Multinationals deterred by misperceptions

Many multinationals retain misperceptions about making value-generating acquisitions in China, deterring growth in transactions by multinational corporations, management consultancy Boston Consulting Group (BCG) said in a research report released on Wednesday.

While many multinationals have established a foothold or expanded operations in the Chinese mainland market through mergers and acquisitions (M&As), "many more have not," said the report.

In the first three quarters of 2014, inbound transactions accounted for only about $75 billion of the $287 billion in total M&As in China, according to the report, citing the latest available data from Thomson Reuters.

In addition, excluding pure financial investments such as private-equity acquisitions, out of some 2,500 deals since 2009, acquisitions by multinationals valued at over $100 million in which the acquirer has taken a stake of at least 30 percent stood at fewer than 50, the data showed.

The reasons behind prospective multinational acquirers' hesitancy over making especially big deals in the country are mostly their mistaken beliefs that "value-generating acquisitions are nearly impossible in China," the US-based consulting firm explained in the report.

Prospective buyers believe they might not be able to attain majority control, which is true in a few industries but is "more the exception than the rule," the consultancy said, among other misperceptions such as fears of the lack of transparency of the regulatory process.