Date
23 September 2017
Zoomlion is seeking to acquire Terex Corp. under a strategic plan to upgrade the former's operations and tap the global market. Photo: Terex.
Zoomlion is seeking to acquire Terex Corp. under a strategic plan to upgrade the former's operations and tap the global market. Photo: Terex.

Why we’ll see more overseas M&A deals from China

Mainland firms are increasingly seeking overseas acquisitions in order to upgrade their technology and transform their operations, initiatives that are seen vital to survival in the changing economic landscape.

A recent example is construction machinery maker Zoomlion (01157.HK), which announced plans to buy stake in Italy’s Ladurner Ambiente to gain access to the latter’s environmental technology.

The push into the green industry is aimed at capitalizing on Beijing’s ambitious plan to clean up its environment.

Less than a month after unveiling the Italy plans, Zoomlion has now revealed that it is also in acquisition talks with US-based Terex Corp.

Terex manufactures an array of equipment used in construction, infrastructure and mining businesses, among other things.

In a regulatory filing, Zoomlion said it “considers the proposed transaction to be a good opportunity for the strategic transformation of the company, and extension and upgrading of its industrial chain.”

Following a decline in building activities in China, the construction machinery sector has been weighed down by weak demand and an overhang of excess capacity.

Zoomlion’s earnings peaked in 2011 and started to fall off the cliff over the past two years. In the first half of 2015, the company sank into red.

Making big changes has become imperative for the Chinese firm.

Numerous firms in various other sectors are also faced with similar challenges.

It’s certain that we are going to hear about more overseas mergers and acquisition deals as corporate China tries to get hold of better technology and improve its competitiveness.

There will be a big learning curve for the companies in identifying the right acquisition targets, absorbing the foreign technology and overcoming some cultural barriers.

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RC

EJ Insight writer

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