Art of persuasion can help Chinese companies find global welcome

The US$4.7 billion deal by meat processing enterprise Shuanghui International to buy the US firm Smithfield Foods has again raised questions about the price of overseas acquisitions. Is it wise for Shuanghui to acquire the US pork producer at over 30 per cent premium without any requirements?

Of course, Chinese companies are acquiring European and US companies at an increasing pace and are becoming more proficient in the financial and legal challenges of outbound mergers and acquisitions, but they still have a long way to go in using communications and "soft power" to realise the full potential of deals. Indeed, these acquisitions are currently often realised with a costly premium: an estimated 15 to 20 per cent due to the point of origin.

And even the highest bid does not guarantee success: Bright Food, for instance, failed in a bid for Yoplait in 2011 despite being the highest bidder.

In the context of mergers and acquisitions, Chinese companies do not seem to be considered on the same level as other foreign companies.

First, as outlined in a recent survey of 1,600 people across the US, Britain and France by MSLGroup, 58 per cent of respondents see the prospect of their company being acquired by a Chinese company as a threat because of working conditions, management style and ethical issues; only 15 per cent see it as a potential opportunity. This is the perception Chinese companies face before they even enter the bidding process.

Second, China's political roots and unprecedented growth have politicians across the globe concerned about remaining competitive and protecting local industries. Chinese buyers are sometimes accused of being spies on behalf of the Chinese government by political opponents, which was the case with Huawei's acquisitions in the US. Despite the keenness of numerous governments to attract Chinese money, there is a degree of conflicting feelings.

The general public and, indeed, a significant segment of politicians remain fearful of "being eaten by the dragon". This is compounded by politicians who seek to make political capital out of the deals.