Jilian Consultants Co., Ltd.
Jilian Consultants Co., Ltd.

Strategies for Overseas M&A Negotiations

The term strategy was originally a military concept. Strategy is characterized as a program of resourceful discovery. The word "strategy" comes from the Greek word "strategos", which means military general and local administrator. It later evolved into a military term, referring to the strategy of military generals commanding troops to fight. In modern times, the term "strategy" has been extended to the political and economic fields, and its meaning has evolved to generally refer to strategies, plans, and countermeasures that are commanding, overall, and decisive for victory or defeat.

Negotiations must also be strategized. Negotiation strategy refers to the strategies, plans and countermeasures that are dominant and overall in the negotiation, and can determine the outcome of the negotiation. Different business negotiations have different strategies. Here we take mergers and acquisitions as an example to discuss how to formulate a strategy for mergers and acquisitions negotiations.

1. How to formulate a strategy for overseas M&A negotiations?

The strategy for M&A negotiations comes from the acquirer's M&A strategy. In other words, the M&A negotiation strategy should be consistent with the acquirer's M&A strategy. M&A strategy refers to the purpose of M&A and the way to achieve the purpose, including determining the purpose of M&A and selecting the target of M&A.

The M&A strategy should be considered in the medium and long-term business and investment plans of the acquirer. Some mergers and acquisitions (especially large-scale mergers and acquisitions) are part of the medium and long-term business and investment plans of the acquirer; Just an occasional transaction.

But they are all for the purpose of fully implementing and completing the medium and long-term development plan of the enterprise, and then accomplishing the ultimate goal of the enterprise: profit. A good acquisition strategy can make a business profitable as quickly or as much as possible. A poor acquisition strategy can backfire.

2. Strategic analysis of overseas M&A negotiations

The five basic principles of corporate M&A decision-making advocated by Peter Ferdinand Drucker, the father of modern management, is a good interpretation of corporate M&A strategy:

1. The acquirer must be able to contribute to the acquired company. Only when the acquirer thoroughly considers what he can contribute to the acquired company, rather than what the acquired company can contribute to the acquirer, can the merger and acquisition be successful. Contributions to the acquired company can be various, including improving the technology, management and sales capabilities of the acquired company, not just financial contributions.

2. If a company wants to successfully carry out multiple operations through mergers and acquisitions, it needs to have a united core and a common language to integrate them into a whole. That is to say, the acquirer and the acquired company must be culturally integrated. There must be a common cultural foundation, at least a certain connection.

3. Mergers and acquisitions must be like-minded. The acquiring company must respect the employees, products, markets and consumers of the acquired company.

4. The acquiring company must be able to provide high-level management personnel for the acquired company to help the acquired company improve its management.

5. Within the first year after the M&A is completed, most of the management personnel of both parties should be promoted, so that the management personnel of both parties believe that the M&A has brought opportunities to the company.

If a target company complies with the above five basic principles to a large extent, the acquirer's overseas M&A negotiation strategy should be: it should be more lenient to the transferor in terms of acquisition price and acquisition conditions (the so-called seller's price, buyer's price, etc.) conditions of).

In other words, be prepared to make more concessions. If a target company only complies with one or two of the above five basic principles, the acquirer should not give more room for concessions in terms of purchase price and conditions, and no further concessions should be made after reaching the bottom line.