Research On The RMS Mode Of Risk Control Of Cross-border M&A In Home Appliance Enterprises

In recent years,under the implementation of the strategy of "one belt and one road" and "China made 2025",cross-border M&A of Chinese enterprises have become an irresistible trend.Influenced by the low speed development of the industry and the decline of profit rate,Chinese household appliances enterprises also hope to develop their global business in brand,channel,technology and other aspects through cross-border M&A in order to find new profit.However,there are huge risks in cross-border M&A.Compared with domestic mergers and acquisitions,cross-border mergers and acquisitions involve laws and regulations of different countries with more complex relationships and greater risks.Based on the case of Midea Group merging German KUKA Group(2016),this paper summarizes a set of method of Chinese household appliances enterprises cross-border M&A risk control,named as "RMS model",trying to provide reference for other enterprises involved in cross-border M&A.The so-called RMS model(Retain its modes of business operation and staffs)means that the merged enterprisethe can keep the autonomy of operation and investment after M&A,and preserve its original organizational structure and staff.Through the case of Midea Group merging German KUKA Group,the writer found that Midea was in risk during M&A.These risks include political risk,legal risk,strategic decision risk,financial risk and integration risk.Midea adopted the "RMS" method to guard against these risks,and the specific methods were:(1)facing the query of Germany government and the public,Midea released friendliness and goodwill,and explained that their would not delist KUKA after M&A,in order to reduce the conflicting mentality of the German government and the public;(2)Showing enough respect to the KUKA Group and ensure the independence of the KUKA Group by signing the Investment Agreement,which aimed at retaining the core technology of the KUKA Group,in order to ensure the completion of M&A projects;(3)Aim at reducing the risk of business integration between Midea and KUKA after M&A,doing some cooperation,such as the establishment of industrial parks and joint venture.Firstly,this paper summarizes the theory of cross-border M&A,defines the concept and type of cross-border M&A,analyses the research on the cross-border M&A risk,combs and summarizes the risk types of cross-border M&A which aresuitable for China’s household appliances enterprises,and collates the relevant risk control theory,analyzes localization theory and origin country disadvantage theory to provide theoretical support for "RMS" mode.Emphasis of this paper is the case study of the M&A between Midea Group and German KUKA Group.Specifically,the paper firstly introduces the basic situation of both sides of M&A,and reviews the process of this M&A incident,qualitatively analyses the M&A risks which Midea encountered,and summarizes the measures taken by Midea under the RMS model.Secondly,combined with the experience and practice of RMS mode adopted by Midea in this M&A,this paper demonstrates and analyses the operation of this mode,and draws the advantages and limitations of risk control in cross-border M&A by using this mode.It have proved that the application of RMS model in this case has achieved great success,Midea have effectively controlled the risk of cross-border M&A,and got good result.The advantages of RMS model in risk control of cross-border M&A lie in: 1.It is easier to achieve the expected results in finance;2.Reduce the conflicting psychology of the merged enterprises and improve the success rate of mergers and acquisitions.Through the research,the author finds that the preconditions for the application of this model are: 1.M&A enterprises should have relevant business experience and have a detailed understanding of the merged enterprises;2.enterprises expect to acquire intangible assets such as technology and brand through M&A;3.the merged company can operate normally.Some scholars have said that at present,Chinese enterprises merge overseas company more for resources and brands,and should try to maintain the independence of the merged enterprises after M&A in order to achieve success in cross-border mergers and acquisitions.However,in reality,there is no specific mature and effective method,and enterprises are prone to make mistakes.This study is just a tentative analysis and discussion.The study finds that RMS model also has many limitations in risk control of cross-border M&A,such as the lack of effective control over the merged enterprises,which easily leads to failure in technology and resource integration.But from the final results of this case,we can know that the RMS model adopted by Midea is very effective,and other enterprises involved in cross-border M&A is worth learning from its success,especially for the household appliances enterprises that want to do diversified cross-border M&A in China.