Three strikes

Question for dealmakers: what would China do?

Microsoft's euro 5.4 billion ($7.29 billion) offer for handset maker Nokia has met unexpected opposition from Guangdong's factory floors. Workers there went on strike on November 20 to complain about unfair treatment as a result of the deal. With spotty legal protection, the easiest option for buyers in such situations is just to pay up. That threatens to push up the cost of transactions even where neither buyer nor seller are Chinese.

Strikes against foreign companies and joint ventures tracked by China Labour Bulletin are on the rise, having more than doubled from 2011 to 2013. One legitimate fear is that mergers seek to cut costs, which could lead to plant closures. There may also be an element of opportunism: a new owner means an opportunity to renegotiate contracts in an environment where wages are going up.

Even where the law is on the new employer's side, China's opaque court system means companies would often rather pay up rather than risk lengthy legal delays. And, if courts ruled in their favour, normal police protection cannot be taken for granted - US businessman Chip Starnes was held hostage in June for a week by workers at his medical supplies factory demanding severance packages.

Striking Chinese workers could be used as deal leverage - though that is a rarity. India's Apollo Tyre is seeking to acquire Cooper Tire and Rubber, and buying out Chinese operation Cooper Chengshan along with it. Apollo said in court documents it believes the Chinese minority shareholder arranged a recent strike at the factory, presumably to bargain a higher valuation for their stake.

Rising protests are based on greater awareness - social media like Sina Weibo has raised the profile of successes. More importantly, labour demand in developed cities like Shenzhen means that workers can be choosier. Job vacancies outnumbered jobseekers in the first quarter of 2013 in data averaged from 101 cities, including Shenzhen, according to China's Ministry of Human Resources.

Without proper unions to air their grievances behind doors, mergers provide workers with an attention-grabbing chance to affect global decisions. When two Western firms sign an M&A deal, China may not always factor in dealmakers' original strategies, but it increasingly affects their ability to close transactions.