effect is not ideal. This thesis aims to explore how to improve the state-owned enterprises’success rate of horizontal M&A and how to choice between the cross-border M&A and domestic M&A so as to realize the optimal welfare. The thesis discusses the efficient causes for state-owned enterprises to conduct M&A activities through three aspects of enterprise, industry and national strategy, and analyzes the opportunities of state-owned enterprises’ cross-border M&A combined with the current international economic situation. Then this thesis analyzes the changes in profit and social welfare before and after state-owned enterprises’ M&A with the aid of a mixed oligopoly Cournot model, which discusses whether the state-owned enterprises’M&A is favorable and how to choose the target enterprise under the conditions of free trade, tariff and different marginal cost, and provides some policy recommendations for enterprise managers and relevant government departments. The findings show that when the marginal cost of an enterprise is low, the state-owned enterprises can get more profits and social welfare after absorbing it, the changes in profit and social welfare are closely related to the new cost after the merger. so integration is a key point to the success of M&A. In the end, this thesis uses empirical case of Industrial and Commercial Bank of China taking over bank of Halim in Indonesia to verify the conclusion of Cournot model, and summarizes the relevant experience and inspiration.