Takeovers, mergers in early days; still have long way to go, analysts say
Companies from the Chinese mainland are acquiring German companies to sharpen their global competitiveness, but the buyers need to consider their own development goals, whether the deals are really worthwhile and how they're going to manage the overseas enterprises, analysts noted.
The remarks followed domestic media reports on Sunday that Chinese companies have launched merger and acquisition (M&A) deals to buy 24 German companies so far in 2016.
For example, home appliance maker Midea Group Co made a bid for German industrial robot maker Kuka AG on May 18, according to a statement posted on Midea's website. State-owned China National Chemical Corp announced on April 29 that it completed the acquisition of German industrial machinery maker KraussMaffei Group.
"M&A deals can help domestic companies enhance their global competitiveness, as these German companies have advantages in terms of technology, brand influence and distribution channels,"Li Junjie, a partner at Zhong Lun Law Firm and deputy director of the Institute of International Acquisition and Investment at Renmin University of China, told the Global Times on Sunday.
Chinese companies acquiring German manufacturing enterprises can thus acquire advanced technology as well as market share and access, He Weiwen, co-director of the China-US/EU Study Center at the China Association of International Trade, told the Global Times Sunday.
He said Midea wants Kuka to meet its own need to use more robots in production and to have a share in the German market.
Chinese investment in Germany stood at $9.1 billion as of mid-May this year, far exceeding the 2014 full-year record of $2.6 billion, 21jingji.com reported on Sunday.
Driven by the "Made in China 2025" plan, domestic companies are targeting small and medium-sized German companies with recognized technologies, but domestic companies have to take into account various factors including whether a proposed M&A deal is in line with the development goal of the buyer, whether the M&A can produce synergy and how to manage the company after making the acquisition, according to Li.
The State Council, the country's cabinet, announced the "Made in China 2025" plan in May 2015 with the aim to boost Chinese manufacturing. Under the plan, the importance of innovation for each industry is highlighted.
Rising M&A by Chinese companies in Germany has caused concerns there.
In the proposed deal involving Midea and Kuka AG, the German government has sought other potential buyers. It has also considered adding conditions to the purchase as well as whether it could apply a foreign trade law to control the deal, Bloomberg reported on June 2.
German Economy Minister Sigmar Gabriel said the country wanted a European suitor, saying "there are efforts to create an alternative offer," according to Bloomberg.
"They worry that Chinese buyers may lay off local workers and transfer advanced technologies to China," Li noted, adding that they always attach conditions to deals.
For example, the conditions may be that buyers can't close plants, lay off local workers and transfer the technologies to their home countries, Li said.
But German Chancellor Angela Merkel's ongoing visit to China indicated there is still vast scope for bilateral cooperation, He said.
Germany will strengthen economic cooperation with China to help the nation integrate into the international economy, according to Merkel, who gave a speech on Sunday at the University of Chinese Academy of Sciences in Beijing.
The era of Chinese outbound M&A deals has just started and there will be more Chinese companies buying overseas entities in the next five years, Pedro Nueno, president of the China Europe International Business School, was quoted as saying by domestic news portal sina.com.cn on May 21.
