A Comparative Mergers&Acquisitions Study Of SANY Heavy Industry And Zoomlion Heavy Industry-the Effects Of Different Motives And Integration Methods On Their M&A Results

Many Chinese enterprises have already dominated their home market despite of foreigncompetition. In the context of globalization, Chinese enterprises have an urgent need toimprove their international competitiveness in the foreign market. However, they have a waysto go compared to their foreign counterparts in various terms such as product design, brandingand marketing. Thus, Chinese enterprises are in need of enhancing their internationalizationas a result of global competition. International mergers and acquisitions which can be thefastest and most convenient way to acquire strategic resources and new market, has becomeone of the main strategies for many Chinese enterprises.This dissertation adopts case study method to comparatively study the mergers andacquisitions cases of Sany Heavy Industry merging with German Putzmeister Holding GmbHand Zoomlion Heavy Industry merging with Italian CIFA（Compagnia Italiana FormeAcciaio S.p.A）, in search of what factors by which the M&A motives and integrationmethod of the international M&A of Chinese companies are affected and how differentintegration methods affect their M&A results. This dissertation intends to go into thefollowing four issues:(1) What M&A motives do Chinese manufacturing enterprises have?(2)What integration methods do they use?(3) How firm specific factors, situational factors andM&A motives affect their integration.(4) How integration affect their M&A performance? Inthe resource base theory perspective, this dissertation analyzes the international M&A motivesof Sany Heavy Industry and Zoomlion Heavy Industry that search for resources. It analyzesthe M&A motives of the cases with five M&A features characterized as competition-driven,market seeking, technology seeking, and strategic assets seeking and efficiency-seeking. Itexplores what factors M&A motives and integration methods are affected with the twoconcepts of enterprise capability and situational factor. This dissertation, applying Hofstede’scultural dimensions theory, studies the cultural differences between the hosting countries andChina in the dimensions of power distance and uncertainty avoidance, and how thosedifferences affects people’s view of organization, thereby affecting the means of problemsolving by the merging parties in the process of resource integration. Moreover, it explores thesolution of cultural differences faced by Chinese enterprises when integrating with theirwestern counterparts. This dissertation analyzes the dependency between acquiring enterpriseand targeted enterprise with the two dimensions of strategic dependence and independenceneeds. This dissertation characterizes the consolidation pattern matched in both dimensions asabsorption, coexistence, protection and control. Through the analysis and comparison between the M&A performances and integration modes of the two enterprises, this dissertationexplores the effects of different integration methods on performance of mergers andacquisitions.After the research and analysis, this dissertation comes to the following conclusions.(1)With international M&A, China construction machinery manufacturing enterprises wish totransfer brands, R&D capacities, and other intangible assets from developed countries toChina, in order to strengthen their competitiveness in the home market. Overseas marketseeking is also a main M&A motive for them due to the risks brought by the heavy reliance onChina market.(2) When the integration measures adopted by enterprises match theorganizational model implied in the people of the host country, international M&A can betteraccomplish absorptive integration. The acquired parties have a strong demand forindependence, which led to the enterprises in the two cases adopted protection mode in theirearly integration. Thanks to stronger cross-cultural management capability, the integrationmeasures taken by Zoomlion are wider and more systematic, therefore it eventuallycompleted the transition of integration from protection mode to absorption which result inenhance of performance.(3) In the case that host and home country cultures varies greatly,acquired party’s demand for independence would be strong in initial phase, thus Chineseenterprises would adopt protection-type integration in order to avoid conflict. Whenenterprises have rich M&A experience and strong cross-culture management capabilities, theycan take timely measures to increase the strategic dependency of the acquired party andreduce its demand for independence in response to the psychological characteristics of thehost country. In case that enterprise has strong motive of market seeking, technology seekingand strategic assets seeking while the main reason of sale of the targeted company is the needto solve funding problem, the acquired party’s strategic dependence will be weak at thebeginning which is a reason for adoption of protection type integration.(4) When enterprisestransfer from initial protection mode of integration to absorption mode, their M&Aperformance would improve. Due to absorption, the merged party’s strategic dependencywould improve and demand for independence would reduce. Thereby, the potential synergiesof the two M&A parties would be realized, so as to achieve the M&A goal of businessperformance1+1>2.