1) Haier acquired GE's appliance division for $5.4 billion to become a dominant player in the US home appliance market and gain GE's R&D capabilities. 2) An analysis of both companies' patent portfolios shows they have complementary technologies, with GE having valuable patents in energy management and Haier gaining expertise in dishwashers and ovens. 3) The acquisition positions Haier to strengthen its position in smart appliances and energy efficient products, transforming it into a global innovation leader over the long run as it utilizes GE's brand and potentially its top inventors.

1. Using IP analysis to evaluate M&A outcomes
Case Study: Haier acquires GE Appliance Division
May 2016

2. Table ofContents
Intellectual Property: major factor in M&A activity 3
IP analysis enables thorough market evaluation 5
IP - a window into future innovation strengths 7
Assess how well two IP portfolios fit together 9
Transformation into a global innovation leader? 12

3. Intellectual Property : major factor in M&A activity
M&A activity reshapes the competitive landscape
When two companies merge, or when one company
acquires another, there is no doubt that it radically
reshapes the competitive landscape. It has a big impact on
market shares and a player’s market influence.
These transactions are often hitting the news. We see, for
instance, more and more Chinese manufacturers seeking to
gain a better footing in the attractive US market – and one
example of this is Haier’s acquisition of GE’s home
appliances business earlier this year, in a deal worth $5.4
billion.
Like many Chinese manufacturers, Haier has big ambitions to
increase its competitiveness at a global level and this
transaction finally gives it the chance to become a dominant
player in the US home appliances space, by leveraging the
long history of GE.
Meanwhile, GE can now refocus on the more profitable
divisions of its business, like gas turbines and jet engines.
The importance of R&D
Although a land grab for market share is the main motivation
behind the transaction, it is clear that R&D opportunities –
underpinned by intellectual property - play a considerable
role. It could result in substantial advantages for the
acquiring company, and have huge implications for other
incumbent players in the market.
As Mr. Hai Shan Liang, Haier’s vice chairman who led the
company's negotiations with GE, explains: “The purchase of
GE Appliances will boost R&D capacity, services and logistics
for Haier's US operations.”1
© 2016 All Rights Reserved 3
The new
agreement sees
the integration of
GE’s home
appliances
business into Haier,
in a deal worth
$5.4 billion.
1 http://english.caixin.com/2016-03-03/100915418.html

4. © 2016 All Rights Reserved 4
Ongoing M&A activity
With that point in mind, this report will consider how IP research can be used to determine
what the Haier acquisition means in terms of its impact on the home appliance market –
however, the same approach can, of course, be used for any technology area where mergers
and acquisitions are taking place.
It is essential to be prepared to conduct this type of analysis, as consolidation and M&A
activities have been gathering pace within so many different industries. It is becoming ever
more important for market participants to be able to conduct thorough evaluations of the
changes in their respective markets, especially given the dramatic reshaping of the
competitive landscape that occurs as a result of such transactions.

5. IP analysis enables thorough market evaluation
When we think of ‘home appliances,’ as we shall consider in this example, we already know
that we’re dealing with a mature market. Everything from fridges to air conditioning units,
ovens and vacuum cleaners have all long been part of our everyday lives.
It’s an industry that gathered significant momentum during the 1960s, as developments in
manufacturing methods led to mass production capability. And, by the 1970s, domestic
appliances were deemed a household necessity. However, despite being a long established
market, innovation has not slowed down, but has continued to grow throughout most of the
21st century.
© 2016 All Rights Reserved 5
This healthy pace of innovation demonstrates how important the R&D aspect is for all the
big names in the home appliance market – a market which includes brands such as
Whirlpool, Electrolux, Samsung, Midea and, of course, Haier.
The sustained rate of innovation shown here is indicative of a market that is set to remain
robust in terms of sales; while the innovations themselves, as represented by these
patents, will define each player’s competitive advantages.
Sustained innovation in domestic appliances
Source: PatSnap Insights
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Granted
Application
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Number of Patents

6. The home appliances market
The market statistics are another indication showing a strong situation. In 2015, for example,
world demand for white goods increased by 3.4% to reach 395 million units.2 There are many
high growth markets driving this trend. India, for instance, represents the world's fastest
growing market for domestic appliances and it’s all due to the increase in the living standards
taking place there.
China, meanwhile, registered immense growth between 2005 and 2010, not only because of
an increase in revenues, but also thanks to government incentives for households that
invested in home appliances. These market conditions have translated into a robust
innovation trend, as the chart below shows China out in front in terms of patenting activity.
© 2016 All Rights Reserved 6
Longer term future prospects, however, will invariably be tied to the ability of players in
this sector to innovate. So, the interesting question for competitors facing the newly
formed competitor is: how does the tie-up alter the innovation strength of the new entity?
Or, in other words, what should we expect from Haier?
Again, the answer can be found using information from patents. Analysis reveals that there
are at least two particularly interesting innovation routes for domestic appliances.
2 http://www.freedoniagroup.com/industry-study/2822/world-major-household-appliances.htm
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South Korea
European Patent Office
WIPO(PCT)
Germany
Source: PatSnap Insights
China takes the lead in innovation

7. One useful piece of analysis uses IP information to determine future market trends, by
tracking words appearing in patents that suggest new or forward-looking technologies.
Is the future smart?
For instance, frequent terms that occur within GE’s IP portfolio, such as ‘computing device’
are an indication of one future direction: that of smart appliances. This could refer to
internet-connected fridges, for example, which might be controlled via a smartphone app.
The smart appliance market is expected to grow at a rate of 15.4% between 2015 and 2020,
by which time it will reach $37.2 billion.3 Products like smart washers and driers and smart air
conditioners are expected to register an important increase in sales, fueling a market that in
2014 was valued at $7.7 billion.
And, by acquiring GE’s home appliance unit, we now know that Haier henceforth has access
to patents that could give it significant additional technological advantages, including new
patents in the field of smart technologies. It means that they should be able to use
differentiation to compete even more efficiently in the future, having already had the skills
needed to reach the world number one spot. At a global level, Haier is the biggest seller of
"major appliances," with just over 10% share. 4
© 2016 All Rights Reserved 7
3 http://www.marketsandmarkets.com/Market-Reports/smart-appliances-market-8228252.html
4 http://www.haier.com/uk/newspress/MediaCoverage/201508/t20150814_281399.shtml
IP - a window into future innovation strengths
Value forecast
(CAGR, 2015 to
2020)
15.4%
1
2
3
Power consumption
Computing device
Wireless communication
Haier takes 10%
volume share of
retail sales
Double digit growth
in smart appliances
Text clusters in patents
reveal potential new areas
Haier is number 1 in
household appliances
Driving change - forces in the home appliance market

8. The environmental factor
And, there is another important trend in this space, linked to environmental matters. Some
consumers choose efficient products in order to protect the budget of the household; others
opt for environmental-friendly appliances that can, over the longer term, reduce the negative
impact on the planet. Either way, there are big incentives for manufacturers to continually
improve domestic appliance performance in these areas.
This is where some of the specific patents submitted by GE become interesting. While GE
appears to have far fewer patents relating to domestic appliances compared to Haier, GE is
estimated to have applied for the most valuable patents in this space. One pending patent
has a value estimation that is almost six times that of the most valuable Haier patent. And its
subject? Energy management.
Acquiring this technology therefore enables Haier to potentially strengthen its go-to-market
message in the United States. On this back of this, it could also further solidify its position in
emerging markets, where incomes are lower and where consumers will be especially keen to
save money on the household budget. From a competitive perspective, the ability to address
both these types of market significantly reinforce Haier’s prospects. And uncovering this
information at this stage gives competitors a chance to consider their next steps.
© 2016 All Rights Reserved 8

9. Assess how well two IP portfolios fit together
Haier’s innovative history
Haier has a heritage anchored in innovation. In 1985, Zhang Ruimin took charge of the then
named Qingdao Refrigerator Factory. After a customer brought to his attention a defective
fridge, Zhang found a further 76 fridges on the factory floor that were defective. He had them
publically lined up, then took a sledgehammer and destroyed one. He ordered staff to
destroy the rest, and from that point forward, the emphasis was on innovation and quality.5
This is perhaps a rather dramatic reaction to customer feedback, but it’s a good story to
underline the point: customer feedback has played an important role in shaping innovative
ideas at Haier, from a design or functionality perspective.
Zhang has a history of supporting not only corporate R&D, but also employee-led R&D. He
encouraged employees to use the corporation as a platform for innovation - including the
creation of their own micro-enterprises inside the company.
© 2016 All Rights Reserved 9
0
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Granted
Application
Number of Patents
5 http://www.ft.com/cms/s/0/942787ce-9cdf-11de-ab58-00144feabdc0.html#axzz46ZTeugNS
Innovation at Haier gathers pace in some of the most recent years
Source: PatSnap Insights

10. Solid rate of innovation
This gives a good indication why there has been a solid rate of innovation at Haier, in terms
of volume. Data from PatSnap Insights shows that Haier was granted 1,181 patents in 2013
and just last year it applied for another 744. Haier has over 9,200 patents and has applied
for 2,536 more. Almost 98% of Haier's patents are registered in China.
The appliance division of GE, on the other hand, achieves a lower volume. Last year, 113
appliance-related patents were granted. The portfolio of the division is believed to comprise
over 1,500 patents. Interestingly, as the chart below reveals, the application process has
increased significantly since 2012. One possible explanation is that the company had
decided to increase its patent portfolio in this area in order to improve its value in the
market, in the run-up to sealing an acquisition deal.
© 2016 All Rights Reserved 10
Whatever the motivation, it is clear that both GE and Haier have been ramping up
innovation and, as both are in a patent portfolio growth mode, at least some aspects of
the integration process should be smoother. From a geographical perspective, 64% of
GE's patents in the appliance sector are registered in the US. Therefore, overall, the
merger is an extremely good fit in terms of teams, geographies and also complementary
technologies. On this last point, from a technological perspective, patent analysis reveals
some new markets for Haier that previously might have been more problematic. One
method for conducting this type of research is to use circle chart analysis.
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Granted
Application
Number of Patents
Acceleration in appliance related patents at GE before acquisition
Source: PatSnap Insights

11. © 2016 All Rights Reserved 11
Circle chart analysis
These circle charts show
segments of keywords in a 2-
tier hierarchy. The outer circle
is an additional breakdown of
keywords within the inner
circle segment.
< Haier
This first chart is based on the
keywords used in Haier patents
and applications, before the
acquisition.
< GE’s IP relating to appliances
By comparing the above to GE’s
circle chart, we can see that,
with the acquisition, Haier
stands to gain in the fields of
dishwasher appliances and oven
appliances. Overall, it is GE's
diversity that provides real gains
for Haier.

12. Transformation into a global innovation leader?
A global strategy
While much focus and early analysis inevitably concentrates on immediate market share
gains for Haier, it is clear that patent analysis reveals much more information about the likely
future direction of a newly formed entity. Of course, Haier would not be happy with a 1.1%
market share in the United States,6 when it commands 10% globally.
As far as the US market is concerned, GE has benefited not only from its long history, but also
from the fact that all its products were labeled “Made in the US”. Haier was already at pains
to address this – to become a ‘global’ manufacturer rather than being known as a Chinese
manufacturer - as underlined by its 2015 announcement that it would invest $72 million to
expand its 15-year-old refrigerator plant in Camden, South Carolina.7
So, the potential gains from the acquisition of GE’s IP has ramifications far beyond the
acquisition’s ability to simply capture share in the American market – it gives Haier the
standing of a global home appliances manufacturer - with a global R&D force.
Long-term consequences
Successfully transforming a brand from a well-known domestic player in the Chinese market
into a global leader is not without precedent. Forbes’ Allan Adamson points out in one of his
articles how Lenovo used the IBM ThinkPad brand to turn Lenovo into one of the most
respected and innovative brands in the hardware and electronics industry.8
The question we need to investigate in IP intelligence is: Will Haier adopt the same strategy
and, if so, will it succeed?
The first vote of confidence comes from GE itself. It is allowing Haier to use the GE brand for
up to forty years. This is clear confirmation that GE believes Haier has the management,
production and R&D capabilities to represent the GE brand for another four decades. In the
meantime, competitors might want to have a look at the inventors behind some of the
lucrative patents, and see if there is appetite for any of these to transfer during this time of
transition.
© 2016 All Rights Reserved 12
6 http://www.bloomberg.com/news/articles/2016-01-20/higher-ambitions-china-haier-s-gambit-to-invade-american-homes
7 http://www.wsj.com/articles/haier-looks-to-expand-toehold-in-u-s-appliances-1440093281
8 http://www.forbes.com/sites/allenadamson/2016/01/19/will-haiers-big-investment-in-ges-appliance-business-pay-off-in-
continued-brand-equity/#55589bbe4f56

13. About PatSnap
PatSnap is the leading IP Analytic and Management platform that empowers even non IP-
proficient users to understand this competitive landscape. Through our simple yet powerful
interface, IP is now accessible to everyone allowing you to compete and innovate on a global
scale. Since it was founded in 2007, PatSnap has served thousands of customers in more than
30 countries worldwide including IBM, National Institutes of Health, United States
Department of Defence, MIT and Singapore’s Agency for Science, Technology and Research.
Find out more: www.patsnap.com
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