January 13, 2016

Mergers on the horizon for many Chinese tech start-ups

The tech start-up world in China is undergoing a lot of changes in order to compete in a crowded marketplace.

It was a multi-billion dollar merger and acquisition year for many Asian countries, especially in China's technology sector. Due to the unsteady stock market and many economic unknowns, many more established companies are hesitant to buy tech start-ups that are struggling to compete with industry rivals. This has lead to many start-ups merging with rivals in order to push their business ahead of market competitors.

For example, the Wall Street Journal's Juro Osawa recently reported that online shopping start-up Mojujie.com chose to acquire its rival, Meilishuo.com, to form a more powerful organization. The deal, estimated at $2.5 billion, is a bold decision during a time when the economy is so volatile, but the newly merged company expects to use this strategic move as a way to compete more effectively in a crowded industry.

This deal follows many other deals from 2015. In October, two smartphone application start-ups that provide movie ticketing and restaurant reservations, Meituan.com and Dianping Holdings, merged as a joint company. This deal was estimated at $15 billion. Furthermore, in order to effectively compete with the worldwide ride-hailing service, Uber Technologies, last year, Didi Kuaidi Joint Company was created through a merger.

"The mergers-and-acquisitions trend hasn't been limited to startups," Osawa reported. "Two of China's biggest online travel companies that are listed on the Nasdaq Stock Market, Ctrip.com International Ltd. and Qunar Cayman Islands Ltd., said in October that they would join forces."

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