How to Approach Chinese Acquisition Targets?

One of the first problems corporate development executives seeking to acquire Chinese manufacturing companies have to deal with is that the owners of qualified acquisition targets are unwilling to consider the sale of their companies.

China ’s shorter history with free market offers some explanations for the reluctance. In China , well-run companies that fill the pool of qualified targets are most likely privately owned. But the younger individuals who started the businesses only two decades ago, for instance, may have not reached their retirement age yet. Transferring ownership to the next generation or to outside buyers is yet to be on the owner’s agenda. Besides, many successful businesses in China have been growing at a rate far higher than that of the overall economy. The prospect of continued growth is foreseeable, at least so before the current global financial crisis stroke. Relinquishing control of a profitable business with optimistic long-term prospect may have appeared a less attractive alternative to many business owners.

Despite the obvious hurdles, a large number of US companies are determined to pursue acquisition in the dynamic China market. Our experience shows also that, with some China-specific features taken into careful consideration, the hurdles can be crossed – unwilling business owners do change their mind and ultimately make the deal. One factor corporate development executives may want to pay particular attention to is how to avoid making the seller a loser in the perceived commercial warfare.

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