Analysis of Acquisitions of Lighting Industry: Evidence from FSL Lighting's Acquisition of Nanning Liaowang

Abstract

After the third wave of acquisitions and mergers in China, acquisitions have become an important means for firms to increase profitability. A proper acquisition decision can reduce a firm's operating costs, protect it against business risks, and significantly improve its profitability. In an active market full of acquisitions and mergers, firms often experience high risks of acquisitions due to information asymmetries. They need relevant case studies to help their managers make appropriate decisions. Thus, through the methodologies of theoretical and case analysis, this paper takes the case (i.e., FSL Lighting's acquisition of Nanning Liaowang) as a starting point, exploring problems in the acquisitions of listed companies and providing suggestions for related financial regulators. The paper is of great importance to the firms in the electric lighting industry. Meanwhile, we find the company's path to internalization beset with many difficulties. The firm faced a relatively slow pace of upgrading its product mix, as well as lower-than-expected increases in operations and profitability after the acquisition. It is believed that companies cannot sustain their competitive advantages based on scales alone in the future. The only way for companies to capture a larger market share is to continuously perfect sales channels, to transform and upgrade their products and to actively expand their businesses in the overseas market. These results shed light on guiding further exploration of post-acquisition reorganization and integration of enterprises.