DEVELOPMENTS IN INTERNATIONAL MERGERS & ACQUISITIONS

by Ju Park, Esq.

2012 continues to be a year of strong recovery for international mergers and acquisitions.  Foreign investors are looking for global opportunities, and many are turning to the United States for investment.  Recently, Chinese companies have acquired significant holdings in the US consumer goods and services sector.  For example, earlier this year, a Chinese conglomerate called Dalian Wanda Group completed its acquisition of the theater chain AMC Entertainment Group.  Companies are targeted for M&A transactions for a variety of reasons, including intangible assets such as know-how, market access, distribution channels, and technology or other intellectual property.  Additionally, acquirers are often able to offset the costs of the acquisition by the increased profits resulting from such intangible assets.  The AMC acquisition illustrates how intellectual capital and experience are valuable assets to foreign investors, and how cross-border transactions provide benefits to both parties as well as the larger economy.

AMC, one of the largest theater chains in North America at the time of its acquisition, offered the Wanda Group an immediate and obvious benefit in the form of access to the North American market, and AMC’s customers.  Also important to Wanda, however, was the extensive knowledge AMC had developed during the course of its cinema operations.  The US has a sophisticated theater industry, and lessons learned about consumers, marketing, and revenue streams provide an instant influx of expertise in high-level theater operations.  The Chinese theater industry continues to grow, and association with the Wanda Group will likely provide AMC with increased access to the Chinese market and distribution channels.  In turn, Wanda Group is likely to see a boost to its internal operations from increased access to AMC as a purchasing partner as well.  AMC is going to be in the market for a variety of goods and services ranging from concessions to content, and Wanda will be well-placed to become AMC’s primary supplier for such needs.  The increased revenue from supplying AMC could eventually offset Wanda’s outlay for the acquisition.  Wanda also plans to invest in and grow AMC’s US operations, which means that the entire US film industry could ultimately see a boost as a result of this acquisition.

Although the US economy has not yet recovered to its previous height, investors are still finding great opportunities.  Outbound Asian mergers and acquisitions have accounted for a significant amount of deal activity in 2012, which shows that our economy is continuing to globalize.  Experience, expertise and know-how are invaluable to companies seeking to grow, and businesses in the US have a lot to offer foreign investors in this aspect.  There are also many opportunities for the acquirers to decrease the overall cost of the acquisition through the use of broader distribution channels and newly-developed relationships, which results in great bargains and economic benefits to both acquirer and target.

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