Managing Integration in Cross-border Acquisitions: The Partnering approach of Chinese Companies

Abstract

Over the last few decades, cross-border mergers and acquisitions (CBM&As) in Developed Economies have become a strategic mechanism of growth of Chinese companies. Managing the integration between the two merging companies represents one of the most critical challenges of the process for Chinese companies, which usually have not international experience and have highly different cultures from Western companies. According to these specific characteristics, Chinese multinationals are likely to leave the most common absorption approach of integration for a lighter strategy, partnering. In partnering, the target company keeps its autonomy and synergies are achieved not through structural integration but with the selective coordination of activities. However, although the increasing number of Chinese companies that are following the partnering integration approach; research is still limited and incomplete. Hence, drawing on a single case study of a Chinese acquisition in Italy, the value of this study lies in the identification of antecedents, features and effects on performance of the partnering approach to acquisitions of Chinese companies in Developed Economies. In a first stage, the subject is addressed by reviewing the literature about CBM&As and post-acquisition integration both from general and Chinese perspectives. After that, in a second stage, an explorative case study of a Chinese company in Italy in a long-term perspective is carried out. Hence, findings that have been obtained through secondary and primary data are compared with the existing literature about partnering approach and about the traditional integration approaches of companies from Developed Economies. Results of the case study convey a holistic picture of the partnering approach. International inexperience of the parent company, elevated synergy potentials and cultural differences are the antecedents for partnering, which is not an end-state approach to integration but is likely to evolve into a more absorptive approach. In addition, this study finds that partnering approach can involve important challenges that can cause negative outcomes and impede the realization of potential synergies. These challenges include coordination problems, cultural clashes and communication issues.