Chinese Inward Mergers & Acquisitions by European Companies and Chinese Outward Mergers ...

477 Pages·2013·2.7 MB·English

Chinese Inward Mergers & Acquisitions by European Companies and Chinese Outward
Mergers & Acquisitions in Europe: A Comparative Study of Critical Success Factors

JOINT DISSERTATION
of the University of St. Gallen,
School of Management,
Economics, Law, Social Sciences
and International Affairs
to obtain the title of
Doctor of Philosophy in Management

submitted by

Yu Chen
from China

and

Herbert Werle
from Zurich and the Principality of Liechtenstein

Approved on the application of

Prof. Dr. Hans-Jürgen Wolter

and

Prof. Dr. Martin Hilb

Dissertation no. 4212
ZSUZ Zurich 2014
The University of St. Gallen, School of Management, Economics, Law, Social
Sciences and International Affairs hereby consents to the printing of the present
dissertation, without hereby expressing any opinion on the views herein expressed.

St. Gallen, October 21, 2013

The President:

Prof. Dr. Thomas Bieger
Declaration by the President

Under certain conditions, doctoral students at the University of St.Gallen have the
possibility of writing a joint thesis. This is intended to provide suitable candidates with
an opportunity to work as a team in order to pursue larger-scale research projects
which would exceed the capacities of an individual researcher. Each candidate’s
contribution must be identifiable to the widest extent possible and must satisfy the
criteria for an individual doctoral thesis.

At its meeting of 21 October 2013, the Programme Committee of the University of
St.Gallen accepted the present work by

Ms Yu Chen from China

and

Mr Herbert Werle from Zurich

as a joint thesis in accordance with Art. 12 of the Implementation Provisions for the
Production and Publication of a thesis at the University of St.Gallen of 10 December
2007. I hereby declare that the above-mentioned doctoral students have fully satisfied
the requirements imposed by the University of St.Gallen with regard to the production
of a doctoral thesis and are placed on an equal footing with doctoral students
submitting an individual thesis in accordance with the Awarding Regulations for
Doctor’s Degrees of 11 December 2006. After graduation, they will both have the
right to use the title of a Doctor of Philosophy in Management of the University of
St.Gallen.

St. Gallen, 21 October 2013 University of St.Gallen
The President

Prof. Dr. Thomas Bieger
Preface

In addition to the continued merger and acquisition (M&A) activities by European
companies in China we have recently seen a significant increase in Chinese companies’
M&A activities in Europe. The authors conducted a comparative study of critical
success factors in M&As by European companies in China and in M&As by Chinese
companies in Europe. The authors come from China and Europe respectively, and
have collaborated to combine their different cultural background, know-how and
experience. The composition of a joint dissertation was chosen to address Chinese
inward as well as outward M&As from both European and Chinese perspectives,
which has important implications for both Chinese companies and European
companies.

Prof. Dr. Hans-Jürgen Wolter Prof. Dr. Martin Hilb
Acknowledgments

Our thankfulness first goes to our doctoral advisors, Prof. Dr. Hans-Juergen Wolter
and Prof. Dr. Martin Hilb, who accepted us as doctoral students and encouraged us in
our joint dissertation project. Their advice and guidance were very helpful and much
appreciated.

Without the support of three European acquiring companies which did acquisitions in
China and two Chinese acquiring companies which did acquisitions in Europe as well
as two acquired European companies in Chinese outward M&A cases, this dissertation
project would not have been realizable. We would like to thank Stora Enso, Nestle,
Bayer, Wolong, ATB, Lenovo and Putzmeister for their assistance in granting
interviews and providing the empirical data for our case study. Special thanks to our
interview partners, who dedicated their valuable time to grant us detailed insights into
the complex cross-border acquisition process and the critical success factors when
doing an acquisition in China or Europe as a European or Chinese company. Therefore
we would like to express our great gratitude to Mr. Karl-Hendrik Sundstroem, CFO of
Stora Enso, Mr. Roland Decorvet, Chairman and CEO of Nestle (China) Ltd., Mr.
Markus Ritzauer, CFO of Bayer Korea Ltd., Mr. Chen Jiancheng, Chairman of
Wolong, Mr. Wang Xiquan, Vice President and CFO of Wolong, Mrs. Xuan Lifang,
Wolong’s Vice Director of Overseas Enterprise Supervision Department of Wolong,
Mr. Andreas Schindler, CEO of ATB, Mr. Hendrik G. Baechle, Director Finance
EMEA of Lenovo Europe, Middle East & Africa, and Mrs. Dr. Renate Neumann-
Schaefer, CFO of Putzmeister. Besides, we also express our great thanks to the
managers of European and Chinese companies, who participated in our questionnaire
survey.

In addition we are grateful to Prof. Hellmut Schuette, Vice President and Dean of
CEIBS, who welcomed us at the CEIBS, Shanghai as guest students from October to
November 2012 and introduced us to academics and corporate decision makers in
Shanghai who provided helpful inputs for the empirical part of our dissertation.
We also like to thank Thomas F. Freear who consulted us in matters relating to the
American English language and provided us valuable feedback as our first reader.

We further like to thank Dr. Klaus Edel, Lecturer for Empirical Research Methods at
the University of St. Gallen, who kindly advised us when we had statistical questions.

Munich and Vaduz, May 2013 Yu Chen and Herbert Werle
Personal Acknowledgments

I would also like to thank Prof. Dr. Thomas Gutzwiller. It was his support, especially
his recommendation for my final admission to the Ph.D program, that I could pursue
my doctoral study at the University of St. Gallen.

I am very thankful that I have this opportunity to work with Herbert on this
dissertation. One plus one makes three, which is one of the rationales behind M&As.
That is also the rationale behind this joint dissertation. To successfully achieve this
objective, it is critical that Herbert and I have worked as a really good team.

Most of all, I would like to express my deepest gratitude to my family especially to my
husband Kai and to my daughter Weiyi. Without their love and support, it would not
be possible that I could be able to finish my doctoral study quickly and smoothly.

Munich, May 2013 Yu Chen

Yu’s professionalism and 100%-reliability, her academic excellence and her
perseverance in pursuing our goals, also in difficult times, was a “critical success
factor” in order to successfully finalize this research project. I am deeply grateful to
her. Last but not least, I would like to thank my wife, Carina who stood “by her man”
and supported me also in this endeavor, with the same commitment, as in many other
endeavors before.

Vaduz, May 2013 Herbert Werle

European-Chinese M&As and Chinese-European M&As: A Comparative Study of Critical Success Factors

List of tables ................................................................................... xv 
List of figures ................................................................................ xix 
List of abbreviations ................................................................... xxiii 
Summary .................................................................................... xxvii 
Zusammenfassung (Summary in German) .............................. xxix 
1  Introduction ................................................................................ 1 
1.1 Research background ........................................................................... 5

1.1.1  Chinese inward M&As worldwide ..................................................................... 6 
1.1.2  M&As by European companies in China ........................................................... 8 
1.1.3  Chinese outward M&As worldwide ................................................................. 12 
1.1.4  M&As by Chinese companies in Europe .......................................................... 18 
1.2 Motivation and research objective .................................................... 22

1.3 Research questions and key definitions ............................................ 25

1.4 Theoretical relevance and practical relevance ................................. 26

1.4.1  Theoretical relevance ........................................................................................ 26 
1.4.2  Practical relevance ............................................................................................ 27 
1.5 Dissertation structure ......................................................................... 28

2  Theoretical background ........................................................... 33 
2.1 Internationalization and M&As ........................................................ 33

2.2 Entry strategies for companies into a foreign market ..................... 36

2.3 Definition and types of general M&As .............................................. 42

2.4 Research on Chinese inward and outward M&As .......................... 45

2.4.1  Research on Chinese inward M&As ................................................................. 46 
2.4.2  Research on Chinese outward M&As ............................................................... 50 

ix
European-Chinese M&As and Chinese-European M&As: A Comparative Study of Critical Success Factors

2.5 Theoretical framework: SCOPE model ............................................ 54

2.5.1  Critical success factors (CSFs) in M&As ......................................................... 56 
2.5.1.1  Definition of critical success factors ............................................................. 57 
2.5.1.2  M&A performance evaluation ....................................................................... 60 
2.5.1.3  Success factors in M&As .............................................................................. 64 
2.5.1.4  Risks, obstacles, and success factors in Chinese inward M&As................... 73 
2.5.1.5  Risks, obstacles, and success factors in Chinese outward M&As ................. 78

2.5.2  Competence-gap closing by M&As .................................................................. 87

2.5.3  Strategic dimension in M&As .......................................................................... 89
2.5.3.1  Strategy – definition and elements ................................................................ 90 
2.5.3.2  M&A strategy and competitiveness .............................................................. 96 
2.5.3.3  Strategy and M&A motives ......................................................................... 100 
2.5.3.4  Real options in M&As ................................................................................. 103 
2.5.3.5  Summary ...................................................................................................... 105

2.5.4  Cultural dimension in M&As ......................................................................... 106 
2.5.4.1  Culture – definition ...................................................................................... 107 
2.5.4.2  Cultures in Europe ....................................................................................... 110 
2.5.4.3  Chinese culture ............................................................................................ 113 
2.5.4.4  Impact of culture on M&As ........................................................................ 118 
2.5.4.5  Summary ...................................................................................................... 121

2.5.5  Organizational dimension in M&As ............................................................... 122 
2.5.5.1  Definition and features of projects .............................................................. 123 
2.5.5.2  Project organization and M&As .................................................................. 125 
2.5.5.3  Structure requirements of the M&A project organization ........................... 126 
2.5.5.4  Resource requirements of the M&A project organization .......................... 128 
2.5.5.5  Responsibility requirements of the M&A project organization .................. 129 
2.5.5.6  Summary ...................................................................................................... 130

2.5.6  Process dimension in M&As .......................................................................... 132 
2.5.6.1  Process – definition ..................................................................................... 132 
2.5.6.2  M&A process ............................................................................................... 134 
2.5.6.3  Summary ...................................................................................................... 138

2.5.7  External dimension in M&As ......................................................................... 138
2.5.7.1  Political, legal and statutory externalities in M&As ................................... 141 
2.5.7.2  Macroeconomic externalities in M&As ...................................................... 143 
2.5.7.3  Social externalities in M&As ...................................................................... 144 
2.5.7.4  Summary ...................................................................................................... 144

x