KPMG: Chinese Enterprises ' ability to filter overseas investment is weaker

October 27 Morning News KPMG, one of the big Four accounting firms, today unveiled a "world-class dream: the status and reflection of foreign investment in Chinese companies", highlighting the strong "internationalization motives" of Chinese companies, with only 4% of large enterprises saying they have no plans to continue investing abroad, and more than 84%　　Small businesses say they will invest more in foreign investment activities. China has jumped into the world's fifth-largest foreign investor in 2009, according to the Ministry of Commerce, with a total foreign investment of $56.5 billion in 2009. But executives at Chinese companies are also aware of the short boards they face in overseas mergers and acquisitions.　　Tao, a partner at KPMG's China Investment and restructuring advisory service, said that Chinese executives, for example, consider themselves relatively weak in screening investment projects or negotiating deals.　　The report shows that mergers and acquisitions will be the main means for future Chinese companies to invest abroad, and only 15% of those who have conducted or planned to invest in the KPMG China survey say they have no plans to make deals.　　KPMG China has conducted online research on Chinese companies ' overseas investment activities in particular, the 156 executives of Chinese companies are able to analyze the status of overseas investment by Chinese enterprises and the problems they face as part of their vision and strategy, target screening and ability, negotiation and execution, external support forces, and project implementation and integration. Similar to other regions, Chinese companies believe that a clear strategy is important for overseas investment, and even 60% of respondents believe that "not having clear investment strategies and objectives" could lead to the worst mistake a company can make when investing abroad. To achieve regional expansion, establish international enterprises and establish corporate visibility, business diversification, integration of industrial chain, access to intellectual property rights, reduce costs and so on are the foreign investment of Chinese enterprises to achieve many goals, 59%, 41%, 33%, 31%, 24%, 24%　　Respondents considered these specific targets to be the real drivers of their overseas investments, and only 9% per cent of the respondents admitted to being under the guidance of the Government to move overseas. According to the report, 48% per cent of companies said they would likely take majority-share mergers and 43% said they would invest in a majority-owned joint venture in foreign markets. But investment in minority stakes or greenfield Investments has become a trend in the past year after large projects have been hit by strong resistance from the target countries.　　Asia remains the hottest region for foreign investment by Chinese companies, with 67% of respondents opting for the region, while Europe and the US are more popular with big companies.　　Although 57% of the companies surveyed have recognized the importance of establishing in-house teams dedicated to screening investment targets, and many Chinese companies do set up specialized strategic teams to screen targets, but they are limited in their ability to identify investment targets that are "aligned with the firm's own strategic objectives and closely linked to basic business". "In some cases, Chinese companies will abandon mergers and acquisitions because, in understanding more, they will find that the target company and theirThe enterprise does not match. "One respondent said that it was important to consider the integration of the transaction, including the structure of the transaction, financial and tax structures, in the investment target screening period." "Not only does it affect the synergy after the merger, it also has an impact on the after-tax return on investment."　　"said Tao, a partner at KPMG's China Investment and restructuring advisory service. "Lack of negotiation skills and execution capacity" is a worry for many respondents. The failure of some big mergers and acquisitions has made Chinese companies understand that the success of a transaction depends not only on "making a reasonable offer based on detailed due diligence and accurate valuation", "communicating fully with stakeholders, managing and winning stakeholder support" and "obtaining the support of governments and regulators in the target market." are also essential; among respondents, 57%, 64%, and 34% per cent said the three factors were important.　　Public relations management issues including environmental communication, influencing participation in decision-making, community advocacy, public education, policy analysis and litigation support have also been incorporated into the negotiation and implementation process of foreign investment. But consolidation after mergers and acquisitions is still the biggest problem. Produce synergy, cultural conflict, organizational set-up and human resource related issues, to develop new vision and strategy for the new company, to solve the financial problems is a series of problems faced by Chinese enterprises in overseas investment, 49%, 47%, 43%, 43%, 39% and 35% of the respondents said this is a difficult problem.　　Of those surveyed, 53% per cent of the respondents had managed and consolidated their trading plans 3 months before the transaction was completed, and 20% even took that time up to 6 months before the deal was completed. Tao said overseas investment is a complex and time-consuming task, and the presence of professional intermediaries can make up for some deficiencies in Chinese companies. This includes discovering the financial, operational and management issues of the target enterprise, trading experience and even confidence.　　Of those companies that have invested in foreign investment, 49% recognize the role of intermediaries, and only 33% of companies that do not have foreign investment projects endorse this. However, respondents to a large industrial enterprise in China also pointed out that "some intermediary structures do not know enough about industry trends and client businesses", and 27% per cent said that "reliance on incompetent intermediaries" was one of the reasons for the transaction's failure to achieve value. So the client company "manages" rather than "relies" on the consulting team and sets reasonable expectations for their performance. (Sanlifa from Beijing)