DEALS M&As ex­pected to surge in 2014

Op­ti­mism based on Chi­nese firms’ ap­petite for fa­mous for­eign brands

China Daily (Hong Kong) - - BUSINESS / VIEWS - MIKE BASTIN The au­thor is a vis­it­ing pro­fes­sor at the Univer­sity of In­ter­na­tional Busi­ness and Eco­nomics in Bei­jing and a se­nior lec­turer on mar­ket­ing at Southamp­ton So­lent Univer­sity’s School of Busi­ness. The views do not nec­es­sar­ily re­flect those of Chi

foot­print such as Huawei Tech­nolo­gies Co Ltd, ZTE Corp, Haier Group and Li-Ning Co Ltd.

To date, Haier and Huawei have pur­sued global ex­pan­sion via or­ganic growth and have not suc­ceeded at or even ap­peared to have con­sid­ered megatakeovers. Huawei, with 70 per­cent of its sales out­side main­land China, is un­likely to change course. The same is true of Haier.

Li-Ning, on the other hand, has not en­joyed the in­ter­na­tional suc­cess achieved by other lead­ing Chi­nese cor­po­rate brands. Its global ex­pan­sion de­sires re­main undi­min­ished. Growth via M&A may fea­ture more promi­nently in its global strat­egy plans for 2014. Ru­mors have abounded for a while about a pos­si­ble takeover of Peak Sports, but there’s been far less over ac­qui­si­tion of any ma­jor global ri­val.

Nike Inc and Adi­das AG re­main too strong, but ma­jor sec­ond-tier com­peti­tors, such as the US-based New Bal­ance Ath­letic Shoe Inc, are well within LiN­ing’s takeover radar. New Bal­ance has a his­tory in main­land China that should make any post-ac­qui­si­tion in­te­gra­tion of the com­pany and its brand name rel­a­tively straight­for­ward. Do not be sur­prised if, around spring 2014, Li-Ning an­nounces the suc­cess­ful com­ple­tion of just such a deal.

While any sig­nif­i­cant global eco­nomic re­cov­ery re­mains at best patchy, Chi­nese com­pa­nies will seize any op­por­tu­nity to ex­pand in­ter­na­tion­ally via cross-bor­der M&A. Slug­gish eco­nomic growth fore­casts for 2014, there­fore, should lead to a bumper M&A year.

Chi­nese com­pa­nies’ global ex­pan­sion is in­evitable, and cross-bor­der M&A of fa­mous for­eign com­pa­nies and their brands of­fers by far the most at­trac­tive route. Ex­pect more M&A ex­cite­ment dur­ing 2014.

JEROME FAVRE / BLOOMBERG

C. Larry Pope, pres­i­dent and chief ex­ec­u­tive of­fi­cer of Smith­field Foods Inc, left, and Wan Long, chair­man of Shuanghui In­ter­na­tional Hold­ings Ltd, shake hands be­fore a news con­fer­ence in Hong Kong on Oct 10. In May, China’s big­gest meat pro­ces­sor, Shuanghui, bid suc­cess­fully for US pork-pro­cess­ing gi­ant Smith­field. Shuanghui’s takeover of Smith­field was val­ued at $7.1 bil­lion.

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