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The rise of the Asian multi-national: what it means for investors
The globalisation of Asian companies through M&A activity is tipped to rise, presenting opportunities and challenges for western companies and investors, according to a special report by Towers Watson.
The report, ‘Asian Trailblazers’, shows that the number of Asian companies in the Global Fortune 500 universe has jumped from 122 (24 per cent) in 2006 to 181 (36 per cent) in 2012. The researchers expect this trend to continue.
Bob Charles, Hong Kong-based managing director of Towers Watson, said that Chinese companies, in particular, were starting to build up their offshore operations and, for many of them, this is a type of experiment. They tend to take less time than more established global companies, if doing a takeover, and they tend to be less price sensitive. They have a strategic imperative to internationalise even though they have less reason to do so, because of the size of the growing middle class domestic market in China, than western global companies.
Charles said that the decrease in time being taken to complete a merger or acquisition and the lack of price sensitivity by some Asian companies with their M&A activity were concerns, but he felt this was probably a temporary phenomenon.
Similarly, Charles thinks that the governance issue which institutional investors have with Chinese and other Asian companies, will dissipate with time.
“As more Asian companies increase the diversity of their own shareholder base, there will be more pressure to improve corporate governance,” he said. “It’s certainly on the agenda in China… There’s also pressure coming form the stock exchanges throughout Asia.”
The report says: “Over the last decade, an increasing number of Asian companies have grown enormously in size, reach and importance – many of them becoming significant global players in the process.
“These companies have capital, vision and agility – reason enough to be taken seriously by multinational companies (MNCs) from developed markets. But add to that the Asian MNCs’ evolving global HR governance practices, and they become a significantly competitive threat to their North American and Western European counterparts.
“We define these companies as ‘Asian Trailblazers’, in recognition of their pioneering spirit and determination to explore and successfully grow their businesses in markets outside their home countries. These organizations have set an example that should provide inspiration to the next generation of Asian companies as they transition from being successful in local markets to genuinely competitive on the global stage.
“It is a well-recognized fact that people drive business success. Our study provides new and relevant insights into the globalization strategies and HR practices that have enabled Asian Trailblazers to achieve so much in such a relatively short time. But it also highlights the nature and extent of the accompanying HR risks. Contrary to the view held by many multinationals from developed countries, our study finds that Asian Trailblazers have well-defined globalization strategies based on clear rationales and goals.”
For the full report, go to: Â www.towerswatson.com/singapore/research/7061
