Buy essay on Mergers & Acquisitions

Mergers and acquisitions are among the most common ways of development of globalization, applied presently by most of even the most successful countries, regional groupings and individual companies. Merger and takeover processes tend to promote enterprise development, optimization of the economic structure, formation of the so-called “growing points” and the gradual development of more efficient sectors of the economy, thus changing the national economic framework (DePamphilis 2009: 5-18).
In the last decade, mergers and acquisitions have become an important part of the reform of state enterprises in China. In 1989, the XIII Congress of the Communist Party of China (CPC) identified the possibility of a reimbursable transfer of ownership of small state-owned enterprises to collectives or private investors (Zhang 2007: 21-25). In 1997, the main report to the XV Congress of the CPC indicated the need to combine the reform of state enterprises with the reorganization, transformation, equitization and strengthening governance in order to improve the economy efficiency (Zhang 2007: 34-36). On November, 8, 2002 at the XVI Congress of the CCP General Secretary Jiang Zemin announced that it is necessary to continue optimizing the structure of the state economy and reforming the state assets management system (Zhang 2007: 79-82).
Companies’ merger and acquisition processes started to develop rapidly in China in the late 20th century. On December, 11, 2001 China joined the World Trade Organization (WTO), which provided the impetus to expand the scope of mergers and acquisitions in the country (Fung 2004:99-130; Chen C 2008: 83-87). Since 1997, the number of mergers and acquisitions of enterprises has been increasing by 70% annually. From 1997 to September 2001, China held more than 1,800 mergers and acquisitions; their total volume amounted to 132.4 billion yuans (Nee 2010: 78-80).
China’s largest private carmaker Zhejiang Geely Holding Group has agreed the purchase of units of Volvo from Ford Motor for $ 1.8 billion, which will be the largest foreign acquisition of a Chinese company. Geely promises to provide full funding of the transaction, although mentioning the possible loan from the European Investment Bank. Geely also promises to keep production in Sweden and Belgium (Nee 2010: 203-205).
On June, 24 Chinese steel producer, the company Anshan Iron & Steel Goup (AnSteel), received the formal approval from the Chinese government to place the company’s shares worth $126.4 million in the assets of Australian mining company Gindalbie Metals Ltd. After the share placing, the company AnSteel will increase its stake in Gindalbie assets from 12% to 36%. And in August 2009, Chinese bank China Construction Bank Corp (CCB), the second largest bank in China, announced its intention to buy a division of American International Group Inc. (AIG) for $ 70 million. Chinese bank China Construction Bank will buy 100% of Hong Kong’s division AIG Finance Ltd. (Rosenbaum & Pearl 2009: 277-78)
In China, mergers and acquisitions are the main content of the strategic restructuring of state enterprises. The choice of models, the definition of exchange ratio of shares and the influence of corporate culture on the integration process are key elements in mergers and acquisitions. Today, for example, China is preparing for a new phase of the struggle for global resources, at which it will use its vast foreign exchange reserves for purchasing foreign oil companies (Tunsjø 2010: 25-45).
In June 2009 the company PetroChina, which is part of the largest oil and natural gas producer China National Petroleum Corporation (CNPC), reported about the completion of the process of buying 45.51% shares of refining company in Singapore Petroleum and would like to discuss terms of purchase of the remainder of the shares. The total transaction will amount to $ 1.02 billion. Also in the summer 2009 the company China Petroleum & Chemical Corp. (Sinopec), the largest petrochemical company in China, agreed to buy the Swiss oil and gas company Addax Petroleum Corp for $ 7.24 billion. Company Sinopec and China National Offshore Oil Corporation (CNOOC) purchased from the American company Marathon Oil the share equal to 20% in oil production in the shelf area of Angola (Block 32) for $ 1.3 billion (Tunsjø 2010: 25-45).
However, mergers and acquisitions bring certain risks. Enterprises should consider problems of management after the purchase. Presently, there are quite a few successful transactions. According to the deputy head of the Institute of Business Administration of China Petroleum University, Dong Syuchen, in the process of acquiring foreign companies there often exist certain political risks, since major international acquisitions are not necessarily purely commercial operations, they are often associated with government activities and affect the interests of the Government of the country in which they are purchased (DePamphilis 2009: 680-82).