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Amid industrial change and economic challenges, more companies are undertaking mergers and acquisitions (M&As) to seek growth opportunities. Eighty-one percent of respondents in a PricewaterhouseCoopers (PwC) Taiwan poll released last week said they would be more active in M&As over the next five years, compared with 71 percent in last year’s survey. Electronic components firms were the respondents’ most popular M&A target at 39 percent, followed by biotechnology and medicine companies at 29 percent and semiconductor firms at 28 percent, the survey found.
The survey also showed that Taiwanese companies view Southeast Asia, the US and Japan as the top three destinations for their overseas takeover and investment deals. That comes as no surprise, as local firms have increasingly been shifting away from China following the COVID-19 pandemic, and amid a rapidly changing global economic and trade environment due to geopolitical conflicts.
The Chinese-language CommonWealth Magazine last week reported that Taiwanese companies’ new overseas net investment outside China last year exceed NT$757.9 billion (US$24.7 billion at the current exchange rate), the highest in five years. That is because US-China tension and a supply chain realignment prompted Taiwanese firms to significantly increase investments in countries such as Japan, the US, Malaysia, Indonesia and several countries in Europe, the report said.
Making no mistake, most Taiwanese companies still view China as an important market because of its size, but they have started to adjust to the Chinese economy’s positioning in their global push. As Beijing tries to beef up domestic industries amid growing trade tensions with other economies, Taiwanese firms are facing more direct competition from their Chinese peers and must adjust their business strategies there.
While Taiwanese firms acted as a link between China and the West in the past, using the “world’s factory” to conduct business with Europe and the US, they today see China as more of a market to sell their products and less of an investment target.
On the other hand, the surge of new investment by Taiwanese firms in Europe and the US also reflects the subtle changes in the attitude of European and US companies in choosing business partners at a time when more governments in the West flag threats posed by China, and develop plans to defend their national interest and security.
The CommonWealth report said China’s overseas M&As began to shrink in 2020 and their value in 2021 was only 60 percent of that in 2016, while more Taiwanese firms were using global M&As over the period to expand their operations and seek new growth opportunities, from electric vehicles and automotive electronics to alternative fuel and energy storage.
The changing industrial and economic environment gives Taiwanese companies an opportunity to expand and transform through cross-border deals.
However, challenges await local firms that mainly focus on lowering manufacturing costs and increasing production efficiency.
To successfully close overseas M&A deals, local firms, particularly manufacturers in mature industries, need to address issues such as global management and risk control, communication, cultural conflicts and employee retention, as well as transition time and unexpected costs — issues that appear natural and unavoidable for Taiwan Inc as it looks at deals to secure business alliances and collaborative partners.
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