Case Two Sample Clauses

Case Two. The SOE (hereinafter referred to as ‘Company X’) was established in 1936 and it employed 1,700 staff before the acquisition. It is ranked first in market share (in terms of output and revenues) in the sector in China with a market mainly based in China because China is the biggest producer and consumer. Company X chose the acquisition expecting to receive financial support. This is because the local provincial government lacked sufficient money to support the company’s development since it had taken charge of Company X’s business. Company X had to rely on self-sufficiency. Although Company X is a leading manufacturer in the sector, it lacked development potential. Therefore, receiving financial support was a reason to choose an overseas company as the acquirer. The managers of Company X also hoped to receive advanced managerial skills to improve the firm’s development. The managers of Company X contacted and negotiated with the world’s top three manufacturing companies of the sector about M&A. These companies proposed the same terms and conditions: (1) To lay-off all technicians of Company X; and (2) To transfer Company X to their production base. However, Company X would not pay taxes to the local city government if it had to be transferred to the production base of a foreign firm. This would be a tremendous loss to the local government and therefore Company X was unwilling to do it. Thus, it finally chose the current acquirer. The acquirer chose Company X as their target for reasons of entering the Chinese market and expanding their Chinese market share. This is because China has a huge potential for expanding the acquirer’s business and Company X is ranked first in market share in the sector in China. The acquirer will expand their market share in China through assuming operating responsibility for the business of Company X. It will occupy China’s biggest market share and strengthen its capability to compete with other world-leading manufacturing companies. Besides market power, intangible assets possessed by Company X are important determinants of target selection for the acquirer. The acquisition was implemented in May 2006. After the acquisition, Company X had 1,800 employees and the ownership was transferred from state-owned to wholly foreign-owned, with the acquirer controlling the final decision-making in Company X. It assigned an expatriate as General Manager to Company X at the initial stage of the acquisition but called back the expatriate late...
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Related to Case Two

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