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How to Guard against and Deal with Risks of Overseas Acquisition under the New Situation?

How to Guard against and Deal with Risks of Overseas Acquisition under the New Situation?

A Big Question for Chinese Enterprises

Recently, the message sent by the policy portfolio of US government has further clouded the widespread concerns about a trade war between China and the US. Will this pose huge risks to Chinese enterprises investing abroad?

In the past decades, globalization has facilitated the cross-border flows of trade, investment, technologies, talents and so forth, and the inter-state foreign trade, capital flow, technological transfer, service provision, talent exchange and so on have significantly promoted the continuous development of the world economy and created an “inseparable” and interconnected economic pattern in the world. Seen from the historical perspective, the progress of globalization and economic integration may slow down at some points, may be doubted sometimes and may even suffer some setbacks. However, the trend of globalization has never been reversed. Globalization means more effective allocation of resources, and maximally increased production efficiency and reduced production cost for transnational enterprises.

Currently, China is becoming the most important capital-exporting country. From the greenfield investments made by enterprises such as Fuyao Group and BYD (electric bus) to a series of acquisitions and mergers in insurance, energy, real estate and many other fields, the increasingly active Chinese capital is creating new ways of the dialogue between Chinese and US businesses.

Control over Overseas Transaction Risks

As pointed out by Zhang Weihua, a well-known expert in overseas acquisitions and mergers, at the “Chinese Enterprise Competitiveness Forum: Enterprise upgrade and Globalization” sponsored by World Executive on April 3, there are many risks involved in overseas transactions, such as the financing risks, government risks and third-party risks. Then, how to manage risks in the transaction process? Zhang believes that overseas transactions should be managed as projects, and that risk management should be conducted with regard to all participants.

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