A Real Great Leap Forward: History, Drivers And Expected Trends Of M&A In The People's Republic Of China
Sabet d'Acre, Constantin
2010
- Submitted in partial fulfillment of the degree of Master of Arts in Law and Diplomacy at the Fletcher School of Law and Diplomacy. Abstract: Since 1978 and China's opening to the world, M&A in China, just as the country's economy, has gone a long way. This thesis intends to understand what were the drivers that led to such growth in M&A in China? In addition, it will analyze what were the trends ... read morein M&A that resulted from these drivers? Finally, it will try to answer the question of what can we say about future trends in M&A in China in light of our knowledge of these historical drivers and trends? With the beginning of the reform and open-up policy in 1978, China progressively opened its economy to sweeping changes. This led to many distortions which put SOEs in difficult situations. Government sponsored M&A transactions to rescue failing enterprises appeared. All in all, in between 1978 and 1991, M&As in China made their first steps. China's reform program found a new life after 1992. A well-needed legal framework started to appear concerning company law in general, but also clarifying certain issues on M&A. However, this framework remained rather unclear and complex. Most domestic transactions were still government orchestrated 'bail-out' of failing firms. Total inbound M&A value over the period increased in size thanks to the improved regulatory environment, and certain important patterns appeared. Finally, outbound M&A remained inconsequential until 2001. Since 2001, and China's WTO entry, M&As in China have greatly changed. Total values of domestic, inbound and outbound M&As have increased substantially. Inbound M&As have benefitted from the opening of the economy and decreased government restrictions. Domestic M&As have grown both thanks to increased M&A led by private companies and industry consolidation led by SOEs. Similarly, outbound M&As have been led by both private and public companies that are looking abroad for growth and technology. However, in all these cases, the government's role is still very existent. When looking at the future, it is likely that government involvement will not disappear. While it is reasonable to expect growth in inbound M&A, this growth will still be bound by the government's interests. With regards to domestic and outbound M&A, private companies will progressively become responsible for more deals of a larger scale as they grow in size, but M&As led by SOEs will not disappear from the picture either if the government's policies do not change too much when the new leadership takes power in 2012.read less
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