24 October 2016 - If early indications are anything to go by, then 2016 is set to be another record year for China’s outbound foreign direct investments (FDI) with $100bn of announced M&A transactions worldwide in the first three months of the year. Accelerating the pace of Chinese deals overseas are initiatives such as the Government of China’s One Belt One Road (OBOR) initiative that, inspired by the Silk Road trade path from China to Europe, is set to build a huge economic corridor that takes in almost two-thirds of the world’s population and accounts for one-third of the world’s wealth.
Backed by considerable financial resources, OBOR is set to open the doors to new trade, investment and economic opportunities between China and countries in Asia, Middle East, Africa and central and Eastern Europe. Certainly, the initiative is a major plank in China’s ‘going global’ objective that has already seen many Chinese companies take to the international stage as domestic growth slows.
In particular, the US and Europe have proven popular destinations for large private, listed and state-owned Chinese enterprises, with companies such as Huawei, Alibaba, Midea, Fosun and Haier now part of the business landscape in both regions. Yet significant challenges remain for Chinese companies that have their sights set on overseas expansion. More recently, state-owned Chinese enterprises (SOEs) are facing greater scrutiny in Europe over merger thresholds with failure to file for approval of a deal leading to sizeable fines. In the US, a move by Chinese investors to acquire a stake in Dutch company, Philips, was blocked by the US on security issues due to the fact that Philips has several US government contracts. And increasingly, unsolicited bids from Chinese companies looking to expand overseas are facing protracted and costly takeover battles.
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Even after a successful takeover or merger, there can be further ongoing challenges relating to cultural and operational differences. Discover the 5 key pre- and post-acquisition pathways Chinese companies can take to improve their chances of success overseas:
- Understand that there is no standard formula for success.
- Make effective use of public relations.
- Nurture leadership and talent on both sides.
- Place equal importance on profit and compliance.
- Manage expectations
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