Chapter 22 Overseas mergers and acquisitions suffered another setback

On February 11, 2011, the U.S. Congress asked China's Huawei Technologies to divest the technology assets it had acquired from the U.S. server technology company 3Leaf Systems on the grounds of "national security considerations."Huawei spent $2 million to acquire 3Leaf Systems in May 2010. In front of the powerful U.S. Congress, Huawei's overseas M&A has encountered another setback.Huawei announced that it has voluntarily withdrawn its application to acquire the technical assets of 3Leaf Systems in the United States.This means that Huawei's second attempt to enter the North American market has failed again.Huawei said it was a difficult decision, and the company did not intend to make such a major impact and attention on the acquisition.

For the powerful Huawei, this acquisition of only US$2 million was not only recommended by the Committee on Foreign Investment in the United States to withdraw the transaction, but also five members of Congress wrote to US Secretary of the Treasury Geithner and Secretary of Commerce Gary Locke, saying that This acquisition directly endangers the national security of the United States. Data show that from 2003 to 2007, China's share in the global M&A market was between 2% and 4%.By 2009, as the global financial crisis dampened M&A activity in other countries, China's share soared to a peak of 9%.However, on the road to overseas mergers and acquisitions, not only Huawei, but also other Chinese companies have repeatedly encountered non-economic and trade barriers, especially in the United States, where they often encounter cold reception.

In fact, Huawei is not an isolated case. While Chinese companies are growing stronger and seeking overseas opportunities, non-economic and trade barriers are like an invisible killer, stifling many merger and acquisition opportunities.According to Deloitte's 2010 M&A Report, more than 50% of Chinese companies' overseas M&A transactions have not been successful, failing to reach the bottom line of value-added.It is worth noting that non-economic and trade barriers are becoming a new round of "growing pains" in the overseas M&A activities of these Chinese companies.

As Huawei's competitors, including ZTE and China Mobile's investments and products, they have not been able to effectively enter the European and North American markets in the past 10 years.Judging from the process of repeated failures, localization and invisible non-trade barriers are currently the biggest obstacles to overseas expansion of these telecom manufacturers. Tan Haojun, a senior financial commentator, commented that although on the surface, Huawei’s encounters in the United States, India, Britain and other countries are not worth making a fuss about, because in recent years, European and American countries’ trade protection against Chinese companies and products has not It is rare, but what Huawei has encountered is the "high voltage line" of "national security".The reason is that other enterprises are general processing enterprises and manufacturing industries, and the products they produce are ordinary processed products and general manufactured products, which belong to the category of low-end manufacturing industries, without any core technology and core competitiveness, and adopt general trade protection measures On the contrary, Huawei belongs to the high-end manufacturing industry and has mastered many core technologies and core products. It has strong market competitiveness and core competitiveness. If it wants to enter European and American countries and markets, it will naturally It will be strongly resisted and restricted by these countries.

Industry insiders analyzed that Huawei has repeatedly clarified that it is willing to open its equipment for inspection at any time, and the United States still does so. The "national security" factor is an excuse on the surface, but in essence it is trade protection in disguise.In recent years, the rise of Chinese telecommunications manufacturers represented by Huawei, ZTE, and China Mobile has put strong competitive pressure on European and American counterparts. In order to protect domestic companies, some governments have repeatedly found excuses for merger and acquisition reviews.To deceive people, "national security" is the most appropriate reason.It is reported that CFIUS, established in 1988, is the United States' specialized agency for managing foreign investment, with the original intention of safeguarding national security.Supporting this committee is a specially established foreign investment approval system.

Despite being stuck in the "approval system" this time, Huawei stated that Huawei will stick to our commitment to long-term investment in the US market, continue to develop business in the US, and cooperate with the US government.Currently, Huawei is developing well in markets outside of North America. Huawei's repeated setbacks in overseas mergers and acquisitions have also given us new inspiration. To improve their core competitiveness and international market competitiveness, Chinese companies must not only face their own challenges, but also face external pressure. Restraint, but also to change the outside world's understanding of Chinese companies.In the face of China's economy constantly appearing in front of the world with new attitudes and new achievements, especially as the total economic volume has surpassed Japan to become the world's second largest, the forces to contain China's development and rise will further gather, targeting Chinese companies and products. Trade protection measures will also continue to change and upgrade.