Sustainable development capacity to support the green transition

2. Systematic overseas M&A capability with Chinese characteristics

To become a world-class industry leader, overseas mergers and acquisitions are a threshold that Chinese companies must cross. The reason is that it is difficult to become a global leader by relying solely on the domestic market, and it is a strategic need for Chinese enterprises to acquire technology and diversify risks through overseas mergers and acquisitions. In addition, after the epidemic, Chinese enterprises' overseas mergers and acquisitions face favorable macroeconomic and market environment, and as long as the industry is not subject to regulatory restrictions, Chinese enterprises' overseas mergers and acquisitions face relatively mild domestic and foreign supervision.

However, it is not easy for Chinese companies to make overseas acquisitions successful. Integration after a cross-border merger is extremely complex, requiring the removal of deep-rooted obstacles such as differences in business concepts and cultural conflicts, which can be challenging for companies without relevant experience. McKinsey studied more than 120 major overseas deals completed by Chinese companies over the past decade and identified two key ingredients for successful overseas investments: a compelling M&A strategy and deal logic, and well-planned and executed post-merger integration.

The key to successful cross-border M&A is that the transaction logic is clear and well aligned with the acquirer's corporate strategy. After a transaction is completed, a comprehensive post-merger integration plan that aligns with the strategic objectives of the transaction is critical to value creation. If the world's best M&A ability is summed up in one sentence, it is "to find the perfect combination between transaction logic and post-merger integration with the goal of maximizing long-term shareholder value for both parties."

On the road of globalization, Chinese enterprises need to adopt the pattern of "systematic mergers and acquisitions with Chinese characteristics". This model can achieve the dual purpose of maintaining strategic focus and focus without losing decision-making flexibility, and the right balance of internal capabilities and external support to ensure high-quality transaction execution. To carry out systematic M&A with Chinese characteristics, the following five-step approach can be adopted to ensure the continuous acquisition and effective capture of M&A opportunities:

Outline a deal in an M&A blueprint without the need for detail;

Proactively create a long list of at least 50 to 100 potential M&A targets each year; Establish a unified evaluation criteria and focus on evaluating 10 to 15 preferred targets each year

Conduct rigorous formal due diligence on key targets, focusing on demonstrating the logic of value creation and the feasibility of cultural integration

Transaction execution and integration planning should be carried out in parallel and iteratively, and the two should not be separated in order to complete the transaction.

Overseas M&A is a tough job, especially for Chinese companies that have traditionally focused on the domestic market. However, keeping an open mind, adhering to the established strategic goals of enterprises, taking value creation as the orientation of mergers and acquisitions, starting from some small and medium-sized mergers and acquisitions with reasonable costs, gradually accumulating experience, and constructing a set of systematic mergers and acquisitions capabilities with Chinese characteristics can effectively help Chinese enterprises quickly gain overseas market share and form a huge help for building world-class enterprises. At the same time, overseas mergers and acquisitions are of great strategic significance for China's chemical industry to form a systematic industrial integration capability, promote the high-quality development of the industry, and build a global market industry chain.

In the next ten years, the road to be taken by Chinese enterprises is destined to maintain the same frequency resonance with the development trend of the world economy and the great rejuvenation of the Chinese nation. Standing at the crossroads of century-old changes, Chinese chemical enterprises should have the confidence, responsibility and methods to consolidate core competitiveness through high-quality development, build world-class enterprises, expand global influence, seize international market opportunities, and forge ahead in the change.

As a leading global management consulting brand, McKinsey & Company has long served the world's largest energy, chemical and materials companies, and has been deeply engaged in the Chinese market for nearly 30 years, providing consulting services to state-owned and private local enterprises. We have witnessed the rapid development of China's energy, chemical and material industries, participated in the turnaround of state-owned enterprises, accompanied the leapfrog development of private enterprises, and assisted the cross-functional transformation of Chinese enterprises to benefit from management and promote development with lean. We will remain committed to helping China's energy and chemical enterprises create long-term value and accelerate their development into world-class enterprises.