The Research On Acquiring Firm’s M&A Possibility In Multinational M&A

Since the global financial crisis starting in2008and the Europe debt crisis in2009, the world economic framework has changed dramatically. Corporations in the emerging economies, especially in China, initiated another post-crisis multinational merger and acquisition(M&A) tide. With the background of world’s economy slow recovering and the Chinese economy well developing,991multinational M&A cases and65.2billion dollars’multinational M&A sum witnessed the continually robust growth on the Chinese M&A market in2012.A general knowledge is acquired through an overview of the multinational M&A development of Chinese firms in2012.After browsing the multinational M&A motivation theories and literatures on M&A possibility, it’s found:on the one hand, academics attach little attention on acquiring firms’M&A possibility but largely on the target company’s; on the other hand, there are rare literatures focusing on the M&A possibility problem from the viewpoint of transaction cost theory. Transaction cost theory, as the representative of new mechanism economics which is one of the top four economic theories upon M&A motivation theory, whether it can explain the other three theories including new classic comprehensive theory、synergy effect theory、 principal-agent theory?Based on the historical literatures, market power hypothesis、synergy effect theory、M&A agency theory are representatives of new classic comprehensive theory、 synergy effect theory principal-agent theory respectively. As a result, this paper positions its studying perspective on acquiring firm and demonstrates market power hypothesis、synergy effect theory and M&A agency theory’s explanation power on multinational M&A possibility. Then three hypothesis are put forward as follows:(1)the lower the acquiring firm’s market power is, the more the transaction cost before multinational M&A is, the bigger the possibility of multinational M&A;(2)the more the unbalance between acquiring firm’s growth ability and profit ability is, the more the transaction cost before multinational M&A is, the bigger the possibility of multinational M&A;(3)the less the acquiring firm’s agency cost is, the more the transaction cost before multinational M&A is, the bigger the possibility of multinational M&A. Taking Chinese listed companies with a multinational M&A background in2012as samples, Logistic regression is used to establish acquiring firms’multinational M&A possibility model. Besides the above technical analysis, it also gives a general analysis on multinational M&A environment in2012from the aspects of economic elements、law elements and mechanism elements.The main conclusions are as follow three points:(1)Market power hypothesis is not enough to explain multinational M&A possibility from the viewpoint of transaction cost theory. In targeting countries with a developed economy、sound laws、complete mechanism, the lower the acquiring firm’s market power is,the possibility of M&A is not certain to be bigger.(2) Synergy effect theory can explain multinational M&A possibility from the viewpoint of transaction cost theory. In targeting countries with a developed economy、sound laws、complete mechanism, the more the unbalance between acquiring firm’s growth ability and profit ability is, the more the transaction cost before multinational M&A is, the bigger the possibility of multinational M&A;(3)M&A agency theory can explain multinational M&A possibility from the viewpoint of transaction cost theory. In targeting countries with a developed economy^sound laws、complete mechanism, the less the acquiring firm’s agency cost is, the more the transaction cost before multinational M&A is, the bigger the possibility of multinational M&A.Combined with the above conclusions, this paper shares five polices and advices:(1)Chinese enterprises need continually optimize their corporate management to reduce the agency cost, in order to improve the possibility of multinational M&A and reduce transaction cost then;(2)The capital market should try it’s best to figure out firms with the unbalance between growth ability and profit ability inwardly, assisting them finish the multinational M&A and reduce transaction cost then;(3)The government needs in a row optimize the domestic macro-economy environment. Because a robust domestic economy is the basis of corporations’multinational M&A;(4)Completing the law-making. It should be crystal clear about the approval procedures*. foreign exchange control、money financing、insurance supporting、tax polices referred to multinational M&A. By building legal multinational M&A procedures, it can provide law support for Chinese companies’"go outside";(5)Optimizing domestic mechanism environment and being familiar with foreign important countries’regulative、normative and cognitive mechanism environment in order to enhance the possibility of multinational M&A.