When the Chinese acquire…


photo credit: *helloharry*

After seeing their great ability to compete in terms of industrial by Chinese companies, we can determine (after a few years from the first major acquisitions) what they produced.
One thing: in only three years (from 2003 to 2006) the value of M& A Chinese rose from 1,6 to 18,2 billion dollars. This dynamic has caused in the world the fear of being bought.
The excellent economic performance of Asian companies at the end of the ’70s laid the foundation to begin to be interested in acquisitions. In the last decade we have seen different and very important acquisitions and we can certainly say that the excellent overall performance of the Chinese economy have surely overshadowed
sensational cases of failed acquisitions (i.e. TCL-Thomson, Lenovo-IBM ).

The phenomenon indeed also interested our beloved industry that has seen a case that allows us to investigate some key topics: the acquisition of South Korea’s Ssangyong Motor Company by the SAIC. Dated 2004 and cost of $ 500 million, SAIC has been able to obtain an equity stake of 49% from GM.

The idea of ​​SAIC was to restore Ssangyong submerged in debt to enhance their development and penetrate the U.S. market. Higher petrol prices and stricter emission standards brought down sales. The lower volumes forced SAIC to manage tensions with workers and to buy Ssangyong vehicles in 2008 for $ 4.5 million and resell them in the Chinese market.

While being in administration since 2009 SAIC has diminished the presence in Ssangyong up to a paltry 3% of shares. In total SAIC has invested 618 million dollars without obtaining anything.

This and other cases of failure have led Chinese companies in the belief that future acquisitions should apply almost exclusively to the tangible assets and high technology trying to grow first in the country and characterized by a tremendous growth market.

With Volvo (acquired for $ 1.8 billion) Geely has integrated the expertise of three new plants in China to strength domestic sales and double the others all over the world soon. The results are giving right to their strategic decisions.

China has not been spoiled by failure and defeat, as demonstrated several times, and it quickly changed course to achieve more ambitious goals and targets.

The Chinese people have repeatedly been shown to have the strength and capacity to do extraordinary things: today we are on the third anniversary of the tragic earthquake in China: 87,000 dead and 5 million people displaced. Well, in three years, they  have enclosed the old city to preserve the memory, almost delivering all houses built: a new city is in another place and all the people have stable employment.

Here, in front of that, I think it is fair to acknowledge the great merits of people that does not enjoy the consideration they deserve. Our industry has no exception on this issue.


Antonio Piscitelli

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