No longer poles apart as ties increase

Promising acquisition?

The takeover has brought mutual benefits to Liugong and HSW.

First, Liugong will acquire the first-class crawler dozers (a specialist bulldozer) production line owned by HSW, said Zeng.

Established in 1937, HSW is well-known for its manufacturing of high-quality crawler dozers at its plant in the Podkarpackie province in Poland.

"The research and development investment for crawler dozer production lines is huge and difficult," said Zeng. "No more than five companies in the world can really make high-quality crawler dozers. The technology Liugong can gain from the takeover is attractive."

Second, the takeover of Dressta can help Liugong expand its European market, which currently is not a major overseas market for certain Chinese companies.

In addition, Poland has almost the lowest manufacturing and labor costs in Europe. The payment of employees at Liugong Machinery (Poland) Co Ltd equals around one-sixth of that of Germans in the same line of work and only 1.5 times Liugong's Chinese employees.

In return, Liugong also helps the Polish company in many sectors, including reducing costs, improving production efficiency and expanding its sales markets.

"In addition to technology communication, Liugong has a well-established global distribution network that Dressta can make use of to increase its overseas sales," said Lestaw Holysz, chief executive officer of Dressta.

"We need more dealers and Liugong has them," he said.

Since Liugong started its "go overseas" strategy in 2002, it has built up a distribution network with more than 400 dealers in 130 countries and regions globally and two overseas manufacturing plants outside China.

Unlike many other Chinese companies, Liugong tried hard to infuse its concepts, culture and management into its overseas plants in addition to making money.

"We want to send a message to the Polish government and local residents that we are not only buying their technology through the takeover. We are also bringing our best technology and products here," said Zeng. "Plus, we will definitely continue our investment and Poland will become Liugong's manufacturing center in Europe."

Challenges ahead

Among hundreds of big and small outbound takeovers by Chinese companies in recent years, integration after transactions is the most challenging and crucial part.

China's largest outbound takeover in history was the acquisition of Canada's Nexen Inc by China National Offshore Oil Corp Ltd, the country's biggest offshore oil exploration company, which was finalized last summer.

Yang Hua, vice-chairman of CNOOC's board, said during a previous interview that a smooth integration determines the future development of the company but it takes time - from several months to three to five years - depending on the scale.