M&A Special

May 2004 China Briefing

In this issue we take a good look at China Mergers & Acquisitions, a review of regulations, a look at risk, a case study of how Perdue Farms bought bankrupt Chinese SOE assets at auction, and a full and complete examination of due diligence issues affecting due process when negotiating the acquisition of a Chinese state owned enterprise. The lead article, “Opportunities and Strategies for Foreign Investors in Chinas Mergers & Acquisitions Market” is by Lulu Zhang, Regional Partner, Dezan Shira & Associates Shanghai, and deals with Chinas M&A regulations in brief, strategies to adopt, tactics, and practical considerations, M&A between foreign invested enterprises in China, and mergers with domestic Chinese businesses. A detailed case study – of Perdue Farms acquisition of bankrupt State Owned Enterprises at auction in China, is a fascinating study of how Dezan Shira & Associates were able to steer and assist Perdue Farms in the process defining the right direction from implementation, negotiation strategy and arranging execution of the deal in what was one of China’s first state owned asset auction acquisitions of bankrupt stock by a foreign investor in China. The deal was complicated specifically as the investor was Perdue in the US, and was not executed internally in China, meaning financial approvals and securities concerning the transfers of US dollars to China, and the negotiation of the right to have this capital recognized as registered capital contributions for a Perdue wholly foreign owned enterprise that did not at the transaction time actually exist, makes for a fascinating case study and highlights the need for good solid and experienced professional advise when dealing with China M&A. A further article, “Acquiring Chinese State Assets Requires Special Due Diligence” by Peter Humphreys rounds off the issue which has become recognized as one of the definitive pieces on Chinese mergers & acquisitions.