China lags Japan, US in deal completions

Chinese acquirers in 2014 completed just 67 percent of their outbound mergers and acquisitions deals, far less than developed-world acquirers, according to a report by the Boston Consulting Group.

The report showed that Chinese deal-making is on the upswing, and in 2014 alone 154 outbound M&A deals were announced, with a total value of $26.1 billion. But only 67 percent of the deals were completed, compared with the 75 percent completion rate for Japanese acquirers and 85 percent for US acquirers.

"Even deals that are completed often fall short of their goals because of poorly planned and executed post-merger integration. These failed deals represent enormous missed opportunities," the report concluded, after interviews with 33 Chinese companies and many more case studies.

The report identified three factors that impeded successful M&As: unclear M&A strategies, ineffective due diligence, and insufficient relevant capabilities.

In terms of motivation, BCG found many companies lack a clear M&A road map, have only a vague idea of the purpose of any given deal, and know little about the value of possible synergies or how to capture them.

"Some private companies had a clear purpose initially, but were overwhelmed by vast, seemingly attractive opportunities abroad and lost their initial purpose," said Luo Ying, a BCG partner.

In terms of implementation, BCG found many Chinese acquirers were not able to act quickly, thus lost many opportunities to rival bidders. Many bidders failed to recognize the urgency of putting together a detailed bid and post-merger integration plan. Compounding the problem, lengthy and cumbersome internal-approval processes hamper the company in assembling a team of a professional advisers.