Research On Ganfeng Lithium’s Motivation And Performance Of Continuously Resource-based Cross-border M&A

With the "going global" strategy and the "Belt and Road Initiative",the Chinese government encourages qualified domestic enterprises to actively allocate overseas resources.The non-ferrous metal industry where Ganfeng Lithium is located faces the dilemma that the domestic mineral resources in the upstream are limited and the demand in the downstream is easy to be regulated by macro policies,which also results in the complex and changeable characteristics of the industry.Therefore,some largescale mining enterprises actively carry out continuous overseas mergers and acquisitions to meet the continuous supply of raw materials required by the business development of enterprises,enhancing their risks-resisting ability.Starting from the manufacturing of lithium compounds and metal lithium in the middle reaches of the industry chain,Ganfeng Lithium began to distribute lithium resources in the upstream of the industry chain in 2011,and began to invest globally strategically in lithium resources in 2015.Its overseas lithium resource merger and acquisition has continued until now,and there has never been a financial crisis in the whole process due to the payment of consideration with a large amount of its own funds.At present,the company has developed into a comprehensive supplier of lithium products throughout the whole industrial chain layout of resource mining,refining and processing,battery manufacturing and recycling.This paper takes 8 overseas mergers and acquisitions(M&A)conducted by Ganfeng Lithium from 2011 to 2021 as the case study object,and studies the motivation behind them and M&A performance after them.Firstly,this paper adopts the method of literature research to sort out the existing overseas M&A motivation,performance theory and literature at home and abroad,which lays a certain theoretical foundation for this study.Then,considering the macro market and the company’s own business characteristics,this paper studies the motivation of M&A.Then in the short-term performance study,this paper adopts the method of event study to analyze whether the continuous overseas M&A events make the company stock achieve certain excess returns in the short term.Finally,this paper uses non-financial index and financial analysis to study the long-term impact of continuous resource-based overseas M&A on corporate performance.The motivation of Ganfeng Lithium’s continuous resource type overseas M&A is mainly the following three points.First,the drive of macro policies: such as the demand level of new energy industry policies and the gradual easing of overseas merger and acquisition policies;Second,acquisition of lithium resources and raw Materials: With the development of new energy and energy storage industry,the complex and changeable lithium ore market makes lithium resource become a strategic resource.The survival of enterprises cannot do without the control of upstream lithium resources.Ganfeng Lithium’s continuous overseas acquisition of lithium resources starts from its core business and locks upstream lithium raw materials in advance with certain cost,thus ensuring high-quality and stable supply of raw materials for future business development.Third,integrated upstream and downstream layout of the industrial chain:The overseas layout of lithium resources is also actively developing upstream business,which is key part of the whole industrial chain strategy of the company,further enhancing the market share and improving its competitiveness.This paper further analyzes the performance of Ganfeng Lithium’s continuous resource type overseas M&A.For short-term performance,the announcement of overseas merger and acquisition has excess positive earnings and has indeed achieved positive market response.In terms of drivers-based performance,the company has obtained a stable supply of high-quality raw materials by investing in lithium resources,so as to further expand the downstream lithium battery business and actively play the business synergies between the upper,middle and downstream sectors.In terms of financial performance,the continuous overseas acquisition of lithium resources has provided the company with high-quality and stable raw material supply,during which the company’s profitability and income quality have been improved,especially in the depressed lithium market environment,the company’s anti-risk ability has been significantly improved.The M&A style of "small step and fast run" keeps the company’s long-term and short-term solvency within a reasonable range.Continuous overseas M&A with its own capital does not cause the company to fall into financial crisis.Full supply of raw materials only when the market demand is strong will further release capacity,enhance inventory turnover,otherwise the market is not high,it is easy to cause inventory overstock;Overseas assets formed by long-term continuous overseas M&A have steadily enlarged the company’s assets scale.In addition,product sales released by high-quality and stable raw material supply also promote the steady growth of the company’s revenue.Finally,combining the result of the case analysis,this paper also obtains the enlightenment that has certain reference significance: The development of resource listed companies in our country should have the awareness of the whole industry chain;Do not ignore the changes in the market;Before carrying out overseas mergers and acquisitions,it is necessary to have a clear understanding of oneself,especially in terms of solvency and liquidity,and explore a suitable path of overseas mergers and acquisitions while minimizing risks.