Chinese firms misstep on mergers and acquisitions

08:50, November 04, 2010      

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Mergers and acquisitions have become the main channel through which Chinese brands amplify overseas investments. However, four specific mistakes predominate the conducting of them (mergers and acquisitions) and need to be fixed, said Lu Jinyong, director of the China Research Center for Foreign Direct Investment at a forum during the second China Overseas Investment Fair.

The first and major mislead by Chinese enterprises eyeing a merger or acquisition is to think that taking over a well-established brand is better than fostering one by themselves,according to Lu.

The second mistake Lu addressed was the fact that Chinese companies believe that a brand obtained from another company-especially foreign- can be its dominant one.

The third mistake mentioned was that Chinese firms have a strong belief that a brand acquired is undoubtedly advanced in technology, while facts prove that the very reason they were sold was that they were at loss.

Finally, Chinese enterprises think that those brands purchased from others' hands are easily manipulated. But actually, managing them is as difficult as managing an acquired company.

Lu concluded that overseas mergers are an important process for Chinese companies to grow themselves into multinational companies, while it is not effective to foster global well-known brands. He stressed that Chinese companies should foster their own dominant brands first, and then step onto the next level.

During his speech, he also said that from 1999 to 2008, China's foreign direct investment (FDI) grew 80.43 percent on a yearly basis. And "if from now on, the country's FDI keeps a growth pace of 30 percent each year, then by 2015, it (FDI) will be the world's largest..

"In this new era's richer China, 25 provinces and areas see their GDP per capita at over $2,500, numbers that accentuate China's light speed development of foreign investments," closed Lu by saying.

Source: Global Times


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