General

In 2022, the overall performance of the M&A market was relatively low due to the repeated impact of the epidemic. According to the data, 4535 M&A transactions were completed in the Chinese enterprise M&A market in 2022, down 4.49% year on year. Chinese enterprises participated in cross-border M&A and completed 117 cross-border transactions, down 37.10% year on year. There were 66 outbound mergers and acquisitions and 51 inbound mergers and acquisitions. There were 76 disclosed transactions with a total transaction amount of US $23.04 billion, down 5.25% year on year.

In 2022, China completed 21 M&A transactions with a scale of more than US $1 billion and 324 M&A cases with a scale of more than US $100 million, of which the largest cross-border case was the acquisition of 100.00% equity of Baring Asia Investment Co., Ltd. by Yintuo Group on October 20, 2022, with a transaction amount of US $6.716 billion. The transaction will greatly expand the company's Asian investment platform and make it truly realize its international layout. The large-value case of merger and acquisition completed in China was the merger of XCMG Group Construction Machinery Co., Ltd. on August 1, 2022, with a transaction amount of 5.930 billion US dollars.

"In recent years, the motivation of A-share listed companies to initiate cross-border mergers and acquisitions is mainly reflected in four aspects: resource acquisition, expansion of international trade market, value investment and global supply chain layout." Zheng Xiaojia, lecturer of the School of International Economics and Trade, University of International Business and Economics, said that resource acquisition includes strategic resources such as natural resources, technical resources, knowledge resources, etc., to build resource advantages, break technical barriers, and learn advanced foreign experience, Help enterprises improve production efficiency, maintain competitiveness and realize industrial upgrading; Expanding the international trade market can expand the world market share, realize the global development strategy and diversification strategy, and enhance the international competitiveness of enterprises; Value investment is to seek for enterprises with undervalued international trade market value, use the Chinese market or the rich operating experience of the enterprise itself to improve the performance of the merged enterprise, open up the space for enterprise appreciation, and obtain the excess income brought by enterprise value improvement or share dividends. Tencent's overseas venture capital is a typical example; The layout of global supply chain requires enterprises to deeply participate in the division of labor of global value chain, gradually realize the transfer to high-end industrial chain, and improve industrial competitiveness.

Cross-border mergers and acquisitions of Chinese enterprises have always been one of the important ways for Chinese enterprises to "go global". In recent years, the intensification of the anti-globalization trend in the development of international trade and economy, the constant geopolitical conflicts, the rise of trade protectionism, the instability of bilateral political relations, the uncertainty in the political, economic, legal and policy aspects of the region where the target company is located, as well as the impact of the epidemic situation in recent years, have brought certain risks to cross-border mergers and acquisitions.

For the future cross-border M&A market of Chinese enterprises, Zheng Xiaojia suggested that the subject of M&A should pay attention to preventing the political risks of the location of the M&A target. The changes in political and economic policies and bilateral political relations in that location will directly affect the success or failure of M&A. Therefore, before M&A, it is necessary to fully understand the political and economic environment, policy agreements, etc. of the place where the M&A company is located, pay close attention to the political dynamics, and formulate reasonable plans for possible policy adjustments in a timely manner.

In addition, cultural conflict is also a problem that the subject of mergers and acquisitions needs to pay attention to. Problems such as different corporate cultures, conflicts between management models and management concepts, and difficulties in implementing improvement plans will all lead to the failure of post-merger integration. Therefore, before the merger and acquisition, it is necessary to fully investigate the organizational culture of the other company, reasonably predict the difficulties that will be faced, and carefully select the appropriate cultural integration mode to ensure the successful integration after the merger and acquisition.

Enterprise mergers and acquisitions often require a large amount of financial support, and the performance after mergers and acquisitions also has great uncertainty. Debt risk is also an issue that cross-border M&A entities need to consider. In this regard, Zheng Xiaojia suggested that cross-border M&A entities should formulate reasonable financing strategies to deal with the debt risks arising from M&A, and take into account the financing needs that may arise in the process of corporate integration after M&A, as well as the adverse impact of the short-term performance decline, and make capital arrangements in advance to avoid the impact of capital rupture on the normal operation of the company. The previous "snake swallowing elephant" acquisition of some enterprises has brought huge debt pressure to enterprises. Therefore, it is also important to make a forward-looking assessment of the market environment.

"Driven by the development of the digital economy, digital cross-border mergers and acquisitions may change the internal driving force of cross-border mergers and acquisitions." Zheng Xiaojia said that with the long-term support of China's policies, the "the Belt and Road" is expected to become the long-term development impetus of cross-border mergers and acquisitions of enterprises.

Interviewed experts said that looking forward to 2023, the impact of the epidemic will gradually fade, and cross-border mergers and acquisitions are expected to return to life. With the optimization of epidemic prevention policy, I believe that the M&A market will also usher in a new recovery with the arrival of spring.