Overseas M&A: Technology-driven

If last year Ningbo Cixing Co., Ltd. successfully merged and acquired Swiss Tang Group as an example of overseas mergers and acquisitions in the industry, this year, China Hengtian Group Co., Ltd. acquired Hong Kong Ericsson Industrial Group and Oerlikon Neumag's carding business unit, which is enough M & A is pushed from the "case" to the "phenomenon" category.

When the domestic textile machinery enterprises suffer from the inability to catch up with foreign advanced textile machinery technology, foreign textile machinery companies are also seeking ways to fully enter China, the world's largest textile machinery market. This technology and market areas are complementary. It has become a major opportunity for the consolidation of global resource integration, multinational cooperation, and even overseas M&A activity in the textile machinery industry.

At present, most of the domestic mergers and acquisitions of textile machinery enterprises are embodied in strategic transactions in capital or equity. Therefore, not all acquired companies are textile machinery companies. In contrast, the purpose of overseas acquisitions by textile machinery companies is obviously more direct and clear. That is, it is driven by the acquisition of advanced textile machinery technology from overseas, and the M&A target refers directly to the overseas advanced textile machinery technology group.

Overseas mergers and acquisitions Mencius High Ningbo Cixing Co., Ltd. has achieved a wholly-owned subsidiary of the Tangger Group, the world’s third largest computerized flat knitting machine manufacturer with net assets of 22.483 million euros, and its Italian fashion design center and Tangg Shanghai Textile Machinery Co., Ltd. The acquisition; China Hengtian Group Co., Ltd. at a premium of HK$5 per share to acquire the equity of Lixin Industrial's major shareholder. Zhu Yu's previous success stories all show that the abundant financial strength is a prerequisite for enterprises to achieve overseas mergers and acquisitions.

However, when companies that meet the conditions for mergers and acquisitions stand on the same starting line, the amount of money is not a decisive factor for overseas companies choosing to acquire companies.

“In the M&A activity, the company’s own ability is the key to a successful M&A.” In the “Journal of Ningbo University” published in May this year, Sun Cifan, chairman of Ningbo Cixing Co., Ltd., was analyzing the company’s acquisition of Tange. The article in the case expresses this view. Sun Pingfan believes that the company's own capabilities are reflected in decision-making, human resources, and technology. Specifically, companies need to have a keen sense of strategy, managers must have decisive decision-making capabilities; companies must have a young, high-quality talent pool, have effective and harmonious business capabilities, familiar with the market, proficient in international operations; The company must have its own brand, independent technology and excellent product quality.

Another factor that cannot be ignored is the local advantages of Chinese companies in the domestic market. Chen Xiaohong, director of the Institute of Enterprise Research at the Development Research Center of the State Council, believes that Chinese companies have their own advantages in overseas mergers and acquisitions, that is, they have obvious advantages in procurement, sales, and service in the Chinese market. "Relying on the integrated mode of China's market superior value chain, Chinese companies can acquire foreign companies with higher technology levels through the advantages of large-scale and fast-growing domestic markets, and enhance the R&D and manufacturing of Chinese companies through value chain integration and technology digestion and absorption. Technical advantages."

In addition, as the so-called “good bird chooses wood and habitat”, the “first impression” of the company in the M&A process is also crucial. As a reflection of corporate soft power and "first impression", the social reputation, responsibility image, and management experience of the company and its leaders are also the invisible thresholds for target merger and acquisition companies.

Technology-driven factors Today's overseas acquisitions are essentially caused by the amount of corporate funds, but the relationship between mergers and acquisitions is a relationship of equal cooperation, mutual help and win-win. Both parties need each other to be more like one. This kind of "marriage" behavior.

The determination of M&A industry is closely related to the strategic layout of the company. For example, Ningbo Cixing Co., Ltd., the No. 1 brand of China’s flat knitting machine, selected “strongly reinforces” and used the world’s top four computerized flat knitting machine makers as the initial selection target for M&A, with a view to realizing technology in its area of ​​flat knitting machines. The product's further overflight; as China's largest textile machinery group, China Hengtian Group Co., Ltd., chooses “to make up for short boards” in order to further strengthen its strength in dyeing and finishing equipment and non-woven equipment and realize globalization. .

For domestic textile machinery companies with overseas merger and acquisition conditions, choosing the right “marriage” object is a crucial step in the strategic expansion of the company. Although textile machinery companies choose to use technology as the driving factor without exception, in the process, there is a chance of “seeing the right eye”, and it is inseparable from scientific and objective comparison and growth forecast.

Heng Tian is the best and largest dyeing and finishing manufacturer in the world. The Lixin Group can be described as “love at first sight”. In 1999, both parties expressed their willingness to cooperate. Later, due to the influence of the textile industry, the cooperation failed to materialize. Afterwards, Hengtian kept a low profile and secretly accumulated the strength of mergers and acquisitions. In 2008, the two parties started substantive negotiations on mergers and acquisitions. After three years, the agreement was finally reached.

Compared to Hengtian, Cixing's process of selecting M&A objects is more tortuous. Japan Shima Seiki and Germany Stoll's ability and strength exceed Cixing's M&A capabilities and was first excluded. After thinking about the development potential and appreciation space that the target company may bring after the acquisition, Cixing gave up the acquisition of Prodi of Italy because Protti was more advanced in technology, but its brand influence gradually became marginalized. Although the Swiss company Tange was founded late, but the independent research and development technology is relatively mature, since the 1980s, there have been many inventions, indicating that it has been pursuing innovation, and constantly enhance its own brand. On the other hand, due to the impact of the international financial crisis, Tangtang suffered a loss and it was eager to have powerful companies inject funds to solve the crisis facing the company. This ultimately provided an opportunity for the successful acquisition of Cixing.

It is understood that the impact of the global financial crisis, including many foreign textile machinery companies with advanced technology and brands, the valuation is still at historically low levels, coupled with the gradual withdrawal of European and American markets from the industry is becoming increasingly obvious, the future of the strength of the textile machinery It is a good idea for companies to “bottom the bargain” overseas to solve the bottleneck of domestic technology.

To integrate, it is more necessary to integrate the distance. However, Hengtian’s acquisition of Ericsson is also unpleasant. However, the more critical issue has already been placed in front of the two companies – how to manage the business from the post-acquisition technology level. The integration of the sector towards a deeper, more cultural-level management integration.

The problem of absorbing and digesting after the acquisition exists in various aspects such as thinking mode, management culture, and product philosophy. The real test has just begun for companies that have successfully acquired overseas acquisitions.

According to reports, after Cistar acquired Tanger, the R&D base in Switzerland was used as a new product R&D platform. The successful products were first produced in Shanghai in small batches. After the technology matured, they were transferred to Ningbo for large-scale production, combined with foreign R&D. Advantages and local low-cost production advantages, to produce a new computer flat knitting machine with high cost performance and high-tech content.

The convergence of technologies only needs to cross geographical boundaries, and the integration of management needs to cross the cultural barrier. As overseas textile machinery companies have advanced enterprise management systems and excellent management teams, both companies have chosen to maintain the relative independence of overseas business management and mechanisms.

Sun Pingfan pointed out that Cixing adopts a "cultural fusion" strategy. The premise of integration is to respect each other and conduct enterprise management measures of "participation is not dominant". Foreign personnel and equipment do not move, and send people to study abroad. Promote, develop each other, thus improving the operational efficiency after mergers and acquisitions.

Similarly, after the acquisition, the Hengtian Group will also retain the existing core team and business structure of Lixin, and at the same time, cooperate with Lixin in various fields such as dyeing and finishing equipment, such as Hengtian’s textile machinery sales system in the Mainland and Ericsson’s The global marketing network can complement each other. Hengtian's platform can provide financial support to Ericsson's customers. The Lixin steel business segment can also help Hengtian reduce steel procurement costs.

Before the acquisition of the "1 + 1 = 2" two individual entities, can achieve the synergy effect of "1+1> 2" after the acquisition in the collision and integration, let us wait and see. (Text / Chen Xiaojing)


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