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Contribution Details
Type | Master's Thesis |
Scope | Discipline-based scholarship |
Title | The Drivers of the Recent Surge of Chinese Overseas M&As and Evidence of Value Creation in the Recent Big Transactions Implying Public Swiss Companies |
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Institution | University of Zurich |
Faculty | Faculty of Business, Economics and Informatics |
Number of Pages | 87 |
Date | 2018 |
Abstract Text | Of late, China’s outbound M&A activity has experienced significant growth, reaching a record volume of USD 217 billion in 2016. It appears that Chinese enterprises have withstood the financial crisis better than Western companies and, since then, have become major players in the global M&A market. This surge of Chinese cross-border M&As must be explained. It stems from a broad range of factors including, the shift of the Chinese economy from an export-oriented to a more consumption-driven model, the decrease in domestic growth, a favorable financing environment and strong political impulses like the One Belt One Road Initiative. The motivations of Chinese enterprises for the acquisition of foreign assets have been driven by the desire to acquire strategic resources and enter new markets. However, Chinese acquisitions have focused lately on advanced technologies and capabilities to up-grade Chinese industries and serve China’s rising middle-class, which is expected to drive Chinese economic growth in the future. To that extent, Switzerland has been a favorable target nation. Major acquisitions have taken place, including ChemChina’s acquisition of Syngenta (the biggest overseas acquisition of a Chinese company to date) and HNA’s acquisitions of Swissport and gategroup. On top of that, the stability of Switzerland’s institutions, the safe-haven characteristic of the CHF in times of global macroeconomic and political uncertainties and the Swiss excellence in innovation and research, reflect Chinese motivation to acquire Swiss companies. The results of my event-study, whose methodology assesses the financial impact of unanticipated events on stock prices, indicates that Syngenta’s shareholders benefitted from the ChemChina’s public tender offer. Abnormal returns hit 5.20% at the effective announcement date of the merger [t=0] and exceeded 15% during my entire event window of 40 days prior and after the announcement [t=-40; t=+40]. However, since Monsanto’s unsolicited tender offer in April 2015, Syngenta’s stock prices already incorporated information of a potential acquisition. Therefore, the results of the event study do not reflect the entire effect of the acquisition as it was not fully unanticipated. With respect to the bidders, no strong conclusion can be inferred from the CAR analysis of ChemChina and HNA. In brief, my thesis first focuses on the explanation of the key drivers of the recent surge of Chinese outbound M&As, which I define as the Chinese 2015-2016 M&A wave. To do that I start with an analysis of the financial theories driving M&As and the theoretical explanations for M&A waves in the first part of my paper. Also, I present some specificities of Chinese listed companies and stock markets, such as the proportion of government ownership – whose motivations differ from minority shareholders. The second part of the thesis introduces the event-study methodology and interprets the quantitative regression results of the recent big Chinese takeovers in Switzerland. |
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