China TMT Industry Overseas M&A Report 2017
"China TMT Industry Overseas M&A Report 2017" was jointly created by Deloitte Mergers & Acquisitions Service team and Deloitte Research. It analyses the development of overseas M&A (Mergers & Acquisitions) of China TMT industry especially technology sector, and examines the driving factors of overseas M&A, the development, risks and challenges of cross border M&A. This report scrutinises four attention-worthy propositions and draws up overall effective plans regarding TMT corporations overseas M&A.
Viewpoints / key findings
China TMT overseas M&A market to grow steadily.
From 2012 to 2016, China served as sponsor country of deal of mergers and acquisitions. Its compound annual growth rate in terms of number of M&As was far more than North America, Europe and other regions. China's TMT industry overseas mergers and acquisitions mainly appear in the technology subsector. The number of transactions accounted for more than half of the entire TMT industry and its compound annual growth rate ranked first in the four major segments. We expect that Chinese TMT overseas mergers and acquisitions market will continue to rise steadily in 2017 as Chinese tech company tries to acquire foreign high-tech and realize their globalization strategy.
Four Propositions and Three Goals
TMT cross-border mergers and acquisitions will encounter many challenges, including various kinds of political and legal restrictions from governments, operational risks and financial risks brought by high premium of mergers and acquisitions, as well as management issues post-merger.
In the process of mergers and acquisitions, we think that four propositions are worthy of attention:
- Control the "brain" of the target enterprises–management personnel should initiate communication as early as possible to prevent loss of core management team of the target enterprise.
- Grasp the "pocket" economy of target enterprises –timely control of financial power of the target enterprise to prevent excessive expenditure in transition period.
- Maintain "steady growth" in sales–maintain positive and timely communication with clients, and evaluate potential loss.
- Dispatch Chinese managers as "bridges"–specify roles and responsibilities of dispatched personnel from China.
Further, for strategic investors, it is especially important to formulate comprehensive and effective integration plan. Generally speaking, three important goals need to be realized:
- Formulation of direction: make implementation and output of integration work cater to realization of overall strategic objectives and maximize value of M&A;
- Value protection: ensure smooth operation of the company during the transition period so that the value of company can be retained;
- Value creation: realize synergistic effect during and after integration, and further enhance the value of the company in the subsequent operations.