A brief description of the main impact of foreign acquisitions of Chinese companies on China's economic development
1. On July 15, 2005, Hunan Valin Pipeline Co., Ltd.?000932.SZ, hereinafter referred to as Valin The pipeline announced that the company had received approval from the State-owned Assets Supervision and Administration Commission and the National Development and Reform Commission on the transfer of some state-owned shares of Valin Pipeline. Wang Jun, the company's deputy general manager and secretary of the board of directors, told reporters that the joint venture will be established in late August.
After Valin Group transferred its 647 million legal person shares of Valin Pipeline to Mittal, the total share capital of Valin Pipeline remained at 1.765 billion shares, of which Valin Group held state-owned shares. Legal person shares account for 660 million shares, accounting for 37.673%, and Mittal holds 647 million non-state-owned shares, accounting for 36.673%. This merger and acquisition case broke the previous record for the amount of foreign capital acquiring China's A-share market. It was also the first foreign capital to acquire a state-owned steel company through equity investment.
According to Wang Jun, mergers and acquisitions have experienced many twists and turns. Mittal originally wanted to hold the same shares as Valin Group, but at the last moment the Reform Commission refused to approve it, saying that the state-owned assets would hold a controlling stake. After this merger and acquisition, the National Development and Reform Commission immediately issued policies and regulations for the steel industry, which did not allow foreign capital to control steel companies, especially large steel companies. Prior to this, relevant laws and regulations did not restrict foreign-owned steel companies.
2. Many countries have relatively complete regulatory systems for cross-border mergers and acquisitions, but this work is still in its infancy in China.
In Germany, company law stipulates that in cross-border acquisitions, when a person acquires 25% or more of the shares or voting rights of a German company, he must notify the Federal Cartel Office. Acquisitions are prohibited when they create or strengthen a controlling market position.
At the end of 2004, Lenovo’s acquisition of IBM’s PC business was reviewed by the Committee on Foreign Investment in the United States; and in September 2004, when China Minmetals proposed to acquire Noranda Mining Company, Canada imposed restrictions on the acquisition of domestic natural resource companies. are concerned about the prospect of mergers and acquisitions, and are considering adopting stricter safeguards and considering whether to amend the bill to give parliament greater control over the merger process. Currently, in Canada, any merger agreement worth more than US$200 million must be approved by the Canadian government before it can take effect
3. In China, cross-border mergers and acquisitions still lack a complete and systematic supervision system. Over the past two decades of reform and opening up, multinational companies have seized the Chinese market through direct investment or mergers and acquisitions of Chinese companies, and have achieved monopoly or are at the critical point of monopoly in many industries. However, China lacks the necessary review agencies for foreign mergers and acquisitions. This phenomenon has attracted great attention from officials and private industry insiders.
While the China Securities Regulatory Commission, the National Development and Reform Commission and other national ministries and commissions are working hard to revise and promulgate relevant laws and regulations on foreign mergers and acquisitions, a white paper from the private organization All-China Federation of Industry and Commerce Mergers and Acquisitions Association explains how to prevent global mergers and acquisitions from affecting my country’s economic security. We put forward systematic suggestions on the impact, mainly including:
First, step up the implementation of relevant laws and regulations with the Anti-Monopoly Law as the main body. The white paper believes that the biggest direct negative impact of foreign mergers and acquisitions is that it may lead to monopoly and suppress my country's infant industries, and the most important means to overcome this negative impact is the Anti-Monopoly Law.
The second is to establish a cross-border merger and acquisition approval agency for review. This agency to perform special review tasks can be composed of multiple ministries and commissions and be directly managed by the State Council.
The third is to establish a national economic security early warning mechanism in mergers and acquisitions. The first is information early warning. It is necessary to establish an M&A economic information network, file management system and analysis system.
Wang Wei, president of the All-China Federation of Industry and Commerce Mergers and Acquisitions Association and chairman of Wanmeng Investment Management Co., Ltd., is the initiator of this white paper. He told reporters that the Mergers and Acquisitions Association hopes to form a platform in the industry to jointly promote development of this business.
4
Shao Ning, deputy director of the State-owned Assets Supervision and Administration Commission of the State Council of China, pointed out on the 12th that with the expansion of the scale of foreign investment, the impact of foreign investment on China’s economic development is becoming increasingly limited. ignore.
Shao Ning said at the "Finance 2007 Annual Conference: Forecast and Strategy" held here that under the condition that domestic and foreign-funded enterprises cannot compete on a completely equal footing, preferential policies for foreign investment are likely to amplify foreign investment. Negative effects of entry.
In this regard, he pointed out that policy adjustments must be made first so that foreign investment can enjoy equal national treatment.
Under such a premise, it is possible to more accurately judge and formulate policies on the effects of foreign capital entering and acquiring domestic enterprises. Domestic and foreign-funded enterprises enjoy equal treatment, which is the benchmark for judging the effects of foreign-funded mergers and acquisitions of Chinese enterprises.
Shao Ning said that with the growth of domestic enterprises and the increase of national foreign exchange reserves, it is an inevitable trend for Chinese enterprises to go abroad to invest and acquire enterprises.
He pointed out that when Chinese enterprises go global, they should first improve their international operation capabilities, including the cultivation and reserve of talents. We should start from the direction of comparative advantage. Such as international project contracting, better domestic manufacturing companies acquiring the same type of small and medium-sized manufacturing companies that are more difficult for developed countries.
He suggested that professional services related to Chinese enterprises going global should be developed, including services for mergers and acquisitions and operations.
5.
How to view foreign-funded acquisitions of Chinese companies
In recent years, foreign-funded mergers and acquisitions are no longer a new term. A merger and acquisition case: Mars "devours" Wrigley, or the latest big event in China's beverage industry: Coca-Cola "drinks" Huiyuan, and the wave of foreign mergers and acquisitions has intensified.
Foreign M&A has become the main trend in international capital operations
Foreign M&A, as an internationally accepted method of attracting foreign investment, is a company that obtains a certain degree of equity from other companies through equity transactions. Control rights, economic behavior to achieve certain economic goals. The mergers and acquisitions here are actually two forms of mergers and acquisitions. A more vivid metaphor is "big fish eat small fish". The survival laws of nature also apply in the commodity market environment. Nowadays, foreign cross-border mergers and acquisitions have become the main way to absorb foreign direct investment in the world today. The "2006 World Investment Report" published by the United Nations Trade and Development Organization in October 2007 pointed out that in the past 10 years, cross-border mergers and acquisitions have gradually replaced "greenfield investment" (referring to foreign investment methods for newly established enterprises such as joint ventures or sole proprietorships) and have become The most important form of foreign direct investment. With the development of international cross-border mergers and acquisitions, corporate mergers and acquisitions and reorganizations have undergone strategic changes. Entering the 21st century, mergers, acquisitions and reorganizations are no longer simply about expanding enterprise scale and achieving integrated operations in order to reduce and disperse business risks. Strategic mergers and acquisitions based on improving core competitive advantages are gradually taking shape. The current mergers and acquisitions and reorganizations are more about accelerating the concentration of resources to advantageous enterprises, thereby promoting and promoting the adjustment and upgrading of industrial structure. Cross-border mergers and acquisitions are the mainstream of international direct investment and the development trend of foreign investment in my country.
In fact, we have also clearly understood the basic routine of multinational companies investing in China: first joint ventures, then holdings, and then mergers and acquisitions. In recent years, foreign M&A investment has developed rapidly, which means that multinational companies have completed the "testing period" of investment in China and begun to realize the transformation from "greenfield investment" to M&A investment. China has also gradually entered an explosive period of foreign M&A investment. development stage.
According to authoritative departments, in recent years, there have been some new major changes in foreign direct investment in China. Foreign businessmen have begun to enter our country in large numbers in the form of mergers and acquisitions of domestic enterprises, especially those with huge market scale and long-term growth potential. M&A of Chinese companies in the field of consumer goods. I believe that the rapid development of multinational companies' acquisitions of Chinese companies is due to two main factors. First, China's economic growth miracle is increasingly attractive to foreign investment; second, China's huge market potential and a series of open regulations and policies introduced by the Chinese government , providing opportunities for foreign investment to enter the Chinese market.
The food industry has become the most sought-after piece of cake for foreign mergers and acquisitions
Looking at the food industry, foreign capital has penetrated into every industry, whether it is the condiment industry, beverage industry, beer industry, etc. Many brands in China have been acquired by foreign investors, and the food market has become the most sought-after piece of cake for foreign mergers and acquisitions.
Mars “devours” Wrigley
Wrigley was once one of the most successful family businesses in the world. Even "Stock God" Warren Buffett is very optimistic about the cooperation between Mars and Wrigley, and has provided US$4.4 billion in subordinated debt. Although after the merger, Wrigley's family history ended and it became an independent subsidiary of Mars, in the long run, the marriage of Mars and Wrigley is bound to have a profound impact on the global candy industry.
First of all, the global sales of this super "Big Mac" in the candy industry exceed 27 billion US dollars, and the market share reaches 14.4%.
After the merger, the new Mars includes many well-known brands such as Aobai, Yida, Green Arrow, Dove, M&Ms, etc., covering many fields such as candy and beverages. For other big players in the food industry, this obviously adds an extremely powerful opponent.
Secondly, since the core business areas of Mars and Wrigley do not overlap, the merger of the two can form complementary products, the integration of personnel, creativity and brands, and the overlap of distribution networks. This brings huge room for improvement to New Mars’ future market expansion. Mars Global CEO Paul Mike publicly stated after the merger that the purpose of Mars and Wrigley's cooperation is not to become the "biggest" but to become the "best" and to establish leadership and leadership in all types of candy products. Provide innovative products.
Coca-Cola’s “Big Drink” Huiyuan
“Huiyuan Juice”, known as the representative of China’s national brands, recently announced that it will also marry into a wealthy family-----Coca-Cola will sell 179 It was acquired at a price of HK$100 million. Looking at this market economy behavior rationally, in fact, Coca-Cola's acquisition of Huiyuan was originally a transaction. In terms of commercial operations, its original nature was extremely simple. But now, Mr. Zhu Xinli, our original "national entrepreneur" representative, has suddenly become a "traitor". Looking at this acquisition dialectically and analyzing its internal and external environmental factors, Coca-Cola's acquisition of Huiyuan is a natural result of the trend of the times.
From an industry perspective, today's juice drink market has evolved into a market with high capital investment and is a typical capital-intensive industry. From the construction of raw material bases, transportation and processing, advertising and promotion, to sales channels mainly in KA and supermarkets, all require a large amount of capital, so the capital chain of many companies is very tight. The rise in costs and expenses last year and this year has given Huiyuan, led by Zhu Xinli, a deep sense of crisis. Retreating may not mean advancing.
In addition to changes in the external market environment, Huiyuan's development path has not been smooth in recent years. Brand advertising has often lacked new ideas, and the launch of new products has not been as successful as imagined. In the market The contracting system implemented in the past has even reversed marketing efforts, and many problems have led people to wonder whether there are serious problems with Huiyuan's internal management level.
Perhaps from the perspective of national sentiment, many Chinese people do not accept it. After all, Huiyuan is a local brand that the Chinese have grown up with, and the news of Coca-Cola’s acquisition of Huiyuan also came - Global Brand Network - Tai Suddenly, the label of selling "national brands" and "state-owned assets" was no longer on Mr. Zhu Xinli's head. From an entrepreneur's point of view, I think he was not wrong. He sold Huiyuan at the right time and at the right price to a person who seemed to be a good fit. But the national brand flag burdened him with embarrassment.
What are national brands and local brands? This is a false proposition that has never been accurately defined. When we talk about national brands, do we mean those registered in China? Are all the shareholders Chinese? Or does it just refer to those trademarks written in Chinese? If it were the first two, the Wahaha, Jinmailang, Mengniu and Tsingtao Beer we see now are no longer national brands. They are either registered abroad or controlled by foreign funds, including Huiyuan, which is also registered in Cayman, and its capital components also include Danone and Warburg Pincus.
Therefore, there has never been a so-called national brand, and everyone must be clear about this. There are only two kinds of brands, one is successful, which everyone can see, and the other is failed, which everyone has forgotten.
So, I personally think that in the globalized market, there is no longer a pure national brand. "Just seek the location, not everything." As long as the corporate brand still exists, it doesn't matter who owns it. , as long as it provides good products and services. Consumers do not need to have too strong national sentiments.
I think what consumers are worried about is whether Huiyuan will be eliminated like Robust and Wahaha? This time Huiyuan was acquired by Coca-Cola because Coca-Cola valued Huiyuan Juice’s brand and high market share. It would be unrealistic to create a brand from globrand.com to replace Huiyuan. In recent years, Coca-Cola has been taking the multi-brand route to achieve the effect of one plus one being greater than two. After the development in recent years, foreign investors have also gained a new understanding of Chinese brands. Some of the original acquisitions may have been to eliminate competitors, but now they pay more attention to the actual brand effect and value.
Just like BMW bought Rolls-Royce but did not abandon the brand, although Huiyuan today is not the Rolls-Royce it was back then, in terms of the juice market, its status and influence are not. almost. Therefore, I think the possibility of Coke giving up Huiyuan is not too great.
How to correctly distinguish opportunities and challenges?
CBCT believes that foreign M&A opportunities and challenges coexist, and it is urgent to improve the Chinese M&A market to protect "local brands".
As a necessary stage for the internationalization of Chinese enterprises, foreign mergers and acquisitions are not only an important way for China to introduce foreign investment, but also a historic opportunity for China’s economic development and structural adjustment. Of course, what we recommend is reasonable and effective ones. The premise is that foreign mergers and acquisitions will not have a negative impact on the Chinese economy, and international mergers and acquisitions rules and practices will be used as a reference to establish and improve China's mergers and acquisitions market as soon as possible.
From the perspective of opportunities brought by foreign mergers and acquisitions, foreign mergers and acquisitions investment will increase the supply of capital, alleviate the constraints of capital shortage and insufficient investment on economic growth; it will cause economic structural adjustment and upgrading, and promote the transformation of the labor force from low to low Productive sectors and enterprises flow to high-productivity sectors and enterprises. But at the same time, we are clearly aware that foreign mergers and acquisitions also have obvious negative factors and potential worries: it will increase the market share of foreign-funded enterprises, lead to an industry monopoly of "one enterprise dominates", and then affect the country's economy and industry. Safety; foreign mergers and acquisitions can even get out of control due to equity transfers. Even developed market economy countries use legislative norms and government controls to circumvent and restrict foreign mergers and acquisitions. Therefore, we hope that when the government supports the development of private enterprises, it will have more practical measures, a fairer environment, and more effective methods to help our enterprises complete industrial transformation and upgrading. We also hope that our ordinary consumers will use their own We must take practical actions to support our local brands and products, and change the consumer mentality of overly liking foreign products. Only when these two factors become positive will it be the real gospel for our local enterprises.
Otherwise, Huiyuan will definitely not be the last company to be acquired in the Chinese food industry. After Huiyuan, we may have a long list of mergers and acquisitions. This is the real problem and real sorrow for Chinese local enterprises and the Chinese economy