Asian Mergers and Acquisitions: Riding the Wave

CHAPTER THREE

The Rise and Rise of Cross-Border M&A

Over the past decade, several attention-grabbing Asian cross-border M&A deals have occurred. What has been surprising is that they have been done before these firms consolidated their local markets. We will explore the drivers behind cross-border deals and suggest this trend will increase. We will explore the added complexity that cross-border mergers and acquisitions (M&A) bring to deals and how firms will have to work harder to extract full value.

Asian companies have taken the standard M&A metrics that have long governed who buys what and when, and thrown them out the door. We have witnessed a sharp rise in cross-border merger activity in many Asian industries before domestic consolidation has begun. Young, aggressive Asian corporations are moving forward more quickly than you’d expect given the state of development of Asia’s economies, and these corporations are snapping up companies in other parts of the world. China’s fledgling automotive sector, for example, has more than 100 players and has many rounds of consolidation ahead. Geely, for one, decided not to wait. In 2010, the Hangzhou-based company, which makes its own brand of mid-sized, mid-tier cars, paid $1.8 billion for Volvo, one of the world’s best-known auto brands.

The kinds of Asian companies that are driving cross-border M&A are surprising. They’re not the type of world-beating champions that led global mergers during the 1980s and 1990s but instead are often ...