China Mergers and Acquisitions - A Detailed Explanation

Posted by goldmillennium on May 15th, 2013

Chinese acquisitions and mergers are certainly growing with time. The total overseas mergers records 65.2 billion U.S. dollars, which is though, slow but a remarkable growth. The growth recorded is 54% every year. China has certainly witnessed a boom in the enterprise of mergers and acquisitions. This is mainly because of domestic and international environment. Companies need to keep certain things in mind while acquiring a new enterprise.

All this actually started with the downfall European market affecting the world market to a greater extent. With the downfall of capital market and credit market, mergers and acquisitions followed quickly. Apart from this, the bank system also got affected to a greater extent. Such things wane the system as a whole. The outcome of all these was bankruptcy of companies and downfall of the economy to the extent that survival becomes difficult. If the situation is so, then mergers and acquisitions will be favorable to both parties. The companies, which are going to doldrums, will be able to survive, and the acquiring company can take over the sick firm at reasonable rates.

However, acquisitions are not favorable if the market is booming. On the contrary, with the downfall of the economy acquisitions will prove to be certainly beneficial.

This is certainly true that a crisis in the domestic market will play a major role in mergers and acquisitions. If there is a downfall in the domestic market, foreign companies will want for acquire local companies. This is because the crisis may have affected the local companies and they may need a holding hand of the bigger sharks in the market to fight the crisis. On the contrary, when other economies are suffering, Chinese companies can acquire foreign companies unlike in domestic crisis where other companies can acquire Chinese firms.

Acquisitions and mergers mainly help to stabilize the situation. The currency rate will also stabilize slowly if the companies flourish after acquisition. This is because of the fact that economies can flourish only if the market does well.

These details play a major role in your acquisition and merger deals. A downfall in either of the markets affects the working of the companies which in turn decides the economy of a place. Domestic and foreign economy along with certain related factors like product regulation, government rules and regulations, etc. play a vital role in 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.