The Risk and Countermeasure Study of Chinese Enterprises Cross-Border M&A in the New Period

Abstract

Pursuing Mergers and Acquisitions (M&A) allows companies access to more markets, achieves higher revenue and influence, and generates new opportunities to exchange knowledge, thus, becoming more flexible and absorptive to new knowledge, technology and change in general. At the same time, they expose themselves to higher risks inherent in operating in the foreign country environment. This study investigates how risks affect M&A and operations in foreign countries. Based on a critical literature review, we have conceptualized M&A and risk relationships. In these terms, both external and internal risks were investigated. The investigation was performed on a macro and micro economic levels. The databases examined encompass Dealogic, Thomson Reuters and M&A Reports provided by EMIS PRO. The country risks of our study model include political risks, financial risks, and economic risks. A qualitative study encompassing descriptive analysis was utilized. The theoretical findings suggest that country risks have a partial influence on M&A deals. However, because many countries with different external obstacles still have significant acquisitions level, this implies that when making a decision of merger or acquisitions as conceptualized in our study, firms do not consider political, financial and economic country risks. Chinese M&A was explored, and it appears that political instability during 2013 – 2015 years decreased the level of M&A. The current finding can be explained by understanding that acquisitions’ level implies the effect of the decision made to enter the market. As long as the risk does not occur in the host country, M&A level remains unaffected. Given this, we can conclude that the state should modify the existing policy regarding M&A. The decision of firms is rarely shaped by the risks existing in the country they plan to make the investment or purchase any company. The findings of the study are a signal for national governments to establish policies that would either ease M&A in their countries or provide sufficient support for their firms to go abroad and perform successfully.