New Factors are Driving Chinese Companies to Pursue Overseas M&A
May 23, 2014

(From left to right): Joel D. Backaler, Author of China Goes West; Li Xiaoyang, CKGSB Assistant Professor of Economics and Finance; Li Kan, Managing Director of TCL Venture Capital and CKGSB EMBA Student

Despite growing appetite from Chinese companies to go abroad, those with active globalization strategies are often falling short of growth targets in their international operations. What are they failing to observe? Are these companies ready to globalize? Moreover, what are the motivations or benefits for doing so?

On May 23rd, CKGSB welcomed Joel Backaler, author of China Goes West, and Li Kan, CKGSB EMBA student and Managing Director of TCL Venture Capital, in a panel discussion that focused on such topics. Li Xiaoyang, CKGSB Assistant Professor of Economics and Finance, moderated the forum to an audience of nearly 100, including media (China Daily and People’s Daily) and senior level executives of Chinese companies considering going abroad.

After brief opening remarks by Professor Li, Joel Backaler took the floor to discuss the emerging phenomenon of Chinese companies going West, addressing questions such as “are Chinese companies ready to go west?”, and if so, “through what channel: M&A, JV, or partnerships?” Joel then outlined and elaborated on the five keys to going West: government, employees, customers, community and capital incentives. He then connected these five concepts with a famous quote, “when you open a window, fresh air will come in, but so will some flies” – when looking to expand overseas, it is important to balance the positives with the negatives. There will inevitably be concerns and risks such as consumer protection, labor rights, environmental costs, national security and competition, but by adopting the right strategy and objectives, going West will also introduce various positive implications such job growth, infrastructure improvements, tax revenues, access to new markets and corporate philanthropy.

Professor Li then set the tone of the panel discussion by emphasizing the Chinese markets that are ripe with opportunity. “New industries are looking to participate in overseas M&A due to improvements in policies, favorable capital markets conditions, and rapid development in the high-technology industry. Additionally, capital development will promote diversification of Chinese companies’ investment tools.” Professor Li proceeded to moderate a panel discussion between Li Kan and Joel Backaler on cross-border M&A. As the gap between the Chinese and Western private equity industries decreases, this will introduce many opportunities for private equity firms and other companies looking to grow through strategic acquisition. Among the top considerations discussed for cross-border M&A were synergies, integration and industry dynamics.  The panel ended with several questions fielded from the audience, addressing specific points made by Joel and Kan.

Globalization and M&A is a topic that CKGSB has strong expertise in, and is reflected through our research and programs (such as our Executive Education courses and CKSGB-IMD Dual Executive MBA). CKGSB was proud to host such a dynamic and engaging event, and looks to continue addressing the hot topics in today’s business environment through knowledge-driven panels and seminars with our world class faculty, alumni and corporate contacts.

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