How to secure the right M&A deal in Belt and Road?
Deloitte with B&R
In last issue's 'Deloitte with B&R', we elaborated enterprises should focus more on soft skills in selecting the proper international talents. Besides selecting and training international talents, the management of risks are also great challenges enterprises will face. With the furtherance of BRI, overseas M&A is becoming the main way for Chinese enterprises' outbound investment. How to make proper evaluation of different kinds of risks in overseas M&As, avoiding "buying wrong" and "buying expensive"?
In this issue, we are pleased to have Mr. Bill Yang, Deloitte China Financial Advisory Partner, to analyze this issue.
In the process of overseas M&A, the enterprise should conduct a comprehensive due diligence based on the strategic objectives and the valuation of the target. Based on many previous Chinese companies' overseas M&A projects, there are two types of major risks. The first one is "buying wrong", that is, M&A targets are out of the strategic expectation enterprises wish to achieve (for example: improving technology, acquiring qualification and expanding the market). The second one is "buying expensive", which means although the M&A targets meet the strategic needs of the enterprises, the price paid (mainly refer to trading price) exceeds the expecting value added by M&A. To mitigate the major risks mentioned above, special attention should be paid in the selection evaluation of the targets. In pre-M&A period, necessary investigation and survey on the commercial, technology and market are the basis. In the execution phase, in order to get ready for the integration, enterprise shall finish a series of analysis on financial, tax, legal, HR, etc. centering on the value assessment of target.
Coming soon: The construction of BRI demand higher requirements of the accounting industry. With more than 50 official languages and 10 more accounting standards, national culture differ a lot among the countries and regions along "Belt and Road". How to promote the interconnection of accounting systems in different countries and provide a more convenient environment for regional development are big issues. In the next issue of 'Deloitte with B&R', we will analyze the opportunities and challenges of the accounting industry in BRI.