Referring to the world-famous IT companies and the booming mergers and acquisitions in 2011, there is no doubt that we will think of world-class companies such as Microsoft, Google and Hewlett-Packard. In this area, Chinese companies are rising stars, and Chinese IT companies are also brewing another round of cross-border mergers and acquisitions.
Last year, IT mergers and acquisitions were as high as 167.7 billion U.S. dollars
According to data from Ernst & Young, the number of mergers and acquisitions in the IT field in 2011 was as high as 167.7 billion U.S. dollars, which is 41 percent higher than that in 2010. Whether it is a Chinese company or a global giant, it is hoped that through mergers and acquisitions, the company will rapidly expand and occupy an unfamiliar market. Of course, complicated mergers and acquisitions are a double-edged sword. They may all be happy, but they are also likely to lose both. What are the reasons for Chinese IT companies to decide to buy foreign companies?
In 2006, “Perfect World” landed in Japan through C&C Media in an agent-authorized model. It was precisely this Japanese game market with huge potential for nuggets. In addition, Perfect World even bet on the similarity between Japanese and Chinese culture.
At the same time, Beyondsoft Corp., which has experience in cross-border mergers and acquisitions in the IT industry, has just acquired India’s ESS company. Han Jie, director of the Beyondsoft Project Management Office, told reporters: “I wanted to win a Fortune 500 client, but found that our company had to meet all of its requirements. We asked ESS's technicians and management staff to work with our team to share this case. Finally, our company became the only Chinese company on the list of companies that entered the company."
The arrival of the financial crisis gave a perfect opportunity for Perfect World. On March 26, 2010, C&C Media, one of Japan's largest online game operators, became a subsidiary of Perfect World. For Perfect, the $21 million purchase is not only an operator, but also 2,100 Japanese Internet cafes covered by its sales and a local Japanese game technology team. At this point, Perfect World has had a vanguard in the Japanese market.
Now, Perfect World Interactive Entertainment is ranked first in the overseas market expansion of Chinese online game companies. The geographical coverage of overseas business has expanded to more than 100 countries and regions in the world. In the third quarter of 2011 alone, the company’s overseas revenue exceeded one quarter of its total operating revenue, reaching 177 million yuan, far ahead of other Chinese online game companies. The Japanese market played a crucial role in this. Through overseas acquisitions, Beyondsoft and Perfect World have achieved their original purpose, one has improved management and technology, and the other has found the original intention of opening the market and realizing localization.
IT industry cross-border M&A risks and opportunities
The overseas mergers and acquisitions of Chinese IT companies have just begun in recent years. In fact, many giants in the IT industry have improved their core competitiveness through mergers and acquisitions.
Microsoft’s senior vice president Zhang Yaqin told reporters: “In fact, all of Google’s business other than search is acquired through acquisitions. Its maps, its videos, YouTube, and its mobile, Android, are all acquired through mergers and acquisitions.”
Compared with the 70% high failure rate of cross-border mergers and acquisitions, the rapidly changing IT industry mergers and acquisitions may face more risks and challenges.
During the interview, Liu Jiehua, secretary-general of the China Press Association’s game committee, told reporters: “When resources come together, let’s see if you can integrate with your business line and your original company's development strategy. We hope for an acquisition. It can bring a win-win situation to both parties, and this situation must be sustainable."
In the ever-changing IT industry, where will future mergers and acquisitions focus?
Zhang Yaqin said: "In the future, many of the acquisitions will be in terms of technology and technology patents. If it is not an advantage, it will become a barrier. Therefore, if you want to develop, you must have a technical or positive attitude. Strategy or a preparedness strategy is very important."
