Acquisition, not yet for state-owned enterprises
2006 is labeled as the year of acquisitions, after two deals between privately-owned enterprises were sealed. However, it is not yet the time for state-owned enterprises, Shanghai Securities Journal reported.
First, state-owned enterprises still need time to reform themselves according to the market economy. Under the current circumstances, acquisitions between state-owned enterprises would take a very long time. Issues such as takeover amount and relocation of staff, as well as management, would be made more complex.
While privately-owned enterprises see acquisitions as a game of survival of the fittest, they do not suffer from the bureaucratic procedures state-owned enterprises have to go through. By the time each department chief has approved of the deal, the market has changed and the potential opportunities have gone.
Second, state-owned enterprises have a single acquisition mode and payment strategy. Private enterprises, on the contrary, base acquisitions on purchase agreements with payment strategies of cash and stocks together. While the acquired can be listed directly, it can also use the cash to take care of the aftermath. The obstacles in the acquisition process are minimized.
Third state-owned enterprises are operated in the shadow of power struggles. Acquisitions are obstructed by the defense mechanism that protects local interests.
The recent merging of Focus Media and Target Media as well as Gome and Paradise may signal a new market trend—complementing corporate development by readjusting corporate structure and conforming resources.