Mergers and acquisitions: What the US and Europe can learn from China

FEB researcher Killian McCarthy, together with Utz Weitzel (Radboud University Nijmegen) and Wilfred Dolfsma (Loughborough University London) compared 13.486 US, European and Asian mergers and acquisitions in the period 2003-2008. They found that Asia, and in particular China, had the best performing acquisitions. The US destroyed value, Europe neither created nor destroyed value, but Asia created value with their acquisitions - and the Chinese created the most.

The outcomes raise the question what the US and Europe can learn from China. What did the Chinese do differently? McCarthy: ‘First of all, the Chinese took their time making an acquisition. Western managers looked to complete their deals as soon as possible, and tended not to walk away from an announced deal, while the Chinese took their time, did their homework, and walked away when the risk was too high.’

Not so tight-fisted

McCarthy and his colleagues also found another significant difference. ‘Asian firms didn’t overpay. Western firms paid a ‘premium’ of up to 48%. In other words: they paid 148 for a company worth 100, while the Asians only pay 16%’, explains McCarthy. ‘This shows Dutch managers are not as tight-fisted as they might like to think that they are.’

More information

• Contact: Killian McCarthy
• The paper The first global merger wave and the enigma of Chinese performance is forthcoming in Management and Organisation Review.