Data show that the transaction volume of China’s overseas mergers and acquisitions in the first quarter of this year has approached that of the whole of last year. Relevant experts said that overseas mergers and acquisitions are not only beneficial to the development of the company itself, but also important to the transformation and development of the industry. It is a "channel" to promote the rapid growth of textile and garment companies.
Chinese textile and apparel companies have made frequent acquisitions of overseas companies recently. In recent months, Chinese textile and apparel companies such as Hangzhou Yongsheng Textile Co., Ltd. and Shandong Ruyi Technology Group Co., Ltd. have successively acquired well-known companies in Europe and the United States, setting off another wave of overseas mergers and acquisitions by Chinese textile and apparel companies.
Chinese textile companies frequently make mergers and acquisitions
Recently, according to relevant media reports, Hangzhou Yongsheng Textile Co., Ltd. acquired French lace manufacturer Desaiye for 300,000 euros (approximately 2.2017 million yuan). The acquisition price is equivalent to only 5% of Desaiye's turnover last year.
Hangzhou Yongsheng Textile Co., Ltd. was founded in 1993 and established a group in 2003. Its headquarters is located in Hangzhou. The group’s main business covers chemical fiber, textile, dyeing and finishing, clothing and import and export trade. While striving to become better, stronger and more distinctive in the industrial chain, Yongsheng is also actively involved in digital technology, financial investment, real estate and other industries, achieving diversified development and now becoming a large-scale private enterprise in the country.
Desailles, which was acquired this time, was founded 70 years ago and is one of the oldest lace manufacturers in France. More than 70% of its products are exported to the Asian market and it is a supplier of well-known brands including Victoria's Secret.
Coincidentally, at the end of March this year, Shandong Ruyi Technology Group Co., Ltd. invested 1.3 billion euros to acquire French fashion group SMCP.
SMCP has become a globally recognized leading company in the affordable luxury industry with its three Parisian contemporary fashion brands Sandro, Maje and Claudie Pierlot. SMCP has 1,118 sales outlets around the world, of which 906 are directly operated and 212 are cooperatively operated. As of the end of 2015, SMCP's brands are available in 33 countries around the world. Most of the clothing prices are around 200 euros, making it an affordable luxury brand.
It is reported that Ruyi Group’s acquisition of SMCP is intended to promote its further development and support its global expansion plan. Especially in Asia, the development of SMCP will benefit from the unique experience and excellent performance of Shandong Ruyi Group. Ruyi Group will insist that SMCP's design and creative team continue to operate at its headquarters in Paris to maintain SMCP's fashion genes and its unique brand image. While SMCP retains its existing corporate strategy and organizational structure, it will also benefit from the global retail industry expertise of its new shareholders.
In fact, in the wave of overseas mergers and acquisitions, it is not just textile companies that frequently take action, but also clothing companies. After successfully acquiring the European brand Laurèl, the women's clothing brand Elise acquired another international affordable luxury fashion brand in January this year. Elise signed an equity acquisition agreement with all shareholders of Hong Kong Tangli International Holdings Co., Ltd., and acquired 65% of Tangli International's equity through its wholly-owned subsidiary Dongming International Investment (Hong Kong) Co., Ltd. for RMB 240.5 million.
Tangli International owns the brand ownership of the American international affordable luxury fashion brand Ed Hardy in mainland China, Hong Kong, Macao and Taiwan, as well as brands such as Ed Hardy Skinwear and Baby Hardy. Its main products are the American affordable luxury fashion brand Ed Hardy. Men's and women's clothing and related apparel.
After the acquisition is completed, Elise will help Ed Hardy expand rapidly, adding 207 stores within three years, and plans to add 50, 76 and 81 stores in 2016, 2017 and 2018 respectively. In addition to store expansion, Elise said that future goals also include deepening the single-store performance of Ed Hardy's main brand business. At the same time, starting from 2016, the Ed Hardy Skinwear brand will be simultaneously developed to create a comprehensive lifestyle collection store.
According to Thomson Reuters data, in the first quarter of 2016, global transaction activity reached US$682 billion, of which US$101 billion (or 15%) involved Chinese buyers. At this level, China's total overseas transactions in the first quarter are close to the transaction record of US$109 billion for the whole of 2015.
Peng Gaonian, head of Citigroup's Asia-Pacific global cross-border M&A department, said that the wave of China's overseas M&A transactions in the first quarter of 2016 has changed the global M&A landscape.
Mergers and acquisitions are an important path for upgrading China’s textile industry
In fact, it is nothing new for Chinese textile and apparel companies to acquire foreign companies.
In terms of textile companies, in 2002, Shanghai Haixin Group Co., Ltd., China's largest plush fabric manufacturer, acquired the assets of the textile division of the American GLENOIT company. After Haixin Group completed the acquisition of the textile division of Glenoit Company as planned, it directly established a complete sales network in the U.S. market, which consumes the largest amount of plush clothing, and established a multinational product design and development organization, which has helped Haixin Group rapidly improve its main business of plush. It has played an important role in the company's development and growth into the world's largest plush clothing fabric company. This is the first time that a Chinese textile company has taken the initiative to acquire leading international companies as a strong player.
In terms of clothing companies, in 2008, Ningbo Youngor Group Youngor successfully completed the merger and acquisition of the Singapore-Malaysia Garment Group for US$120 million. This was the first time a Chinese clothing company had M&A of an overseas company. Through this merger, Youngor has obtained the 14 production bases of the New Malaysia Group in Sri Lanka, the Philippines, Guangdong, Jilin, Shenzhen and other places in China, and the ODM processing business of more than 20 brands including POLO and CalvinKlein. It owns Nautica, PerryEllis and other 5 authorized brands, as well as an excellent team with decades of experience in international brand management and design, can access hundreds of department store sales outlets and logistics systems at all levels in the United States.
Industry experts believe that overseas mergers and acquisitions are not only beneficial to the development of the company itself, but are also important to the transformation and development of the industry. Through mergers and acquisitions, we can transform ourselves from small to large, strengthen corporate development, and optimize resource allocation. Mergers and acquisitions are an important path for the upgrading of China's textile industry.
Liu Yaozhong, deputy director of the International Trade Office of the China Textile and Apparel Industry Federation, believes that there are currently two trends in overseas mergers and acquisitions by Chinese textile and apparel companies. One is to acquire leading companies in Southeast Asia and other countries. The main purpose is to extend the company's continued manufacturing Strength and other advantages. On the other hand, the main purpose of acquiring European and American brand companies is to use the brand advantages of related European and American companies to make up for the brand deficiencies of domestic companies and enhance the company's position in the global textile and apparel value chain.
“The main purpose of these recent overseas mergers and acquisitions is to use their platforms and sales channels to allow Chinese products to enter their mid-to-high-end markets.” Wuhan Textile, who has been engaged in research on mergers, acquisitions and reorganizations of textile and apparel companies for many years Xu Chaoyang, dean of the University’s School of Accountancy, said in an interview with reporters.
Integration is key to realizing expected M&A value
However, mergers and acquisitions are only the first step. How to continue to invest in and manage the acquired brands is even more important for domestic apparel companies.
“Mergers and acquisitions are not about buying a shell, but more about the core resources behind it such as talent, management, channels, and design. Integrating these core resources is the real meaning of mergers and acquisitions.” Liu Yaozhong said.
Xu Chaoyang introduced that integration is the key to realizing the expected value of mergers and acquisitions. It is difficult to integrate human, financial, material, knowledge, information and other resource elements for textile and apparel enterprises, involving multiple stakeholders. Therefore, it is necessary to systematically promote the integration process of mergers and acquisitions and control the risks in mergers and acquisitions integration.
Technical integration must be carried out first. Textile and apparel companies have acquired the entire production factors of the target company through mergers and acquisitions. When reconfiguring these production factors, the merging company always strives to integrate the target company's advanced production technology or certain production links and replace them with new technologies and new processes. Old technologies and old processes are added, and new technical processes are added to achieve optimal allocation within the merged enterprise to achieve the purpose of capital appreciation.
The second is management integration. Due to changes in the property rights structure and management team after mergers and acquisitions, the management organization, management system, and management methods must be adjusted, and the content, focus, and methods of enterprise management will change. Therefore, it is necessary to establish a standardized corporate governance structure, straighten out property rights relationships, reconstruct the organizational system, and improve the management system.
Once again, it is the integration of human resources. Mergers and acquisitions of textile and apparel companies usually have a huge psychological and emotional impact on employees, especially when the company is acquired and taken over. Stabilizing key talents has become the main strategy for mergers and acquisitions integration. During the integration process, the resignation of professional managers, key technical personnel and marketing personnel may result in the loss of key skills or important customers, causing huge losses to the company. Therefore, it is necessary to retain these key employees through emotional communication and appropriate incentives. Become an important part of human resources integration.
The last thing is cultural integration. Each textile company has its own corporate culture. Simply covering and replacing the culture of the acquired company with the culture of the acquiring company may cause strong conflicts and antagonisms, which may lead to losses for both parties and end in failure. Effective cultural integration should fully absorb the essence of the target company's culture and establish a composite new corporate culture. The senior leaders of both parties to the merger and acquisition must adhere to the principle of seeking common ground while reserving differences during the corporate culture integration process, and establish a cultural communication and understanding mechanism with the acquired company.
“Overseas mergers and acquisitions are the development trend of the industry. It is a 'channel' that effectively integrates technology-related resources of textile and garment enterprises and promotes the rapid growth of textile and garment enterprises. However, if not done well, it will 'lose both the wife and the soldiers'. What M&A requires is '1+1>2'." Xu Chaoyang reminded.
Reporter’s observation: In recent years, overseas mergers and acquisitions by textile and apparel companies have occurred frequently. In this wave of capital export, who can ride the wave and seize the global market share? The capital situation has always been unpredictable. As the reporter has seen, overseas mergers and acquisitions are not just a competition for capital. Companies also hope to expand their global business footprint through mergers and acquisitions overseas, thereby improving performance.
Compared with general mergers and acquisitions, textile and apparel companies invest higher costs in overseas mergers and acquisitions. In addition to time costs, companies need to conduct in-depth inspections of the companies they acquire. More importantly, how can the acquired company or brand be better integrated? After the merger, what are the development plans of both parties? Can it continue to enhance the influence of its own brand? Before overseas mergers and acquisitions, companies must carefully consider the above issues. After all, overseas mergers and acquisitions do not necessarily achieve asset appreciation, and more energy is still needed for corporate operations and management in the later stages of mergers and acquisitions.
When most companies choose the path of overseas mergers and acquisitions, they mostly consider that the acquired companies have something they can use for them. For example, through overseas mergers and acquisitions, you can enrich the diversity of your own brand, open up overseas markets, supplement corporate shortcomings, etc. More importantly, textile and apparel companies can learn international operating experience from overseas mergers and acquisitions. As globalization develops more and more deeply, companies can accumulate more experience and foundation to promote the international development of brands.
More and more domestic textile and apparel companies choose overseas mergers and acquisitions, which not only shows that domestic companies are not short of money, but also shows that companies have opened up a global perspective in their development. From this perspective, overseas mergers and acquisitions by textile and apparel companies seem to send a more forward-looking signal.
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