Are the Winds of Mergers and Acquisitions Blowing East to West?

HONG KONG, March 6, 2012 — In a program co-organized the Asia Society Hong Kong Center and KPMG, Mary Ma, Chairman of Boyu Capital and Vice Chairman of Lenovo, and Douglas Brooks, Assistant Chief Economist at the Asian Development Bank, joined Asia Society Co-chair Ronnie Chan in a discussion of the growing incidence of outbound mergers and acquisitions in Asia. "This will be nothing less than a powerful, powerful program!" warned Chan. "And like it or not, much of it will focus on China."

Chan opened the conversation with the question, "Will geopolitical issues between Asia and the West become a barrier to economic development?"

In response, Brooks noted that varying levels of resistance can be found across business sectors in the United States. Some industries, such as the textile industry, show very little resistance to Asian involvement. Others, such as the military armament sector, are understandably more resistant. "Overall, I think that the situation is getting better," he said. "Lenovo's acquisition of IBM PCs was a very interesting example. Back then, everything was running on IBM computers. There were worries that China would know everything that was going on in US computers. But it went ahead."

Ma, who took the lead in Lenovo's famous 2004 acquisition of IBM's PC division, reflected that one of the biggest complications in transnational mergers and acquisitions is the radically different corporate cultures. IBM originally quoted their price at 1.5 billion dollars. Ma said, "We thought, 'Wow, what a great price! We can get that down to 750 million.' We thought we were in the Chinese marketplace. This much has changed." (Eventually they settled on 1.25 billion.)

Brooks agreed that while there is a growing understanding in China of how business is conducted in the United States, "Unfortunately, I haven't seen so much improvement in Western organizations understanding China."

But Ma was adamant that the major difficulty of the merger and acquisition process was not the sale, but everything that follows. "The hard part is running a profitable company," she said. She stressed the importance of synergy and integration. "Culture, culture, culture is everything," Ma said.

Chan then posed the question, "Is America losing out by not welcoming the Chinese investments?"

Brooks answered, "It may be. The U.S. has generally supported competition, including helping Europe to develop after WWII. Now it's realizing that it has created a lot of competitors. If you believe in free-market capitalism, that's great. But some of the events of the past few years are making people rethink the free-market part of it."

Chan countered, "So if you win, it's good, and if you lose, it's bad?"

"It's human nature," said Brooks.

Reported by Maddie Gressel

Video: Watch the complete program (52 min., 52 sec.)