Deloitte, the business advisory firm, has announced today research findings into the success of international M&A investment in China.

George Budden, Merger Integration Advisory Service Partner at Deloitte, commented: “This year is a special year for China as the country celebrates the year of the golden pig, which only takes place once every 60 years.  The business community throughout China is heralding the New Year as a particularly auspicious year and hopes it will bring economic fortune.  A key driver of China’s success so far has been the huge interest shown by international investors.  Our research has shown, however, that only 20% of transactions deliver significant value.  The first two China Hands’ ‘Golden rules’ certainly hold true: ‘anything is possible’ but ‘nothing is easy’.”

The research has identified a series of important factors which can hinder the prospective Chinese business acquirer:

• Compliance: the requirements of an average Western company will come as a shock to most private companies in China;Corporate structure: many acquirers find that a chart of the structure and the ‘real’ structure do not tally;
• Meeting expectations: the acquirer can often have high expectations of how quickly the project can deliver value but often the deal process can take three times as long in China;
• Local regulations, laws and stakeholders: these stakeholders have considerable influence even after the deal is done and are ignored at the acquirer’s peril;
• Tax and integration: a hugely complex task which can often be ignored;
• Communication and training: language and soft-skills training are of huge importance to both sides and can require significantly more effort than in the West;
• Unexpected surprises: anything, no matter how unexpected or unintentional, is possible in China!

Budden went on to say: “The success rate of M&A in China is very similar to that of the West, however, while competition and sophistication are the key challenges in the West, the hurdles in China are more complicated.  Time can be the theme that ties these issues together.  While international acquirers flock to China to make the most of the opportunities available, they can become hugely frustrated by the length of time it takes for the acquisition to deliver value.  Those companies that are taking a more professional approach to integration and are addressing key issues of culture and meeting the needs of the local regulations and stakeholders are finding that it might just be an auspicious golden year after all!"

Ends

Notes to editor
Please download our report on Merger integration in China.

About the research
This research has been compiled based on Deloitte's direct experience of supporting M&A and Integrations in China, and through interviews with a broad range of China based senior Western and Chinese managers on their firms' experiences with their acquisitions over the last 5 years. Collectively these acquisitions represent well in excess of USD 1 billion worth of acquisitions in China. 

About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, and their respective subsidiaries and affiliates. Deloitte Touche Tohmatsu is an organisation of member firms around the world devoted to excellence in providing professional services and advice, focused on client service through a global strategy executed locally in nearly 140 countries. With access to the deep intellectual capital of approximately 135,000 people worldwide, Deloitte delivers services in four professional areas—audit, tax, consulting and financial advisory services—and serves more than 80 percent of the world's largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies. Services are not provided by the Deloitte Touche Tohmatsu Verein, and, for regulatory and other reasons, certain member firms do not provide services in all four professional areas.

As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other's acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names “Deloitte”, “Deloitte & Touche”, “Deloitte Touche Tohmatsu”, or other related names.