MUNICH, Germany, April 16, 2013 /PRNewswire/ --
- Chinese companies investing in technology development through mergers and acquisitions
In recent years, a number of Chinese companies have either bought German firms outright or acquired a shareholding in them. This investment activity is being driven by a desire to gain access to state-of-the-art technology. But contrary to initial expectations, most of the new owners are not interested in draining their newly acquired companies of knowledge. Instead, we are seeing productive collaboration in research and development. This was what Technische Universität München (TUM) and the Munich Innovation Group discovered in their recent collaborative study. Chinese companies are looking at these investments as a way to expand their product portfolios, strengthen their position in China, and gain a lasting foothold in Europe.
Sany acquired German mid-sized company Putzmeister, a leading manufacturer of concrete pumps, to become a world leader in heavy machinery. Lenovo took over the electronics company Medion. Weichai Power bought a stake in Kion, one of the world's biggest forklift truck manufacturers. The list of Chinese companies that have recently bought German firms outright or acquired a stake in them is long. By realizing an opportunity in the midst of the economic and financial crisis, they have been have made a change towards medium-sized technology and market leaders.
But up to now, no-one has been able to pinpoint the motives behind the Chinese investment strategy. Researchers from TUM and analysts from the Munich Innovation Group decided to investigate the approach of 50 Chinese companies in a study entitled "China is investing". They focused on the electronics, mechanical engineering and regenerative energy sectors as well as international conglomerates. The researchers mostly relied on economic databases, commercial register entries and patent applications. The latter source proved particularly revealing. For example, by studying the geographical distribution of patent applications, the researchers could draw conclusions on the target markets. And when a Chinese parent company and its German subsidiary jointly file an application, it can be assumed that a joint development project is underway.
The research team found that the Chinese acquisition and shareholding strategies were broadly similar across all the sectors investigated:
Access to advanced German technology
The Chinese companies examined in the study were all seeking high-value intellectual property. But there were only rare cases of the new owners relocating the know-how to Asia. Instead, more than 75 percent of them chose to strengthen the German research and development departments. In many cases, the German management team was retained.
Enlarging product portfolios
The acquisitions enabled around half of the companies to add new technologies to their product portfolio. Some of the Chinese investments were prompted by a desire to extend the buyer's value chain by integrating upstream or downstream development and production steps.
Securing market position
Bolstered by an improved product portfolio, Chinese companies in the mechanical engineering and electronics industries in particular are seeking to strengthen their position on the Chinese market. But they also have their sights set on the German and European markets: The new owners are using their acquisitions to extend their research and development capabilities, establish new sales locations and expand their customer and logistics networks.
Strategic foothold in Europe
Some Chinese companies are less concerned about transferring intellectual property or building up their business in Europe. They are more interested in the opportunity to observe and gain insights into the European and US markets. Finally, another motive for acquiring German locations may to avoid the EU's customs and import regulations.
"Acquisitions by Chinese companies do not pose a threat per se," explains Prof. Isabell Welpe of TUM's Chair for Strategy and Organization. "In many cases, the experience has been a very positive one for the German companies involved. The investors' strong financial footing has helped them safeguard jobs and production capacities, advance the development of their technologies and gain access to the Asian market."
Overview of sectors, company profiles and further information (only available in German):
Technische Universität München (TUM) is one of Europe's leading universities. It has roughly 500 professors, 9,000 academic and non-academic staff, and 32,000 students. It focuses on the engineering sciences, natural sciences, life sciences, medicine, and economic sciences. After winning numerous awards, it was selected as an "Excellence University" in 2006 and 2012 by the Science Council (Wissenschaftsrat) and the German Research Foundation (DFG). In both international and national rankings, TUM is rated as one of Germany's top universities and is dedicated to the ideal of a top-level research-oriented entrepreneurial university. The university's global presence includes offices in Beijing (China), Brussels (Belgium), Cairo (Egypt), Mumbai (India) and São Paulo (Brazil). The German Institute of Science and Technology (GIST - TUM Asia), founded in 2002 in Singapore, is the first research campus of a German university abroad.
Dr. Philipp Sandner
Technische Universität München
Chair for Strategy and Organization