Chinese companies acquiring overseas are entering their third phase. During the first phase, the vast majority of outbound M&A deals were made to secure natural resources. The second wave of activity was largely about acquiring brands or technology and other capabilities that Chinese companies could use to help build their businesses at home.
Now, when companies look to acquire beyond China’s borders, it’s often to help them achieve the dual goals of winning at home and exporting abroad, enabling them to strengthen their domestic competitive stance while simultaneously positioning for global expansion, especially in other developing markets. This latest stage of M&A is helping Chinese companies gain market share in utilities, construction and Internet-based businesses in countries such as Brazil.
Client:Web Genius Lab
Date:December 15, 2018
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Appendix: Where are the deals?
Ride-hailing company DiDi illustrates how some acquirers are exercising far more caution than was common during the first two phases of China outbound M&A. The company made a solid strategic rationale for its recent acquisitions, as spelled out in an investment thesis, and followed up with more stringent due diligence.
While this arrangement works fine for most of Ruyi’s acquisitions, a stronger approach to integration is called for in different situations—for example, when acquiring a technology company in a developed market with the intention of bringing the technology back to China.