Chinese corporations are on a steep M&A learning curve and are learning many of their lessons the hard way. Armed with deep pockets of foreign exchange, a thirst for technology and natural resources, and a determination to join the ranks of top-tier multinationals, Chinese companies are buying up foreign assets like never before. But they are running into all the classic problems of an emerging market in its first forays overseas: snapping up assets that lose their shine after the deal is done and discovering that turning around acquired companies can be a long and costly business.
That is if the deal gets done at all. Sinophobia in the US prevented Chinese companies from acquiring oil company Unocal and consumer appliance maker Maytag. Even when Chinese companies break through this barrier, the opposition could still harm their business. In the most high-profile deal to date, computer-maker Lenovo bought IBM’s struggling PC division for $1.75bn last year but encountered difficulties with a contract to supply computers to the US State Department because US politicians feared that the Chinese could use the computers for spying.
