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Discuss on Exchange Rate Risk Management of Overseas M&A—— In the Case of Haier's Acquisition of GE Appliances

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DOI: 10.38007/Proceedings.0001222

Author(s)

Doudou Hua

Corresponding Author

Doudou Hua

Abstract

In recent years, more and more enterprises hope to expand foreign markets and circumvent trade barriers by means of overseas M&A. But overseas M&A involves many transaction links, many currencies, and RMB shows bilateral fluctuations. The first difficulty that Chinese enterprises will face is the exchange rate problem. Therefore, the prevention and avoidance of exchange rate risk in M&A business is an important link for enterprises to successfully complete M&A business. In accordance with the case analysis of Haier's acquisition of GE household appliances, this paper constructs a framework of exchange rate risk identification and management, and explores the causes of Haier's exchange rate risk and how to carry out exchange rate risk management in stages. It is found that Haier manages exchange rate risk in three stages, mainly through the combination of financial derivatives and financing methods to avoid exchange rate losses. Finally, we get enlightenment from the case, explore the exchange rate risk management path in overseas M&A, and provide ideas and choices for enterprises to reduce M&A costs.

Keywords

Overseas Mergers and Acquisitions; Exchange Rate Risk; Financial Instruments