An Inquiry Into The Performance Of Oversea M&A

The last two decades have witnessed the steady economic development in China, but the tradition approach by extensive investment, pure money supply expansion and cheap labor force cannot sustain its long-run growth. With the deepening of global economic specialization and rapid development in China, more Chinese enterprises shift their business from local market to overseas, stimulating a new round of merger and acquisition (M&A).The WIND economic database displayed that global cross-border M & A in the 21st century is more active than the 20th century, and global cross-border M&A transactions amounted to 905.2 billion US dollars in 1999, because Europe and the United State enterprises overseas mergers and acquisitions actively. During the 2007 economic crisis, overseas mergers and acquisitions swiftly rose to nearly 20 years maximum transaction amount of $ 1.0227 trillion, during which sovereign wealth funds plant to buy overseas assets. Moreover, Chinese overseas M&A is relatively backward western countries. From1999 to 2000, Chinese cross-border M acquirer amount is negative, while the amount of the sale side is $ 7.3 billion in 1999 and is $ 37 billion in 2000. During this time, more foreign companies stationed in China for the acquisition of Chinese assets. After 2000 the amount began to soar from $ 73.26 million in 2001 to $ 4 billion in 2014, because of the rapid development of the whole economic.2008 is a cut-off point, and the transaction amount is different. This shows that China's economic relations with the global economy become more closely. Domestic companies is not limited to grow and develop in China, so they look for more choice of overseas strategic development, and cross-border mergers and acquisitions is a good choice.The first part of the paper introduces the background and significance, then the author begin a brief introduction to the context of this article. The second part mainly define the concept, the theoretical motivation in merger motivation were discussed; and literature review about M&A theory. There is not yet a conclusive theory to explain all the motivation of acquisitions, so it is suitably to analyze specific cases in different situation. Finally the paper introduces the explanation about mergers and acquisitions at home and abroad. Development of theory followed the practice closely, many scholars have thought to explain, so they started turning to the empirical analysis of econometric model to prove the theory of mergers and acquisitions, especially M&A performance.The third part is around the case of Ji'en Nickel Industry. The author began a brief presentation of the case, then using the SWOT theory to analyze the motive of Ji'en Nickel Industry to focus on the strengths? weaknesses% opportunities and challenges in details.The fourth chapter is the main part of this paper. It focus on short-term performance analysis and long-term performance analysis, and then the author finds reasons of different performance. In the short-term performance analysis it uses more current event study methodology. First it is important to determine the time of occurrence of mergers and acquisitions, then establishing estimation WINDow and event WINDow, finally it is useful to calculate excess returns in the event WINDow. The result shows this acquisition improve the performance of Ji'en Nickel industry in the short term. In the analysis of long-term performance, the author use accounting data analysis to analyze profitability, liabilities, operating capabilities and the ability to grow. Although mergers and acquisitions occurred in 2009, it is confused to make the conduction. Due to the particularity of this merger case, Royal Mines began a two-year construction, so it is comprehensive to use a two time periods to compare the performance of a company in same industry, which is 2010-2012 and 2013-2014. The analysis revealed that long-term performance significantly decreased clearly, then the author find out the reasons, which are summed up the existence of "business illusion" and "scale illusion".The fifth part of this paper is to summarize the case, the author give his own proposals for the M&A to improve the efficiency of merger integration in reference.The contribution of this paper is that, although many use event study to analyze the short-term performance of M&A, the econometric model has a strong assumption. If some case studies may not validate assumptions, so the excess return may be wrong. In order to avoid such errors, the author conducted a test and conduct the normality test. In the analysis of long-term performance, it is common to use the happened time as the base year for M & A analysis, but because of the particularity of the case, the author consider the first operation time for analyze.The deficiency of article is that a case study is special, so it is not useful to use the conclusion for others cases. Secondly, the event study method is based on the theory of market efficiency, but there are many impacts from behavioral finance theory in recent time, finally the author discusses the long-term performance which it assumes other conditions are not changed, but in the long term there are changes.