Reasons for Chinese chemical companies to seek overseas acquisitions
Potential government support:
Finally, China's one belt, one road initiative, seems to indicate official support for China's overseas expansion. Such overseas expansion will also improve the status of enterprises at home.
These views show that there are many reasons for Chinese chemical companies to seek overseas acquisitions. All in all, the positive results of such acquisitions include
Improvement of profitability (because China's profitability is relatively low)
Better use of economies of scale (because costs are diluted in larger markets)
Acquire new technology (because acquisition brings new products, ideas and technologies)
More resilient business (because business risk is spread across multiple countries)
Greater value capture (as Chinese companies increase their share of activities)
However, it should also be pointed out clearly that there are obstacles to successful acquisition, especially for Chinese enterprises with limited M & A experience in the western world. Therefore, we recommend the support of consultants with rich experience in Chinese and western chemical industry and cross-border M & A transactions. In other missions, such consultants will ensure that
Obtain reliable local information about target company, market, law, etc
The acquisition is in line with the buyer's strategy and objectives
Synergy will be taken into account, so it can be taken into account when determining the issue price
Cultural differences, for example, Chinese and Western cultural considerations
An integration plan maximizes the revenue of the acquired company
At present, due to the impact of the new coronavirus, the valuation of many western chemical companies is relatively low. In addition, some western enterprises will face liquidity problems and insufficient export demand. If you act quickly, it may give decisive buyers a chance to get a good deal.
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