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Chinese companies have targeted natural resources and technological sectors for their overseas mergers and acquisitions (M&A) strategy, according to the latest report from Boston Consulting Group (BCG). Between 2001 and 2005, Chinese firms launched 28 M&As in the mining and energy industries with an average deal value of US$280 million. Over the same period, the number of M&As in technology and communications industry stood at 17, with an average deal value of US$225 million. To provide a clearer picture of Chinese firms' position on the world stage, BCG compared China to 13 rapidly developing economies (RDEs) including South Africa, India, Malaysia, Russia, Mexico, Brazil and Turkey. China made only 82 M&As in developed countries from 2000 to 2004, only 11 percent of the total 776 overseas M&As by RDEs over the same period. In contrast, South Africa's outbound M&As in developed countries totaled 169 while those of India registered 201. The report noted that 62 percent of China's outbound M&As targeted Asia, with Kazakhstan, the Hong Kong Special Administrative Region, Indonesia and the Republic of Korea receiving most of Chinese mainland's outbound investment. Triggered by China's entry to the World Trade Organization in late 2001, the latest wave of overseas M&As is predicted to be stronger as a result of fiercer domestic competition and an increasing amount of opportunities in the world market. China's national interests such as securing access to natural resources, diversifying investment of growing foreign reserves and developing national champions and turning them into global players will also act as powerful driving forces, the report acknowledged. David C. Michael, senior vice president of BCG, advised Chinese companies to develop a clear strategic growth plan via M&A and focus particularly on intellectual property, labor and environmental issues. "Do not rush into a deal. Get your feet wet first to gather overseas experience," he said. Founded in 1963 with 61 offices and 4,600 staff worldwide, BCG is a global management consulting firm and has assisted many large Chinese clients with strategic topics including corporate strategy, cross-border M&A, branding, risk management and IT transformation. (Xinhua News Agency May 11, 2006) |
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