The top priority for China's business empire to expand its overseas entertainment territory is to pay attention to quality and structure.

my country's going global strategy has not been implemented for a long time, and there are no specific requirements on which aspect to go global. However, since development, more emphasis should be placed on quality and structure. The top priority for China enterprises to go global is to move from a manufacturing country to a manufacturing power. The most important thing in investment theory is to obtain local resources, enter the local market, or demonstrate their own advantages.

Original title: Overseas cultural and entertainment landscape of those business empires

Overseas mergers and acquisitions have become the choice of many companies to go abroad. 2015 and 2016 were the two years when China's overseas mergers and acquisitions surged. Statistics show that China's foreign direct investment flow in 2015 was US$118.02 billion. China's foreign investment ranked second in the world after 13 consecutive years of growth; in 2016, foreign direct investment reached US$170.11 billion.

However, this growth changed in 2017. In the first half of this year, China's total foreign investment cooperation fell by 45.8% year-on-year. Among them, foreign investment in the real estate industry fell by 82.1% year-on-year, and foreign investment in the culture, sports and entertainment industries fell by 82.5% year-on-year. "Relevant departments will continue to pay attention to irrational foreign investment tendencies in real estate, hotels, studios, entertainment, sports clubs and other fields, prevent foreign investment risks, and advise relevant enterprises to make prudent decisions." At the press conference of the National Development and Reform Commission on July 18, Yan Pengcheng, director of the Political Research Office of the National Development and Reform Commission and spokesperson, made a clear statement.

On June 22, the financial market ushered in a storm. Wanda Film's share price fell, and its market value shrank by about 6.7 billion yuan in one day. Wanda bonds were sold wildly, and the price fell like a cliff. Fosun's share price plunged. Roughly calculated, the market value of the three Fosun stocks evaporated by approximately 11.5 billion yuan that day. News came out at that time that in mid-June, the regulatory authorities required banks to investigate the credit and risk analysis of several companies including Wanda, HNA Group, Fosun, and Zhejiang Rosenneri. Most of the investigation targets were private enterprise groups with relatively fierce overseas investment in recent years and large exposure to the banking industry.

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in 2010, Fosun invested 25 million euros to hold a 7.1% stake in Club Med (the world's largest resort hotel group), completed its first overseas M & A transaction, and then became the largest shareholder through continuous increase in holdings in the secondary market.

At that time, Wanda was planning a third transformation, from a single real estate to a commercial real estate and cultural tourism comprehensive enterprise. There are still two years before May 2012, when Wanda completed its first overseas acquisition of AMC, the second largest theater company in the United States, for US$2.6 billion.

After completing its first overseas investment, Fosun began to accelerate the path of mergers and acquisitions: in 2011, it invested 44.06 million Canadian dollars in a 12% stake in Canada's Jinduicheng West Color Company; in May 2011, it acquired a 9.5% stake in FolliFollie, a famous Greek fashion product group for 84.58 million euros, and later increased its stake to 13.85%; In 2013, Fosun completed 6 overseas mergers and acquisitions within one year, involving men's clothing, real estate and medical industries.

Since then, as of 2017, Fosun has conducted as many as 15 mergers and acquisitions, covering fields ranging from banking, insurance, fund finance, hotels and resorts, petroleum, medicine and catering. In the view of Fosun Chairman Guo Guangchang, Fosun's investment is "chaotic but not chaotic." All investment revolves around two main lines, one is the different stages of China's economic development; the other is that in these different stages, China people need the increase in consumption brought about by improved lifestyles.

Compared with Fosun, Wanda's investment targets are relatively simple, mainly focusing on two major sectors: commercial real estate and culture, entertainment and sports. In 2016, Wanda Group successively invested in the acquisition of three major theaters: Carmichael in the United States, Odeon&UCI in Europe, and Nordic Cinema Group. As of now, Wanda Group's share in the global film market has exceeded 15%, and it occupies Europe, North America, and China's movie theater market. First place. At the same time, Wanda purchased control of Legendary Pictures of the United States for US$3.5 billion.

In Wang Jianlin's view, the reasons for internationalization are: first, to expand the scale of enterprises. If some industries want to be large-scale, international investment must be required, especially the entertainment and sports industries; second, to become an international enterprise; third, to avoid business risks, and transnational development means Reduce business risks.

Since Wanda Group launched internationalization in 2012, its business has spread all over the world. Through overseas acquisitions, Wanda has quickly ranked first in the world in three fields: real estate, film operations and sports industry.

On June 7, Hurun Research Institute and Yijie jointly released the "2017 Special Report on Cross-Border M & A of China Enterprises" for the first time. It shows that in 2016, overseas investment M & A transactions of China companies grew by leaps and bounds. The number of overseas investment M & A investment transactions announced by China companies and with available information reached 438, an increase of 21% compared with 2015; The cumulative announced transaction amount was US$215.8 billion, a significant increase of 148% compared with 2015.

Buying and losing sports clubs

In many overseas mergers and acquisitions, the contradiction between high premiums and losses in acquiring sports clubs is prominent. On the evening of the 18th, CCTV News 1+1 column named "Suning Group invested 270 million yuan to control Inter Milan. The latter has suffered losses for five consecutive years, with a total loss of 275.9 million euros." Suning's share price fell accordingly.

Yin Zhongli, a researcher at the Institute of Finance of the Chinese Academy of Social Sciences, said in an interview at the time: "If the company's own money can do anything, the problem is that the money is not its own. These institutions have a high domestic debt ratio. They use money borrowed from banks and raised from other financial institutions to squander and purchase assets abroad. Once they make mistakes in overseas investment, this will increase domestic financial risks and give them a bonus."

Immediately, Suning Yunshang clarified on the interactive platform at night that Inter Milan Football Club was invested and acquired by Suning Sports Group, a company affiliated company. The funding source of the acquisition was legal and compliant, the investment valuation was reasonable, and the investment risks were controllable.

According to incomplete statistics, since 2014, the equity of at least 12 overseas football clubs has been acquired by China Capital, with a total investment of more than 15 billion yuan. Among them, in September 2015, Wanda purchased a 20% stake in Atletico Madrid for 45 million euros; in 2016, China-Europe Sports Investment Management Changxing Co., Ltd. purchased a 99.93% stake in Italian AC Milan Club for 520 million euros; In the same year, Suning purchased a 70% stake in Inter Milan for 270 million euros.

However, according to Italy's "Milan News Network", in 2015, AC Milan's loss reached 89.3 million euros, and in 2014, the loss reached 91.28 million euros. AC Milan has lost a total of 270.5 million euros in the past five years.

This is not the first time that the government has proposed "irrational overseas investment." In December last year, the heads of the four departments of the National Development and Reform Commission, the Ministry of Commerce, the Central Bank and the Administration of Foreign Exchange held a press conference and shouted through the media: The regulatory authorities pay close attention to some recent irrationality in real estate, hotels, studios, entertainment, sports clubs and other fields. The tendency of rational foreign investment, as well as the hidden risks existing in types of foreign investment such as large-scale non-main investment, is recommended that relevant enterprises make prudent decisions.

Gao Hucheng, then Minister of Commerce, once bluntly stated that irrational investment in overseas sports clubs had major risks and hidden dangers. Pan Gongsheng, deputy governor of the central bank and director of the State Administration of Foreign Exchange, clearly pointed out that China companies have acquired many football clubs overseas, many of which transfer assets under the packaging of direct investment.

With the strengthening of supervision, Bai Ming, deputy director of the International Market Research Institute of the Ministry of Commerce Research Institute, told reporters that my country's going global strategy has not been implemented for a long time, and there are no specific requirements on which aspect to go global. However, since development, more emphasis should be placed on quality and structure. The top priority for China enterprises to go global is to move from a manufacturing country to a manufacturing power. The most important thing in investment theory is to obtain local resources, enter the local market, or demonstrate their own advantages.

Editor: Xiongwei