Mergers and Acquisitions (M&A) in China’s Pesticid

ShanghaiForum1MergersandAcquisitions(M&A)inChina’sPesticideIndustryisUnderwayDrNormanLai黎剑雄博士ShanghaiForum2AgendaIAboutM&A30MinIIDriversandDomesticActivities45MinIIIConclusion30MinShanghaiForum3AgendaIAboutM&A30MinIIDriversandDomesticActivities45MinIIIConclusion30MinShanghaiForum4AboutM&A¾KeyDefinitions¾PerspectivesonExternalGrowth¾FormsofM&AandAlliances¾MotivationsforM&A¾SuccessfulM&A¾ReasonsforfailureofM&A¾GovernmentRoleandCompetitivenessShanghaiForum5KeyDefinitionsMergerTwoorganisationsagreetojointogetherandpooltheirassetsinanewbusinessentityAcquisitionJoiningoftwounequalpartners¾Agreedacquisition-directorsacceptbidandrecommendacceptancetoshareholders¾Hostileacquisition-againstwillofonesetofdirectorsIntegrationDescribesallabovemechanismsShanghaiForum6PerspectivesonExternalGrowthDeWitandMyer(1998)presentedaninterestingreviewofthefactorsunderlyingmergerandcollaborativeactivityfromtwoopposingperspectives,thePortfolioPerspectiveandtheCoreCompetencyPerspective.ShanghaiForum7PortfolioPerspectiveThePortfolioPerspectiveisbasedontheviewthatM&AandAlliancescreatesynergythrough:¾Benefitsofintegrationareleveragingfinancialresources,entrytonewmarkets,spreadingofrisks¾Successfulmanagementdependsuponresponsiveness¾ThereforeemphasisisplacedondevolvingresponsibilitytoSBU’sthatcomprisetheorganisationtoincreasetheirspeedandflexibilitytorespondtochangedintheenvironmentShanghaiForum8CoreCompetencePerspectiveTheCoreCompetencePerspectiveisbasedontheviewthatM&AandAlliancescreatesynergythrough:¾Leveragingofresourcesandcorecompetencesbetweenbusinesses¾Increasedbargainingpowerwithcustomersandsuppliersetc.¾Improvedlinkagestodistributors¾CounterbalancelostresponsivenessShanghaiForum9FormsofM&AandAlliancesExistingExistingBusinessBusinessSuppliersSuppliersDistributors/Distributors/CustomersCustomersCompetitorsCompetitorsProducersofProducersofsubstitutesorunsubstitutesorun--relatedproductsrelatedproductsUpstreamUpstreamAlAlliancelianceVerticalVerticalbackwardbackwardM&AM&ADownstreamDownstreamAAlliancellianceVerticalVerticalforwardforwardM&AM&AHorizontalHorizontalM&AM&AHorizontalHorizontalAllianceAllianceDiversifiedDiversifiedM&AM&ADiversifiedDiversifiedAllianceAllianceShanghaiForum10MotivationsforM&A¾Speedofmarketentry-newmarket¾Toincreasemarketsharebycombining2businesses¾Toincreaseproductportfolio¾Toreducecompetition¾Toreducecosts/increasesales-economiesofscale¾Synergyandtoleveragecorecompetences¾Toaccesssupplyordistributionchannels¾Toacquirenewproductsornewtechnology¾Touseunderutilisedresources¾Toaccessneworscarceresources¾ToenhancereputationShanghaiForum11SuccessfulM&AResearchindicatesthatthemeasurestobetakentoincreasethechanceofsuccessinclude:¾Findasuitabletargetpartner¾Evaluatethetarget’scompetitiveposition¾Evaluatethetarget’scultureforcompatibility¾Investigatethecompatibilityofthetwostructures¾Ensurekeyresourcescanberetainedaftermerger¾Ensurearealisticpriceispaidfortargetstock¾PlanthepostmergerprocesscarefullyShanghaiForum12ReasonsforfailureofM&AMergershaveaveryhighfailurerateandeventhosethandon’tfailmaynotincreaseprofits(Kay,1993)Causesoffailure:¾Lackofresearchintotargetbusiness¾Culturalincompatibility¾Lackofcommunication¾Lossofkeypersonnel¾Payingtoomuch-highfinancialrisk¾Lackofgrowthintargetcos.market¾Legislativemeasures¾TimetoachievefinancialbenefitNote:researchindicatesthatasmanyas70%ofacquisitionsendupwithlowerreturnstoshareholdersofbothorganisationsShanghaiForum13AgendaIAboutM&A30MinIIDriversandDomesticActivities45MinIIIConclusion30MinShanghaiForum14DriversandDomesticActivities¾GovernmentRoleandCompetitiveness¾Country-LevelDeterminants¾Firm-LevelDeterminants¾MajorDomesticM&AinPesticideIndustryShanghaiForum15¾GovernmentRoleandCompetitiveness¾Country-LevelDeterminants¾Firm-LevelDeterminants¾MajorDomesticM&AinPesticideIndustryDriversandDomesticActivitiesShanghaiForum16GovernmentRole&Competitiveness¾GovernmentscanaffectcountryCompetitivenessthrough:‰Policymakingandintervention‰Tradeliberalizationandexchangerateadjustment¾Industrialpolicies¾Importprotection,financialsubsidies,regulatorychanges,trainingandinfrastructurepoliciesShanghaiForum17GovernmentRoleToplayasupportingroleinnationalCompetitiveness,governmentsshould:¾Emphasizecompetitivenessofinfrastructure¾Enforcestrictproductandservicequality,andenvironmentalstandards¾Deregulatecompetition¾Adoptstrongdomesticcompetitionpolicies¾Provideconduciveenvironmentforsustainedinvestment¾ProvidesecureandstableeconomicandpoliticalenvironmentShanghaiForum18Targets20102011-20152016-2020Chinatop20enterpriseshadaround32%marketshareChinatop20enterpriseswillhavemorethan70%marketshare6%ofsalesturnoverwillbeallocatedforinnovationandR&DBrandedproductswillhavemorethan50%marketshareHygiene&LowEnergyProductionHi-toxicityandhi-residueproductshad50%oftotalproductionReducehi-toxandhi-residueproductgradually;reducepollutingby-productsby30%Reducebothhi-tox,hi-residueproductandpollutingby-productsby50%Wordtop2companieshad50%marketshareandtop10companieshad90%marketshareChinawithexceptionoffewmanufacturersh