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The global financial crisis has a great influence on the industries by increasing the probability of mergers and acquisitions. Currently a great slump occurs to the global share prices, which provides great opportunities for the Chinese enterprises to conduct mergers and acquisitions. However, has the time for them to copy the bottom really come?
 
When the share prices of GM Motor and many other international manufacturing enterprises took a nosedive, the Chinese domestic manufacturing enterprises were waiting for the opportunities of mergers and acquisitions. The experts told the Chinese enterprises to hold calm attitudes towards this. 
 
Nosedive of the Manufacturing Enterprises' Share Prices
 
On October 9, the US share market canceled the ban on short selling, the share price of GM Motor, which is the leading enterprise of the American auto industry, decreased by 30%, reaching 4.76 US dollars per share. However, the share price of that company increased on October 10, reaching 4.89 US dollars. In the middle of October, the share price of GM Motor decreased to its lowest point in 50 years.
 
On October 10, General Electric Company (GE) published its business performance in the third quarter of this year. Though its share price increased by 13% to 21.5 US dollars, it was still the lowest interval from 1997. Its business performance in the third quarter of this year decreased by 22%, which matched with the previous record. This was also one reason for the rally of its share price.
 
Though the operation income of GE increased by 11% to 4.23 billion US dollars, the profit of its Department of Consumption and Industry which is responsible for the household appliances, decreased incredibly by 82%.
 
Besides GE, many other companies which used to perform well got into trouble in the financial crisis.
 
The closing price of the United Technology Corporation on October 12 was 47.63 US dollars. Its market value was 45.932 billion US dollars, which was the lowest in five years.
 
In the second quarter of this year, the net profit of the company increased by 11% to 1.3 billion US dollars. The share price of Honeywell Corporation dropped by 2.52% on October 10 to 30.6 US dollars, which already fell back to the price at the end of 2003. In only one year, the share price of Honeywell dropped by a half. Its profit in the second quarter of this year increased only by 18% compared to the same period of last year.
 
On October 10, the share price of Siemens Corporation from Germany was established at 62.88 US dollars, even lower than the price in the period that the bribery scandal of its top management was disclosed. In the middle of October, the market value of Siemens was 55.14 billion US dollars. A year ago its share price reached 160 dollars. Comparatively the current share price dropped by 61%.
 
A Waiting Game for Chinese Enterprises
 
In order to promote the share prices, increase the profits and improve the confidence of the investors, some enterprises decided to sell some of their assets increasing slowly or irrelevant to the core business of the company. This brought scarce opportunities for the Chinese domestic enterprises.
 
"We are watching some objects for our acquisitions. Some of the European companies may be good choices," said Liao Yi, a spokesman of CHINT Electric. Seven years ago CHINT Electric found a chance. At that time a well-established enterprise in Europe wanted to sell its assets. CHINT Electric agitated and united many companies to conduct the acquisitions. However, this company still chose two consultation companies as its buyers.
 
"But now we think it is also a good opportunity. We will consider some companies with complementarity and regionality," said Liao Yi. They would like to choose some companies having increasing tendency in their strength, like the ones in the industries of electrics and new energy sources. "Now we have entered the solar energy industry and planned to set a plant in Europe. If there is an existing overseas plant, we will consider acquiring it."
 
In his opinion, the American enterprises are large in the size and take the dominant place in the electric field. So acquiring an American enterprise is harder for us than acquiring a European enterprise. However, some American enterprises are suitable for the acquisitions by the Chinese enterprises.
 
Undoubtedly, the acquisitions and integrations of the overseas enterprises has always been a difficult problem for the Chinese enterprises. Such a phenomenon has existed for several years.
 
Liao Yi thought that the acquisitions of the overseas enterprises got involved in the important cultural agreement. "Most of the European enterprises are partial to the American enterprises because their culture is more similar to each other and the communications between Europeans and Americans are easier."
 
The failure of CHINT Electric's acquisition was mainly attributed to the cultural difference between Europeans and Chinese. The European enterprise didn't identify the Chinese enterprises from the perspective of culture. However, the Chinese enterprises also have their own advantages. The largest one is that China's financial system is very powerful and willing to support the Chinese enterprises to conduct overseas mergers and acquisitions.
 
Shen Wenchun, a researcher of Galaxy Securities, said that there were some large-sized electric equipment companies in China. But only Shanghai Electric and Harbin Electric have enough strength and power to conduct the overseas mergers and acquisitions.
 
"The main reason is that the asset-liability ratio of the electric enterprises is high. Take the Chinese enterprises of power transmission and distribution for example. Such enterprises usually have business with State Grid Corporation of China (SGCC) which is the national power company. Because SGCC usually defers its payment, the enterprises of power transmission and distribution do not perform well in the cash flow. Most of the overseas enterprises require the disposable purchase by case in the acquisition. This is difficult for most of Chinese electric enterprises."
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