The Risk of Cross-border Mergers and Acquisitions of China’s Medical Industry
- With the development of economy and technology, China with the
increasing number of elderly people has become one of the countries with
a relatively high degree of aging population in the world. The demand for
health care has increased, because of the increasing prevalence of chronic
diseases of elderly. At the same time, the rising of China's per capital
disposable income, the increasing of the demand for national health
management, and ascending of the total expenditure on medical and health
care of Chinese residents have led to an increase in consumer demand in
China's medical industry. China has listed the medical industry as the
strategic emerging industry with vigorous support, introducing a series of
policies to encourage the rapid development of the medical industry. The
number and the scale of medical companies in China is increasing and
expanding. However, due to the lately start, the lack of core technology and
innovative capabilities, China's medical companies are concentrating in the
low-end market and facing fierce competition. Many companies have
encountered bottlenecks and many of them are trying to seek development
opportunities through M&A.
In recent years, the frequent M&A in China's domestic medical market
results in the decreasing in the number of domestic high-quality tenders and
the increasing in valuation prices. Many medical companies have begun to
turn to international markets for cross-border M&A. While expanding
overseas markets and increasing global market share, companies can also
quickly acquire relevant technologies, accelerate research and
development, and enrich product types and industrial chains. Due to the
weakly overall strength of China's medical companies, and the shortly
history of cross-border M&A, China’s company’s experience in
internationalization is insufficient. And the risks faced by China’s medical
companies in cross-border M&A it relatively high. Therefore, in the whole process of medical companies' cross-border M&A activities, it is crucial to
identify risk points in a timely manner and taking effective risk aversion
measures accordingly.
This paper selects the case of cross-border M&A in China’s medical
industry--Bluesail Medical's acquisition of Biosensors to study the
motivation of cross-border M&A of China’s medical companies and the risks
and related risk response measures at various stages of cross-border M&A.
First of all, this paper reviews scholars' research on M&A-related issues
from the aspects of M&A motivations, causes of M&A risk, and medical
industry M&A. Subsequently, this paper makes an analysis of the causes
and risks of cross-border M&A in China's medical industry. Then, this paper
takes Bluesail Medical’s acquisition of Biosensors as the case study, and
analyzes several motives of the M&A of Bluesail Medical. In addition, the
risk of this cross-border M&A of Bluesail Medical was identified and its
countermeasures were analyzed and evaluated from three stages: pre-M&A,
M&A process and post-M&A. In this study, it is found that Bluesail Medical’s
M&A has the following risks: decision-making risk, valuation risk, payment
risk, financing risk, financial integration risk and human resource Integration
risk. In the last part, this paper summarizes the case analysis and puts
forward suggestions on the risk response of cross-border M&A of China’s
medical companies, hoping to provide references for the risk identification
and response of related M&A of China’s medical companies in the future.