Merger and Acquisition Activity in China: 1985-1996
研究1985至1996年间中国并购活动的特征，包括目标行业、所有权形式、交易类型和收购方来源国，为管理者提供决策参考。
In 1996, China attracted $42 billion in foreign direct investment (converting it in the second largest recipient of foreign direct investment in the world behind the United States). In 1996, its economy experienced a 9.7% growth rate. As more foreign companies try to establish a presence in this big emerging nation, the Chinese merger and acquisition (M&A) market will continue to offer immense opportunities. Characteristics of this M&A market examined include the industries and form of ownership of the target firms, the types of transactions, and the home country of the acquiring firms. INTRODUCTION The vast Chinese market (over 1.2 billion people) offers immense cultural, political and legal challenges as well as opportunities to multinational corporations. In the last 20 years, and under the leadership of Deng Xiaoping, China introduced market policies. The recent re-accession of Hong Kong, the reaffirmation of market policies by Jiang Zemin, and China's possible admittance to the World Trade Organization will open China to global competition even more. In the first six months of 1997, China attracted $23 billion in foreign direct investment. The government decided to restore some incentives in order to attract more foreign investors (Khan, 1997). The purpose of this paper is to describe M&A activity in China between 1985 and 1996. As the country continues to restructure its economy, M&A will be becoming more important instruments to enter this vast market. In particular, we examine issues such as: who is mainly involved in M&A activity, in which industries are the transactions most heavily concentrated, what are the main forms of M&A methods used by firms, and what is the ownership structure of acquirers and targets within the region. It is hoped that such information will help managers who are involved in M&A deals to make the right moves and complete deals in a timely and cost-effective manner. DATA SOURCE AND CHARACTERISTICS STUDIED Data for this study were drawn from Securities Data Company's (SDC) Worldwide M&A database. M&A transactions occurring around the world are included in this database if any of the following qualifications are met: The value of the transaction is known and exceeds 1 million U.S. dollars, The transaction resulted in the acquirer gaining at least 5% ownership of the target, The value is undisclosed ( i.e. the target is privately held or a subsidiary). We examine completed M&A transactions that were announced between January 1 st of 1985 and December 31st of 1996, and the value of the transaction was known. This study investigates four characteristics of cross-border M&A activity in China. These characteristics are the industrial sector of the target firm, acquisition method used, the ownership status of the target firm, and finally the home country of the acquiring firm. Industrial Sector of the Target Firm M&A are often used by companies to extend their market reach or product range (Subramanian, Ebrahimi, Thibodeaux, 1992). Knowledge of the primary industries that are going through a privatization and restructuring process provides insights of the types of investment opportunities available through M&As. Economic and technological infrastructure in certain industries in China may not attract foreign direct investment (FDI), or the existing firms may rarely be traded. Companies eager to establish a presence in the region may have to develop alternative entry strategies, such as the establishment of joint ventures with local or regional partners. In this study, targets are classified as being in: manufacturing, services, wholesale and retail trade, financial sector and natural resources as defined and categorized by SDC. Type of Transaction M&A transactions fall into three basic categories: Asset acquisitions (AA), Mergers (M), Stock Acquisitions (Partial (AP), Majority (AM), Remaining Interest (AR), Certain Assets (AC)). …