The challenges facing outbound Chinese M&A

Author: | Published: 1 Dec 2005

Companies from the People's Republic of China (PRC) are increasingly investing in assets outside China. As the Chinese economy sustains its high speed of growth, this wave is expected to maintain its momentum.

While some transactions have been finalized, some of the proposed Chinese acquisitions did not close. Oil company CNOOC's recent unsuccessful takeover bid for Unocal provides one well-publicized example. Ultimately, a combination of factors accounts for the success or failure of any proposed acquisition; many of these relate to the parties' commercial judgements and aspirations and therefore the reasons for the failure of a proposed acquisition can only be sensibly analysed on a case-by-case basis. From a practitioner's perspective, however, PRC companies' acquisition campaigns share some generic features – some of these features have facilitated, while others have militated against, offshore acquisitions. To provide some thoughts as to potential pitfalls for Chinese acquirers, it is worth identifying...