Beyond Borders | Global Expansion Throughout Acquisition
Since the 1960s, globalization has been advanced by a multitude of factors, along with declining costs in telecommunications, expansion of capital markets, and falling regulatory barriers. More currently, the advancements in information technology have accorded opportunities for many corporations to emerge multinational. As a product, international expansion has become an important avenue for corporations looking to improve profits. And in fact, there have been many successful examples of companies expanding into overseas markets – particularly the Chinese market – through acquisition of other firms.
Take, for example, Rhodia Group, a developer and producer of specialty chemicals. In late 2010, Rhodia acquired Feixiang Chemicals in order to help accelerate the company’s growth strategy in China. In reality, it is one of the larger inbound acquisitions in China’s chemical sector. Besides bolstering growth, Feixiang Chemicals will also help Rhodia to strengthen its position in the surfactant industry, as well as enable the company to increase its footprint in an important – and rapidly growing – market.
Another example is PPG’s 2010 purchase of Bairun, a privately held packaging coatings company in southern China. PPG, a coatings and specialty products company, will be able to enhance their leadership position in the Chinese and Asian packaging coatings industry through this acquisition.
Likewise, last May, DuPont announced its intent to acquire a minority share in Zhonghao New Chemical Materials, a fluorochemical manufacturing company. While the deal is still pending completion of agreements and government approvals, if successful, DuPont will be able to integrate the company into its Chemicals & Fluoroproducts division and, as a result, strengthen its ability to serve customers worldwide.
Nycomed, a privately owned pharmaceutical company based in Switzerland, is just one more example of a corporation expanding its global presence through acquisition. In November 2010, the company significantly grown Chinese presence by acquiring a majority stake in bio-pharmaceutical company Guangdong Techpool Bio-Pharma Co., Ltd.
According to Peter Hall, partner at The Valence Group, the trend of international development through acquisition into China will likely continue. “The days when a Chinese presence could be regarded as a ‘nice to have’ are over,” he said. “A presence is now critical for long-term survival as local capabilities and market presence are essential.”
John Brown is a retired financial advisor specializing in M&A deals. If you would like to learn more about merger & acquisitions in specialized niches visit Valence Group.
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