Edward Tse's Blog

November 2016media

Discourse With ChemChina Could Be Hurdle For New Syngenta CFO

Oct 3, 2016 6:06 pm ET

Communicating with a Chinese audience with different expectations could be a key challenge for new Syngenta AG’s new finance chief, after the acquisition by state-owned China National Chemical Corporation.

Mark Patrick, a company veteran who spent the past 23 years at the Swiss agrochemicals firm, took up his new role Monday, Syngenta confirmed in an email. He replaces John Ramsay who stepped down at the end of September.

“Mr. Patrick’s challenge will be to manage financial communications at Syngenta, responding no longer to investors, but to the new parent company ChemChina,” said Edward Tse, founder and CEO of Gao Feng, a strategic consultancy based in Shanghai.

Earlier this year, ChemChina, one of the biggest chemical firms in China, offered $43 billion for Syngenta. Should the deal — financed with debt — close by the end of the year as expected, it will be China’s largest overseas acquisition to date.

Chinese companies have been on a global spending spree recently, signing $159.2 billion in overseas deals this year and by that surpassing the record year of 2015, according to data from Dealogic.

Mr. Patrick spent five years as head of commercial finance at Syngenta before being named CFO. He also held various finance roles at the Swiss company, among them as head of business reporting and as head of the crop protection finance unit.

Syngenta declined to answer additional questions about Mr. Patrick’s appointment, citing the upcoming quiet period before the release of the company’s quarterly results Oct. 25.

Despite the differences between European and Chinese accounting rules as well as management styles, Mr. Patrick is unlikely to face much intervention from ChemChina headquarters in Beijing, said Klaus Meyer, a professor for strategy and international business at the China Europe International Business School (CEIBS) in Shanghai.

Contrary to American buyers, Chinese firms have the reputation of not intervening straight after a successful acquisition, often times leaving the existing management in place, Mr. Meyer said.

“In situations such as these, the Chinese acquirer lacks internationally-experienced managerial staff to lead the business and to initiate restructuring without losing the core competences that they are seeking in the acquired company,” Mr. Meyer said. “The approach that seems to work best in such cases is to leave the local management team in charge in an approach known as ‘light touch integration.’”

This is a pattern seen in previous take-overs by ChemChina. With the acquisitions of KraussMaffei Technologies GmbH and taking a controlling stake in Italian tire maker Pirelli & C. SpA, the parent company has let management remain independent, Mr. Tse said.

However, Mr. Patrick will have to meet clear performance expectations from the new Chinese owners, Mr. Meyer said. “The Chinese are used to steep hierarchies, so a strong relationship of trust and respect with the Chinese boss is essential to survive in that role,” Mr. Meyer said.

In the first half of this year, Syngenta reported sales of $7.1 billion and earnings before interest, tax, depreciation and amortization (EBITDA) of $1.8 billion, slightly lower than during the first half of 2015.

The Committee on Foreign Investment in the U.S. (CFIUS) approved the deal in August, but it still faces potential hurdles from regulators in the EU.

“Chinese SOEs (state-owned enterprises) like ChemChina are very much aware that they are representing their country, and thus are concerned about their image abroad,” Mr. Meyer said. “Therefore, they are under strong pressure to demonstrate that they can play but the rules of the game of a Western market economy.”


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Founder & CEO of Gao Feng Advisory Company, a global strategy and management consulting firm with roots in China. —learn more

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