Lenovo's $2.3 billion acquisition of IBM's x86 server business in China has been far from straightforward as a workers strike derails a smooth transition. Over 1000 Chinese IBM workers went on strike to voice their displeasure with the terms of their transfer to Lenovo.
Lenovo will take over the IBM factory in China as a part of its purchase of IBM's x86 server business. So far, production at the factory has been suspended since protests began on Monday. Workers are unhappy with the choice being given to them by IBM. They have a choice of working for Lenovo under comparable terms as their jobs at IBM or they can accept a severance package. However, factory workers are demanding higher wages at Lenovo as well as higher severance payments.
A similar incident occurred in 2013, when Apollo Tyres of India sought to purchase Cooper Tire factory, an American firm. The workers took control of the factory and threw out their managers. This revolt essentially put an end to the largest Indian acquisition of a US firm. Furthermore, hundreds of workers at a Nokia factory stopped working after Nokia terminated the contracts of over 50 employees.
The Chinese workers do not have any belief in their trade unions or the labor bureau and are not allowed to form independent unions. Furthermore, the uncertainty around foreign takeovers has resulted in a general distrust of foreign employers. This hostility towards foreign takeovers adds a greater element of risk to cross border mergers and acquisitions.