How to define the motivation and purpose of M&A

To clarify M&A's motivation and purpose, first of all, enterprises should clarify why they want to implement M&A in China and what they want to achieve through M&A ... Some multinational companies merge in China in order to enter new markets, and the income is only part of their pursuit goal. It is important to seize the opportunity to enter the China market. Others hope to gain new customers and new market opportunities through mergers and acquisitions, reduce competitors and achieve faster growth. Before M&A, we should clearly understand the purpose of M&A, and we should not do so blindly. And according to the purpose of M&A, choose the appropriate M&A target. For example, Nestle's merger and acquisition, the most important thing is whether the acquired object has comparative advantages, such as special expertise, specific market or marketing network. Starting from the overall strategic goal of enterprise internationalization, it is clear that transnational M&A is for market, technology, brand and resources. In this way, we can choose the target enterprises that meet the purpose of mergers and acquisitions, and avoid heavy-quality and light-weight mergers and acquisitions. Conduct extensive research and formulate M&A strategy. According to the purpose of M&A, conduct extensive research and collect information comprehensively and accurately, instead of taking opportunistic actions. M&A behavior should not only consider its own capital strength and M&A cost, but also consider economic cost and expected income. Instead of blindly buying "cheap" enterprises to expand, it is better to judge whether M&A can achieve the expected strategic goal through repeated evaluation and demonstration, and enhance the potential value of enterprises through M&A, so as to realize the purchase value. A successful cross-border M&A project spends 60%-70% of its time on strategic planning. The M&A strategy is formulated on the basis of these investigations and reviews. It is necessary to fully understand the business and resources of the target enterprise engaged in mergers and acquisitions. Finally, the economic strength, technical level, market share and other factors of both parties are comprehensively compared with the external factors such as economy, politics, law and culture of the countries where both parties are located, so as to understand the integration difficulty of both parties. Let clear goals run through all attributes. Before considering any transaction, senior management needs to formulate a set of guidelines for future growth, which is the first step to ensure the smooth progress of the merger. This policy not only includes the long-term strategic planning in the usual sense, but also determines the list of major issues in great detail according to the strategic objectives of enterprise integration and merger, organic increase of investment and establishment of alliance relations. The guideline provides a basis for enterprises to choose what type of transaction, and establishes a system of "judging right or wrong according to the target", thus ensuring a convincing business analysis of each transaction intention. With this set of standards, the CFO and the M&A team can objectively evaluate the prospects of the transaction. If a transaction meets the growth criteria, the value it brings will exceed its own value. If the two don't match, or the alarm signal is terrible enough, then the experienced M&A team should be ready to quit the transaction. Prepare internal resources for M&A After the M&A strategy is formulated, the internal M&A team should be led by the company leaders and the leaders of relevant departments. M&A team should be familiar with the knowledge of law, accounting, finance and other aspects involved in the evaluation process, so as to ensure rapid response and decision-making, as well as smooth external contact. Fully understand policies, people's feelings and legal environment. Before foreign investors carry out M&A activities in China, they should first consider whether M&A activities conform to China's industrial policies. These industrial policies may change over time. Therefore, when foreign investors are going to buy stocks in China, they should first find out whether there are access restrictions in this industry, otherwise they may run the risk of not getting approval from the examination and approval authorities after spending a lot of energy. In addition, we should also consider market competition audit, mainly anti-monopoly audit. For example, Coca-Cola's acquisition of Huiyuan died because it failed to pass the anti-monopoly review of the Ministry of Commerce of China. Multinational companies should also abide by the laws and regulations of China and respect the national feelings of the people of China, so as to reduce the resistance of M&A in China. In China, not every enterprise is suitable for M&A. Some enterprises did not strictly examine the value of the assets actually acquired and the matching degree between their own capabilities and strategies, but came to the negotiation table of M&A because of their cheap prices or impulsiveness. Enterprises should evaluate and combine their own structural capabilities, including the analysis of internal acquisition team formation, their own strategy, operation and financial capabilities, and measure the future development trend, business opportunities, leading figures and risks of the company and its industry, so as to judge whether M&A in China can really bring added value to enterprise transactions.