The Cross-border M&A Of China’s Equipment Manufacturing Industry:Acquirer’s Qualification, Cultural Difference And M&A Performance

The equipment manufacturing industry determines the core competitiveness of the whole industry chain, which is the foundation of the national economy and industrial development. Along with the fast promotion of industrialization and urbanization process of China in recent years, the equipment manufacturing industry such as engineering machinery, precision machine tools, electrical equipment are developing rapidly. The production value of China’s equipment manufacturing industry has been the highest in the word for three years.Because of lack of core competence, industry transformation and upgrading are facing obstacles, many enterprise try to through Cross-border M&A to promote their technology. Moreover, the western equipment manufacturing enterprises are stuck in financial crisis and their assets drop significantly since the economic crisis, it brings opportunity for Chinese enterprises to participate in the global manufacturing’s resource allocation.The equipment enterprises of China have participated11cases of Cross-border M&A in the first three quarters of2012, the amount of Cross-border M&A accounts for45%of Manufacturing Cross-border M&A, both of amount and quantity of its record the highest in the same period. China’sCross-border M&A of equipment manufacturing industry has entered a new phase. With the new trend of the Cross-border M&A, a series of problems should be deeply analyzed and M&A performance is one of the most important study topics. Both domestic and abroad academic circles have done a preliminary exploration on M&A performance of Chinese enterprises. Subject to the limitations of sample and the difficulty of data collection, it lacks research on some specific industries include the equipment manufacturing industry. Although China’s Cross-border M&A of equipment manufacturing industry has been noticed widely in the market, whether it is supported by the investors, whether Cross-border M&A can create value for Chinese enterprises and Which factors influence the M&Aperformance, there are many problems need to be further studied.In view of the above, this paper first studied the related concepts and basic theory of Cross-border M&A, then compared the mainstream methods of M&A performance appraisal; Second, we analyzed the impact on Cross-border M&A performance by the acquirers’qualification (include ownership nature, profitability and liabilities level) and cultural difference, then set the research hypothesis. In the second part, this paper use Even Study analyze the sample companies’M&A performance based on the efficient market hypothesis. We selected35listed companies from a collection of data base include Wind Info, Tai’an database, RESSET database and the Deloitte report. Calculating the cumulative abnormal returns by using Market model and then performing a significance test. This result shows that the Average Cumulative Abnormal Returns of overall sample is4.78%and every day’s ACAR have passed significance testing except the19th. It achieves a positive evaluation of the market that the Cross-border M&A of equipment manufacturing industry of China has a good start. In the third part, this paper uses empirical study to test research hypothesis. Using the cross-section regression, we find that ownership of property does not significantly affect stock Cumulative Abnormal Returns. Profitability and liabilities level have respectively passed10%and1%level of significance test which are in line with the expectations of judgment and both of their coefficients are negative. It suggests that low levels of liabilities can help enterprises get better M&A performance, the lower the profitability of the equipment enterprises, the more support the M&A can be got. Cultural difference have passed10%level of significance test, it can be indicated that the greater the cultural differences of the host country and home country, the less support the Cross-border M&A can be got. In addition, theexchange rate, the market atmosphere and the relative size of M&A have a positive effect to M&A performance.