Clothing Industry: A Policy Opportunity For Overseas Mergers And Acquisitions

"In the new competitive situation of changing the stock market and controlling the power, we should push forward the globalization strategy with the innovative thinking of the industrial chain layout, and the value and significance of overseas mergers and acquisitions have been reassessed."

At the end of last year, when YOUNGOR acquired ELLWOOD Hongkong's new Malaysia group, it pioneered the traditional industry competitiveness breakthrough because of its pioneering action.

Li Ru, chairman of YOUNGOR group, said: "after the completion of the merger, we are the first clothing company in the world from cotton to weaving, logistics, and sales to cover the whole industrial chain."

2E (Xu Jingbo) said that 60% of the cost of garment enterprises came from fabrics. As a company without fabric production, new Ma will bring about "cost reduction and efficiency improvement" in 2008.

Contrary to the belief of the partners, the outside world is speculation about the inherent risks such as policy, finance, management and cultural integration, which take Chinese private enterprises as the main body.

Just a few months later, Fu Ziying, Vice Minister of Commerce of China, said at the sixth annual meeting of the China Import and export enterprise. Due to the tight liquidity in the US financial market due to the subprime mortgage crisis, some private enterprises and institutions were in temporary difficulties, providing good opportunities for mergers and acquisitions for Chinese enterprises.

"These enterprises have well-known brand and strong international marketing network, have strong R & D ability, if our enterprises can succeed in merger and acquisition, these advantages can be all of me, can greatly promote the international competitiveness of Chinese enterprises."

This statement is considered to indicate the policy direction of the Ministry of Commerce this year.

A contest beyond policy

With regard to the pressure caused by the appreciation of the renminbi to the export oriented enterprises and the double load from the internal and external markets, Fu Ziying believes that Chinese enterprises should also see opportunities when they see risks.

"When we see the impact of RMB appreciation on exports, we should also see that appreciation can reduce the cost of imports and foreign investment.

Historically, German and Japanese l enterprises have used the favorable opportunity of currency appreciation and relatively cheap foreign capital to actively expand the scale of foreign investment, from simple export to export and overseas production, realizing the interaction and interaction between trade and investment, and gaining a lot of profits.

Based on this view, the Ministry of Commerce said that the government should provide tax convenience and relax relevant controls on foreign exchange use, so that "going out" enterprises can issue foreign exchange bonds for financing, and continue to promote agreements with countries concerned in economic and trade cooperation, investment protection and avoidance of double taxation, so as to create a favorable external environment for cooperation between enterprises and governments.

As early as the beginning of the new year, Jiang Hengjie, executive vice president of the China clothing association, put forward the theory of value innovation: "integrating resources both inside and outside the world is a new innovation of China's clothing industry.

We should overcome some backward ideas, actively explore the brand development route, find our own position, and be ready to integrate or integrate at any time.

Now it seems that the more obscure argument at that time was the fear of uncertain policy factors and the tolerance of the majority of enterprises that formed inertial thinking to new things.

When reporters interviewed people in many sectors about YOUNGOR's merger and acquisition, despite their keen eyes on this folk sample, they were always suspicious of its universality.

"In a short time, it is difficult to replicate in this industry."

A senior official admitted that the pformation of the main body of mergers and acquisitions from the state commercial banks and state-owned large enterprises to private enterprises is a matter of nearly two years. Despite obvious policy leaning, a new market behavior with huge capital as a grafting tool is not necessarily covered by policies and policies.

Authoritative survey shows that the success rate of overseas mergers and acquisitions of Chinese enterprises is only two to 30%, which contains enormous risks:

China's existing policies to encourage and support overseas mergers and acquisitions of local enterprises are still very limited and lack practical operability.

At present, there is no clear industrial policy and Industrial Guidance standard for overseas mergers and acquisitions in China, and the "going out" of enterprises is generally in a state of disorder.

China's legislature has promulgated a number of laws and regulations regulating and restricting M & A activities. However, these normative documents are almost confined to regulate domestic mergers and acquisitions, and regulations on overseas mergers and acquisitions of Chinese local enterprises are basically in a legal vacuum.

Companies that seek buyers often have one thing in common, that is, the departments that are ready to sell are loss making or non profitable, non frontier areas and downhill businesses.

Transnational mergers and acquisitions require strong financial support. However, at present, the financing channels of Chinese enterprises are too limited, and capital markets and financial institutions are also not developed. This leads to the fact that Chinese enterprises can only rely on the power of international consortia when overseas mergers and acquisitions.

On the one hand, the exchange rate promotion has enhanced the strength of Chinese enterprises' foreign investment, but at the same time, it has also reduced the assets stock of overseas subsidiaries of foreign companies in Renminbi denominated accounts of domestic parent companies.

In addition, the gap between the internal governance structure of Chinese local enterprises and overseas mature enterprises is very large. How to absorb the positive factors of western corporate culture and retain the cultural advantages of local enterprises has also become a challenge to the wisdom of Chinese entrepreneurs.

Complementary survival

Mastering the common sense of acquisition and grasping the timing of policy is equally important for avoiding risks.

According to statistics, many textile and garment enterprises or listed companies are making good profits at present, with low asset liability ratio and considerable capital strength and financing capability.

The net profit margin of excellent clothing enterprises can reach over 20%, and the general assets and liabilities ratio is also 30% - 40%. The total assets of the top ten enterprises in the industry are RMB 1 billion 450 million yuan, and the first YOUNGOR group's total assets have reached 4 billion 200 million yuan.

However, "it is only one-sided to lock the capital strength only with the terms of merger and acquisition. It is important to have the ability to do more important things."

Chen Guoqiang, an industry expert, said that enterprises with poor capital strength and excellent management capabilities are also the potential players of the new round of overseas mergers and acquisitions.