Factors to Consider At the Time of China Mergers and Acquisitions

Posted by goldmillennium on March 14th, 2013

Chinese mergers and acquisition is growing with time. The total overseas mergers hit the record of 65.2 billion U.S. dollars, which shows a gradual rise of 54% from year-to-year. Chinese enterprise of mergers and acquisitions is blooming, mainly because of domestic and international environment. Companies need to keep these factors in mind while they merge with a company or acquire a new enterprise.

Factors Related to External Environment

The downfall of a superpower like Europe affected the world market to a greater extent. It weakened the capital market, credit markets, and companies taking an active part in mergers and acquisitions. Apart from this it seriously affected the functioning of the banking system as a whole. Things like this will wane the system as a whole. It will lead to the bankruptcy of companies and the downfall of the economy to such an extent that survival would become difficult. Under such situation mergers and acquisitions are favorable and beneficial to both parties. The companies, which are going to doldrums, would be able to survive, and the acquiring company will be able to take over the sick firm at reasonable rates.

This scenario of the acquisition may not be possible if the market is booming. However, companies can make the best of the situation by means of mergers and acquisitions which in turn will also be beneficial to the company acquired which will otherwise find survival difficult.

Factors Related to Domestic Environment

Apparently, a crisis in the domestic market will also affect mergers and acquisitions. Under this situation, foreign companies would come forward for acquisitions since the crisis may have led to the overall downfall of the economy wherein domestic companies would want the support of bigger sharks in the market for fighting the crisis. During the external crisis, Chinese companies can acquire foreign companies unlike in domestic crisis where foreign companies overtake domestic firms.

Acquisitions and mergers will help stabilize the situation. The fall in the currency rate because of the crisis will also stabilize gradually if the company grows after acquisition. This is because the growth of the economy on the whole depends a lot on its economic growth.

These factors play a major role in the decision of acquisition. A fall in either of the markets plays a key ingredient and affects the performance of the companies which in turn decides the economy of a place. Domestic and foreign economy along with certain related factors like government rules and regulations, product regulations, etc. play a major role in overtaking or acquiring any company.

About the Author:

Mr. Javier Hernandez, CEO is an international lawyer with a Master’s in European Union Law, International Business Transaction and Commercial Law and Chinese Law. Mr. Hernandez has eight years of experience in China and specializes in the business and legal areas in China including laws related to company formation & representative office in China. He has published and gained recognition in several magazines, including the Tsinghua Enterprise Business School magazine, as well as European and American magazines.