Overseas investment "slow" and "fast" combination
Weichai Power Co., Ltd. (hereinafter referred to as Weichai) is one of the most powerful automobile and machinery equipment manufacturing groups in China. Since the new century, Weichai has always adhered to the path of "international cooperation and independent innovation."
At home, Weichai has carried out a series of improvements and innovations on the WD series engines introduced in Austria. In April 2006, China’s first “Blue Engine†high-power engine, which had completely independent intellectual property rights and achieved Euro III emissions, achieved mass production in Weichai.
Overseas mergers and acquisitions are conducive to industrial restructuring and industrial upgrading of China's construction machinery
In foreign countries, in 2003, Weichai invested more than 100 million yuan and established a European R&D center jointly with the world-famous AVL Austria. With the help of the most advanced technology research and development platform in the world, we independently developed the Euro III engine. On April 28, 2006, Weichai Power, Foton Motor, Germany's BOSCH Corporation and Austrian AVL Company entered into an international strategic alliance in Beijing. The parties cooperated closely in R&D, products, and markets.
In addition to international research and development and cooperation, Weichai is also brewing to the world. On January 23, 2009, Weichai acquired the relevant assets of the French Baudouin company through its subordinate subsidiary Weichai Power (Hong Kong) International Development Co., Ltd. with a bid of 2.99 million euros and took the first step in overseas acquisitions. The newly acquired Baudouin company specializes in the design, development and sales of engines and drive assemblies, which is exactly in line with Weichai's 12-liter diesel engines. Compared with the income of Weichai with several hundred billion yuan, this investment can only be considered as a small scale, but it has foreshadowed the further development of foreign markets. Since then, Weichai has not, as most people are willing to do, have succeeded in winning other companies, but has chosen to settle down and practice in silence.
After three years, on January 10, 2012, Weichai Group reached an agreement with the main creditor of Ferretti, Europe’s largest luxury yacht manufacturing company, to acquire its controlling share. It is worth mentioning that Weichai's reorganization of Ferretti took only five months to reduce its bank liabilities from the original 760 million euros to 116 million euros. Because of the complicated ownership structure and excellent design scheme, it became even more important. 2012 Europe's most classic transaction case.
This time, Weichai Power did not choose to “slowly†again. In less than eight months, on September 3, 2012, Weichai took the shares of KION, the world’s second-largest forklift manufacturer, with EUR 738 million. According to the framework agreement, Weichai Power paid 367 million EUR to KION. Acquired 25% of Kia's newly issued shares and obtained a call option to increase the equity to 30% before KION went public; at the same time, the company paid 2.71 to KONCO-controlled Linde Material Handling Company. Billion euros to obtain a 70% equity interest in Linde Hydraulics and make related options arrangements for the future to further enhance Linde Hydraulic's equity. The negotiation with KION took only four months and is by far the largest direct investment by Chinese companies in Germany.
External expansion driven by internal and external advantages
In a large number of studies on cross-border investment, the famous British scholar Deng Ning once proposed the eclectic theory of international production. He believes that only when the company has the advantages of ownership, internalization, and locational advantages will the company conduct direct foreign investment. To carry out international business activities, different combinations of advantages will enable multinational companies to choose different modes of entry into overseas markets. Ownership advantage refers to a company's asset control, including technical advantages, enterprise scale advantages, and cross-national experience. Internalization advantage refers to the advantage of transferring ownership advantages across borders within an organization. The location advantage is the advantages of the host country's unique natural resources, low cost of production factors, and various preferential policies for attracting foreign investment. Applying this theory to Weichai Power's transnational investment practice, we can analyze the reasons for its success from the following aspects:
The "winter period" of the international market provided a good opportunity for Weichai. The financial crisis of 2008, coupled with the spread of the European debt crisis in the later period, has caused severe attacks on global, especially European and American industrial companies. The French Baudolean company entered the process of resuming reorganization due to sluggish product sales and broken capital chains at the end of 2008; the global yacht market was affected by the financial crisis, coupled with leveraged acquisitions by Ferretti shareholders and over-borrowing caused excessive financial burden on the company; Due to the high level of liabilities and the heavy financial burden, Kion Group of Germany could not meet the requirements of public listing, and it urgently needs to carry out capital structure reorganization and seek strategic partners.
Weichai also seized this opportunity. After the financial crisis occurred, Weichai successively developed international markets such as Russia, Indonesia, and Vietnam, and changed its position relying on a diversified market strategy to rely too much on the single market in Europe and the United States. In addition, since September 2008, Weichai has organized special research teams and successively visited the United States, Europe, Southeast Asia, and other countries and regions to conduct comprehensive research and evaluation of international capital markets, product markets, and talent markets. At the same time, various forms of strategic seminars have been held in Hong Kong, Shanghai and Beijing successively. They have conducted careful and detailed research on the future trends of the industry in both domestic and foreign markets, and formulated a set of countermeasures for corporate operations.
The country's strategic layout and policy support for heavy industry. With the improvement of the country’s overall strength, China’s industrial structure will also be gradually adjusted to a new level. When former Premier Wen Jiabao once presided over the State Council executive meeting on February 4, 2009, he mentioned that it is necessary to combine the key projects of large industries such as steel, automobiles, and textiles to promote the autonomy of equipment. In support of the "going out" of domestic enterprises, Deng Xianhong, deputy director of the State Administration of Foreign Exchange, stated for the first time at a press conference held on February 18th, 2009 that in the next step, China will have to take advantage of its large foreign exchange reserves and adopt multiple Measures to support domestic enterprises to go global. In the same year, the Shandong Provincial Automobile Industry Adjustment and Revitalization Plan (Draft for Soliciting Opinions) proposed for the first time that “the key support for Weichai Power, Shandong Automobile Industry Group, Shandong Province Construction Machinery Group's joint reorganizationâ€, Weichai and other companies have become important production bases for international heavy-duty vehicles, construction machinery and marine engines.
Facts have proved that the strategic cooperation between Weichai and KION has enabled Weichai to quickly master the world's leading high-end hydraulic technology, and through technology introduction, digestion and absorption and independent innovation, boosting China's construction machinery industry structural adjustment and industrial upgrading, and promoting China's engineering. Machinery industry extends to the high end of the value chain.
Weichai Power's own strategic planning and advantage utilization. The lessons learned from the failure of overseas investment by Chinese companies are mainly due to the following reasons: Most companies lack cross-country experience and have a single investment model; they do not fully understand and grasp the host country’s R&D environment and related policies and regulations, and they make entry into overseas markets. The results of the selection of the model; the low level of integration and integration of cross-border mergers and acquisitions and the lack of management capabilities. The reason why Weichai can successfully enter foreign markets is inseparable from its own efforts. Based on its own strategic planning, Weichai strengthens its international cooperation in R&D and independent innovation capabilities, enhances its ability to connect advanced technologies with advanced technologies, and uses capital advantages to seize strategic resources and make full use of the existing localization experience of foreign companies. Successfully completed overseas investment.
Weichai chose Europe as the location for overseas investment on the basis of extensive research on the international market. On the one hand, due to the profound foundation of the construction machinery industry in old developed countries in Europe, the development is more mature and it can provide more technical information. It is also related to preferential policies for European countries to attract foreign investment. For example, Weichai Power, through its cooperation with KION, can quickly master high-end hydraulic technology and achieve comprehensive breakthroughs in many fields such as construction machinery, agricultural machinery, yachts, and aerospace. In addition, Germany's policy requirements for foreign investors are very loose, and will provide the same preferential measures as domestic investors. Through preferential policies, the cost of research and development is reduced and the cycle is shortened.
In the process of investment, Weichai has always maintained the attitude of strategic partners, using its own solid financial foundation and first-class work team to help foreign companies complete strategic reorganization and achieve a win-win situation through in-depth cooperation and exchange, which is also in the host country. Increased goodwill. The CEOs of Weichai's overseas companies are all European natives. Executives sent from China are not leaders of enterprises, but are supporters of resource allocation and they play a role in communication and coordination with the country. This kind of management structure reflects Weichai's respect for the local cultural environment and thus avoids misunderstandings and conflicts caused by differences in concepts. In the acquisition of Baudouin, the French local government proposed to ensure the employment of employees, to ensure that the remaining 15 years in the manufacture of diesel engine factory in France and other relevant conditions, Weichai meet one by one. The cooperation with KION is not a 100% wholly-owned acquisition of Weichai. Instead, it is strategically acquiring shares and reaching mutual complementarities. This will greatly reduce the worries and inconsistencies of German employees, labor unions, and regulatory authorities.
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