A Cambridge academic predicts a surge of acquisitions by Chinese companies in Europe as they bid to harness technology and R & D to their manufacturing capability.Peter Williamson, Professor of International Management at Cambridge University’s Judge Business School, says the strategic pivot by China will change the industrial landscape of Europe and rapidly close the technology gap between the two continents.
Professor Williamson says the Chinese puzzle has finally fallen into place. Previous abject failure in the global merger and acquisitions market has prompted China to bounce back with the revised strategy, he will tell the next Judge Business School business briefing at the Cheung Kong School of Business in London on December 15.
He will address ‘The rise of Chinese offshore M&A: What it means for the next round of global competition.’
Professor Williamson has experience in China since 1983, assisting numerous multinationals and joint ventures, and more recently, Chinese companies venturing abroad.
He will argue that China’s revised global acquisition strategy will impact on many western and European companies and rapidly close the technology and quality gap.
Professor Williamson uses the Chinese proverb ‘failure is not about falling down, it’s about getting up once you’ve tripped over’ as he explains what is emerging from China’s flawed merger and acquisition policy.
He said: “Chinese companies said ‘we’ve made some mistakes, let’s stand up, get back on our feet and try again with a different strategy.”
His interpretation of the new strategy is the Chinese focus on companies with heavy asset bases like coal, copper and iron ore mines around the world. This approach is not particularly relevant to Europe, he says, but they have also revisited the region concentrating on smaller companies with outstanding technology and strong R & D.
Professor Williamson says this approach makes a great deal of sense.
“The Chinese are excellent at volume manufacturing and low cost. What they are lacking to move up the value chain and improve the quality of their products is technology and R & D capability.
“By buying companies in Europe with those strengths, they can actually complete the puzzle.”
He predicts that the global competitive landscape will change as a result of this new strategy in very fundamental ways.
Many western, especially European, companies have relied on the idea that there’s a big technological and quality gap between the China at the low end and European companies at the top.
“By this new acquisition strategy that gap is going to close a lot more quickly than any of these companies thought possible a few years ago,” he argues.
“Therefore the kinds of advantages the European companies have relied on for their profitability are going to be reduced substantially at quite a fast pace.”