International Law

Common mistakes made during M&As

By Andy Scott

Feb. 4 - Today we excerpt part of an article that appears in the China Briefing’s new Technical Guide to M&A. With more and more multinationals consider mergers and acquisitions as a means of entering the Chinese market, many are finding out the hard way that mistakes and misperceptions about M&A deals in China can lead to disaster. In this except, we look at the common mistakes made when buying a State-owned enterprise or other Chinese company.

When buying a State-owned enterprise, often the felling is that it?s the government, so everything is OK. Actually this is not necessarily true, and in our experience, additional, not less, attention to detail needs to be put into effect when dealing with State Owned Enterprises (SOEs). Although the management of the enterprise may well stress ?government connections,? thus implying some sort of favored status, the role of the government typically ceases at the level of shareholders. It does not really extend far into management, except for businesses of extreme national importance, such as in energy or in the manufacturing of certain key commodities and supplies. For non-essential SOEs involved in various normal manufacturing and trading sectors in which the government has no particular vested interest, although the government will have a seat on the board, there is no guarantee that this actually manifests itself into anything meaningful within the operations of the business. (more…)

Full post as published by China Briefing Blog on February 03, 2008 (boomark / email).