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Analysis: Overseas M&A in China's Construction Machinery Industry

Analysis: Overseas M&A in China's Construction Machinery Industry

  • Categories:Industry News
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  • Time of issue:2012-05-23
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(Summary description)After Sany Heavy Industry spent 2.7 billion yuan to acquire the German company Putzmeister, Liugong also invested in the acquisition of the construction machinery business unit of Polish construction machinery company HSW. At the same time, XCMG is planning to acquire Schwing, a giant German company in concrete construction machinery...

Analysis: Overseas M&A in China's Construction Machinery Industry

(Summary description)After Sany Heavy Industry spent 2.7 billion yuan to acquire the German company Putzmeister, Liugong also invested in the acquisition of the construction machinery business unit of Polish construction machinery company HSW. At the same time, XCMG is planning to acquire Schwing, a giant German company in concrete construction machinery...

  • Categories:Industry News
  • Author:
  • Origin:
  • Time of issue:2012-05-23
  • Views:0
Information
After Sany Heavy Industry spent 2.7 billion yuan to acquire the German company Putzmeister, Liugong also invested in the acquisition of the construction machinery business unit of Polish construction machinery company HSW. At the same time, XCMG is planning to acquire Schwing, a giant German company in concrete construction machinery...
 
China's top construction machinery manufacturers are now accelerating the pace of going global, and a series of overseas mergers and acquisitions have come one after another. Although people are no strangers to overseas mergers and acquisitions, if it goes back 20 years, Chinese companies often play the role of being merged. The current situation is just the opposite. Experts believe that this wave of cross-border mergers and acquisitions is a sign of the gradual maturity of my country's construction machinery enterprises and an inevitable choice for the development of enterprises in the context of China's economic globalization. Behind the concentration of overseas mergers and acquisitions in China's construction machinery industry, there are both accidental and inevitable.
 
go out to achieve growth
 
As early as 2008, before the arrival of the overseas mergers and acquisitions, Zoomlion acquired 100% of the shares of CIFA, an Italian concrete machinery company, at a consideration of 271 million euros. Time proved that Zoomlion’s choice was not wrong. When acquiring CIFA, Zoomlion retained the original management and production team and became the first large-scale Chinese construction machinery manufacturer to do so. In the past three years, the acquired CIFA successfully got rid of the impact of the economic crisis and began to make profits last year. Zoomlion has gained the support of advanced technology and global marketing network to achieve rapid development.
 
In recent years, the weakness of the US economy and the continuous spread of the European debt crisis have provided a good opportunity for overseas mergers and acquisitions of Chinese construction machinery companies that are prepared. Some companies seized the opportunity to lay a solid foundation for the transformation of China's construction machinery from manufacturing to intelligent manufacturing in the wave of competition in the development of construction machinery.
 
The report shows that in 2011, both the number and value of overseas M&A transactions by Chinese companies set a record: 207 transactions with a value of 42.9 billion US dollars; entering 2012, the momentum of mergers and acquisitions has become more intense, and many acquisition targets are world-class companies. The overseas acquisition of the Chinese construction machinery giant is not just to dismantle the production line and ship it back to the country. What it pursues is brand recognition and distribution network, and achieves the goal of pushing China into the world's largest construction machinery exporter.
 
The importance of overseas business highlights
 
At present, the global construction machinery marketA has reached 150 billion US dollars. Chinese companies are fully capable of going out and grabbing a larger share. Among the world's 50 largest construction machinery manufacturers in 2010, Chinese manufacturers accounted for 15% of their revenue, compared with 1.6% in 2003. According to the 12th Five-Year Plan, the sales scale of my country's construction machinery industry will reach 900 billion yuan by 2015. To achieve this rapid growth, overseas mergers and acquisitions will undoubtedly be a shortcut for China's construction machinery industry to become bigger and stronger.
 
Chen Deming, Minister of Commerce, once stated that he will encourage powerful companies to invest in mergers and acquisitions, integrate resources on a global scale, cultivate internationally renowned brands, and increase support for private companies to "go global." He pointed out that in the future, my country will accelerate the negotiation of investment protection agreements with important economic and trade partners, eliminate barriers to market access, and strengthen the protection of investment rights; strengthen risk warnings for enterprises, improve emergency response mechanisms for overseas emergencies, and guide enterprises to respond to overseas anti-monopoly Review and litigation.
 
This is imperative for China, which is in the stage of development and transformation. Due to the unresolved financial crisis and the European debt crisis, a large number of European companies are facing declining product sales, defaulting on supplier payments and employee salaries, and even on the verge of bankruptcy. This has not only mobilized the enthusiasm of Chinese companies to buy dips abroad, but also rapidly improved their comprehensive strength. , Integration into the international market provides a rare opportunity. If these mergers and acquisitions can be successfully completed, it will have a substantial effect on expanding the overseas influence of my country's construction machinery companies, absorbing advanced technology from foreign construction machinery companies, and improving the quality of Chinese products. Compared with the ill-fated overseas mergers and acquisitions in the communications and automobile industries, the road of mergers and acquisitions for my country's construction machinery companies is relatively smooth. In addition, while expanding overseas markets, my country's construction machinery companies have also focused on strengthening overseas trademark and patent layouts in recent years, laying a foundation for the smooth progress of mergers and acquisitions.
 
M&A needs to strengthen risk prevention
 
With the continuous improvement of overseas marketing and manufacturing systems of Chinese construction machinery enterprises and the continuous penetration or deepening of overseas mergers and acquisitions and other means into the global market, the international expansion of China's construction machinery industry will surely enter a higher and newer stage. As a result, the influence of Chinese construction machinery companies in the global construction machinery industry will rapidly increase and gain the right to speak in the global construction machinery industry. Since the 1990s, overseas mergers and acquisitions have gradually become an important way for Chinese companies to invest abroad. Although there are many successful cases, there are indeed many failures. For example, in 2004, SAIC Motor purchased a 48.92% stake in South Korea's Ssangyong at a high-profile price of US$500 million, but the acquisition once caused Ssangyong employees to strike. Since then, Liugong once suspended its acquisition of the Polish HSW construction machinery business unit. After some twists and turns, the two sides finally reached a consensus.
 
Analysts believe that Chinese companies have more and more experience in overseas mergers and acquisitions, and these failed cases need to be addressed and analyzed. On this basis, some failures should be allowed.
 
Although the understanding and understanding of Chinese companies on mergers and acquisitions has become mature and rational, risks still exist all the time, and mergers and acquisitions still need to be cautious. According to industry insiders, there are not many successful M&A cases of companies worldwide. my country's construction machinery enterprises must have a clear goal: Why do they need that company? Can it be controlled? Can the funding problem be solved? Therefore, the acquisition of overseas companies must be cautious and avoid risks as much as possible to truly become bigger and stronger. In any case, mergers and acquisitions have given domestic companies the opportunity to participate in the international market at close range, and will also promote the completion of the goal of the construction machinery development strategy in the 12th Five-Year Plan-from a large manufacturing country to a manufacturing power, from extensive, imitation, and quantitative to Technological innovation, quality and efficiency transformation.

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