Advantages and disadvantages of cross-border mergers

1, can provide a new source of funds for the technological transformation of state-owned enterprises.

The long-term planned economic system, resulting in the state-owned enterprises own accumulation is insufficient, the lack of funds needed for technological transformation, limiting the ability of enterprises to expand reproduction. Lack of technological transformation of the funds needed to accumulate will inevitably lead to the lack of enterprise development, a competition that is facing difficulties. State-owned enterprises to transform the mechanism, out of the predicament, one by deepening the reform, the second by increasing investment in technological transformation, the third by reducing debt and social burden. These three measures require capital investment. Currently the main source of enterprise funds: a bank loan, the second is the enterprise self-financing, the third is the use of foreign capital. Due to the increasing indebtedness of enterprises, the repayment ability is insufficient, the loan is more and more difficult; enterprise economic performance continues to deteriorate, there is no ability to accumulate. Therefore, the direct use of foreign capital has become an important channel for state-owned enterprises to raise funds. The direct utilization of foreign capital grafting transformation of old enterprises to make up for the funding gap of industrial technological transformation plays an important role. In the increasingly fierce market competition, enterprises need to continue to upgrade technology, if there is no sustained investment in technological transformation, even if the enterprise's current economic efficiency is relatively good, in the long-term competition will be difficult to maintain.

2, can promote technological progress and industrial upgrading.

It is undeniable that most of the technologies introduced into China by multinational corporations in recent years are not the most advanced, and some of them are even mature technologies which are already in the period of decline; nevertheless, most of the technologies are still higher than the domestic level. Cross-border mergers and acquisitions can promote the technological progress of domestic enterprises, and through technological spillover and diffusion and other ways to drive the domestic enterprises in the same industry, technological upgrading.

3, can prompt state-owned enterprises to change the mechanism.

Under the traditional planning system, the property right relationship of state-owned enterprises is not clear, and the main body of investment is not clear. In the past decade, state-owned enterprises have been reformed continuously,

but the relationship between owners and operators, between enterprise efficiency and employment, and between backbone enterprises and their burden of social welfare groups can never be effectively sorted out. The introduction of foreign direct investment in state-owned enterprises, the realization of the combination of state-owned enterprises and foreign capital, not only changed the single asset structure of state-owned enterprises, but also through the definition of property rights, asset evaluation, the establishment of corporate governance structure, so that the relationship between property rights clear; state-owned assets and foreign capital into one, the attributes of the capital to chase profits will be revealed, a change in the lack of power of state-owned assets, the binding force of the shortcomings of the softening of the capital requirements of the value-added The nature of capital demand value-added will mercilessly exclude the interference of all non-production factors, get rid of the enterprise's "baggage", to achieve a reasonable combination of factors and technological progress; due to the joint venture foreign participation in the management of the joint venture, and with reference to the operation of joint venture law, which from the property rights and legal system to solve the problem of the lack of separation of government and enterprises. At the same time, the joint venture enterprise adopts the management system and management methods that are compatible with the modern market economy, introduces the incentive and constraint mechanism in the wage system, and establishes the social security system for the employees according to the law, so as to make the enterprise become a competitive main body of the market that can be fully integrated with the market economy. At the same time, mergers and acquisitions and reorganization of state-owned enterprises can be negotiated with multinational corporations, to take a variety of ways to solve the problem of surplus personnel resettlement and debt repayment, which is in the state of shutdown, semi-suspension of production and serious losses for the state-owned enterprises is a better way out.

4, can make domestic enterprises to participate in the international division of labor more effectively.

According to Vignon's product life cycle theory, the production of a product is sequentially transferred between the innovating country, other developed countries and developing countries. When shifting to developing countries, TNCs take into account existing branches and production capacity. All things being equal, if a multinational company has its interests in China, it will prioritize the transfer of production to China, thus giving China a certain technological advantage over other developing countries.

5. Senior technical and managerial talents can be trained.

Through mergers and acquisitions, multinational companies can bring advanced technology and management concepts into China. The Chinese technical and management personnel working in them after the M&A will constitute the viable force of Chinese enterprises in the future.

II. Unfavorable aspects.

1. Technology.

The entry of foreign capital into the domestic market will also raise the cost of hiring technicians, which affects research and development costs in the opposite direction. Moreover, it is because of the financial strength of multinational corporations to raise the salaries of technical personnel, domestic enterprises, research and development team stability is worse, which may have a profound impact on the coherence of the technological innovation process of these enterprises.

2. Cross-border M&A may inhibit the accumulation and growth of domestic entrepreneurial factors.

Economic development in developing countries relies on the accumulation and growth of local entrepreneurial factors in addition to the accumulation and growth of factors such as capital and technology. The entrepreneurial element is the source of local technological, production and organizational innovation, and is also a key element in mobilizing all kinds of local resources and forming the basis for long-term development of the local economy. In order to carry out their global strategies after mergers and acquisitions, multinational corporations often control the main leadership position of the company, and the original Chinese leaders are either forced to obey the global war arrangements of multinational corporations, or are relegated to secondary positions. At the same time, in order to monopolize high profits in the host country, multinational corporations often take dumping and other means to combat domestic competitors of the same kind.

3. It will lead to the dependence of domestic enterprises in the international division of labor.

In the contemporary international division of labor, an enterprise's research and development capabilities, management skills and marketing skills are the basis for a country's dominant position in the international division of labor. Chinese enterprises generally do not have such capabilities and skills, and are to a large extent passively involved in the international division of labor by multinational corporations, which results in their dependence on developed country multinational corporations in terms of technology, management and sales channels in their participation in the international division of labor.

4. It may lead to the loss of national wealth.

Transnational corporations tend to underestimate the assets of state-owned enterprises when acquiring and merging with them, which is especially prominent when the state-owned enterprises are in business difficulties. If the tangible and intangible assets of state-owned enterprises are not reasonably assessed before the merger and acquisition, it will often result in a large loss of state-owned assets in the merger and acquisition.

5, may weaken the national macro-control efforts.

Legal basis

Article 173 of the Company Law A merger of companies shall be effected by the parties to the merger signing a merger agreement and preparing a balance sheet and a list of property. The company shall notify the creditors within ten days from the date of the resolution on the merger and announce it in a newspaper within thirty days. Within thirty days from the date of receipt of the notice, or within forty-five days from the date of the announcement if the notice has not been received, the creditors may demand the company to settle the debts or provide corresponding guarantees.