Recently, British Steel Group announced that it had exchanged contracts with China Jingye group and reached an agreement for the latter to acquire some of the former's assets.

As a private steel enterprise in China, Jingye group goes abroad to acquire the second largest steel plant in the UK, which is really admirable. Li Chengpo, chairman of Jingye group, is 70 years old and still active in the market. According to the public information, 30 years ago, Li founded dedicated steel company. Since then, with the rapid growth of China's economy, the steel company in northern China has grown rapidly. In 2018, the operating revenue of this steel group reached 90.1 billion yuan, ranking 18th in China in terms of steel production scale, and it is one of the important private steel enterprise groups in the northern region.

Founded in 1967, British Steel Group once accounted for more than 90% of British steel production capacity at its peak. It is now the second largest steel company in the UK. However, in the past few decades, the owner of this steel company has changed owners for many times, and finally had to go bankrupt because he could not make ends meet.

The acquisition of the company by China's Jingye group is considered to be a "hand in hand" at a time of crisis. However, Jingye group wants to take the international road through acquisition of British Steel Group to make up for the lack of domestic market. It is to choose a laying hen or a hot potato. At present, there are three major problems for outsiders to worry about.

The first is that the union of British Steel Group is the "hard Lord". Under the terms of the agreement, the acquisition is subject to UK regulatory approval and certain employee consultation procedures, including engagement with the company's union representatives and employees prior to completion of the sale. The legal status of the British company trade union cannot be underestimated. The trade union in the overseas market is powerful and can directly influence the key terms of the acquisition. In fact, in addition to the high investment in fixed assets, the first problem is the heavy burden of employees, and the "first enemy" of new buyers may be trade unions. 5000 steel workers, together with the employment and income security of at least 20000 workers in the supply channel, will be a real problem that the dedicated group must face. Many years ago, there was a case of a bankrupt company in Europe selling assets for zero euros without anyone daring to reach out. It seems that zero Euros can obtain a lot of assets, but in fact, it is a negative asset. Once it takes over, it has to bear a huge debt. More importantly, it has to ensure the welfare of employees of bankrupt enterprises, which is a big pressure. The employees of European enterprises who are used to enjoying high welfare treatment, if they are not satisfied, will organize strikes through the power of trade unions. I don't know if Jingye group has made this clear.

Secondly, the Chinese and British corporate culture is hard to break in. Acquisition is easy to break in, and the corporate culture of acquiring a European enterprise is quite different from that of China, and there are even many collisions. For example, in China, it's common for enterprise employees to work overtime. At the command of the boss, employees have to work overtime. Sometimes they work in vain and dare not to be angry. European workers, on the other hand, will not do more than eight hours and a minute. What's more, there are great differences between China and the UK in terms of market concept, enterprise management, management style, and employment concept. When Jingye group takes over British iron and Steel Group, it will encounter many troubles in corporate culture, which will be difficult to break in for a while, and even have a negative effect due to the collision of the two cultures, affecting the company's decision-making and market opportunities.

Once again, the British steel market is hard for dedicated groups. The whole country of Britain has repeatedly dealt with the issue of brexit, which has made people panic. Brexit is dragging down the UK. For the first time in seven years, the economy has been experiencing negative growth, and it is even more difficult to completely eliminate it. In such a situation, dedicated group takes the British Steel Group which is on the verge of bankruptcy into its arms. I don't know what the reason is, is it to copy the bottom? The £ 70m acquisition of British steel is not cheap in itself. What's more, steel demand in the UK and its surrounding markets has been very weak. At present, the development of Britain, an old industrial country, has come to an end. There is no increase in demand, only fluctuation. In addition, the British economy has relatively limited influence in the world. Once brexit, it will lose the market protection of the EU, which will directly affect the competitiveness of the country's steel. In this situation, I'm afraid that such a steel plant is full of variables. Is dedicated group better than British Steel Group?

It is worth noting that in recent years, the expansion of overseas assets of Chinese private enterprises has frequently encountered difficulties. In January 2018, Wanda sold 60% of its first overseas project, Wanda one in London, and obtained 1.7 billion yuan. When it bought the London based project in 2013, Wanda saw it as the beginning of a global layout. At that time, selling this landmark project meant the end of Wanda's globalization strategy. Wanda's overseas asset expansion proved to be a dead end.

Now, Jingye group is against the trend. China's domestic steel market is still in the test of destocking. Li wants to seek the growth point of enterprises in the international market, which is a good starting point. But can we do as we wish, to catch up with the "lame ass" of British Steel Group, or to go downhill accidentally because of this burden? We'll see.（From LGMI)