CLOSING CASE 9.1 Emerging Markets:

Emerging Acquirers from China and India Multinational enterprises (MNEs) from emerging economies, especially China and India, have emerged as a new breed of acquirers around the world. Provoking "oohs" and "ahhs," they have grabbed media headlines and caused controversies. Anecdotes aside, what are the patterns of these new global acquirers? How do they differ? Only recently has rigorous academic research been conducted to allow for systematic compar- ison (Table 9.1). ti Top target Industries Top target countries Top target regions Energy, minerals,and mining High- lech and Unted Kingdonm %ofsuccesshly closed 47% ofatwardforeign direct investment OR011.7% ofthe world- that of India (05%aone visble similarity is that both Overal, China's stock of direct wide totalismore than three times Chinese and Indian MNEs seem to use acquisitions as their primary mode of OFDI Throughout the 2000s, Chinese firms spent US$130 billion to engage in acquisitions over- MINEs from Cina and Inda target industries to support and strengthen their own most competitive industries at home. Given China prowess in manufacturing. Chinese irms' oversess acquisitions primarily target energy, minerals, and mining -crucial sup- seas, whereas Indian firms made acquisition deals worth US$60 billion. ply industries that feed their operations at home. high tech Indian MNEs" world-class position in and software services is reflected in their interest in acquiring firms in these The geographic spread of these MINEs is indicative of the level of their capabilities have undertaken most of their deals in Asia, with Hong Kong being their location. In other words, the geographic distribution of Chinese acquisi- tions is not global; rather, it is quite regional. This reflects a relative lack of capabilities Chinese fems most tavorable to engage in managerial chalenges in regiors detant from China, especally in more- developed economies. Indian MNEs have primarily made deals in Europe, with the UK as the leading target country. For example acquisions made by Tata Motors (Jaguar Land Rover [JLRD and Tata Steel (corus Groupl propeled Tata Group to become the number- one private- sector employer in the UK. Overal, Indian frms display a more global spread n their acquisitions, and demonstrate a higher level of confidence and making deals in developed economies From an institution-based view, the contrasts between the Indian acquirers are significant. prises (SOEs), which heve their own advantages (such leading Chinese and The primary players from China are state-owned enter- as strong support from the Chi- and trappings (such as resentment and suspicion from host-country by Chinese firms tend to destroy value for thei S one thing, but completing them is another matter movers and shakers of cross-border acqusibons from India are pri- which generally are not viewed with strong suspicion. The lim- vate business groups, ited evidence sugpests t that M&As by Indian firms tend to create value for their of potential hubristic and managerial motives evidenced by completing the overseas acqui- Chinese multinationals have particutarly poor record in sition deals they completed, which compares urtavorably to indian lier 67 high-profile deals is one ting, but completing them announce. Fewer than half (47%) of ther of8-40% completon rate, amese ines lack of and financing is one reason, but another reason is the ence in due aligence a lash and resistance they encourter,especialily in developed ecoromies. The 2005 tailure

Questions:

1. Why have firms from emerging economies such as China and India significantly expanded their international footprint?

2.Why do they focus on industries related to their existing areas of excellence?

3.Why are they interested in using acquisitions as a mode of entry?

4.How successful (or terrible) have their acquisitions been?