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– This is the script of CNBC's news report for China's CCTV on May 20, Friday.
Welcome to CNBC Business Daily, I'm Qian Chen.
Despite its recent domestic economic slowdown, Corporate China's foreign acquisition binge continues apace.
Chinese corporate giants have been relentlessly pursuing Western foreign assets in a shopping frenzy with no signs of abating.
On the surface, Chinese foreign acquisitions appear to be geared toward industries that meet the strategic resource needs of its domestic population, however, this does not relieve the Chinese acquirers of their profit obligation.
Despite their deep pockets and large appetites, Chinese acquisitions are beginning to disappoint.
They face a toxic cocktail of political, economic, and cultural headwinds. And the cracks that now appear in some of the early deals should serve as an early warning sign for future deals.
Certainly a number of deals face political risks and are thwarted before they even have the chance to get off the ground.
A number of deals also face economic risks. Chinese acquirers have demonstrated a willingness to be eager buyers, paying exorbitant premiums and taking on too much debt along the way.
Chinese acquirers routinely bid far more on a multiple of EBITDA (earnings before interest, taxes, depreciation, and amortization) basis than is prudent.
Paying back a high debt load is burdensome and can hamstring managers, leaving them with limited strategic growth options.
Economic and political risks have caught local governments' attention.
Fairchild Semiconductor recently rejected a takeover by a state-backed Chinese company. In spurning the deal, Fairchild suggested that the deal was likely not to receive approval from the Committee on Foreign Investment in the United States (CFIUS) because acquisitions in the semiconductor industry raise substantial national security concerns.
Similarly, deals with Syngenta as well as Phillip's Lumileds have all faced a "NO" vote from the CFIUS.
In Feb this year, the China National Chemical Equipment Corporation (ChemChina) announced plans to acquire Syngenta, a Swiss agricultural giant. If approved, this $43 billion transaction will replace Nexen as the largest Chinese foreign acquisition ever.
Beyond well-documented economic and political risks, there is another obstacle that foreign acquirers often overlook that is especially pronounced in Sino-Western deals - cultural risk.
Chinese culture is exceptionally different from Western culture, and Chinese acquirers often have trouble integrating and effectively managing their newly acquired targets.
CNBC's Qian Chen, reporting from Singapore.
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