Publication Store

In this issue:

• Practical Points for Establishing JVs
• Drafting a JV Contract for an Effective Partnership
• The Legal Fundamentals of M&As in China
• Team China’s Outbound JV and M&A Investment

In the wake of the financial crisis and the realignment of the Chinese economy from an export-oriented model to one focused on domestic consumption, Sino-foreign joint ventures (JVs) and mergers and acquisitions (M&A) activities by foreign investors in China are gaining momentum. Long considered investment structures to be entered carefully but not overlooked, different motivations to enter JVs and undertake M&As are evolving. Although China M&A deals will only account for 8-9 percent of the worldwide total in 2011, there has been a sharp increase compared to the 2-4 percent they accounted for in the early 2000s, according to JP Morgan. Yet a profound (and not unfounded) distrust of JVs and M&As lingers among foreign investors, largely fueled by the high profile, multinational China JV and M&A deals that have gone wrong in recent years.

The separate needs of Chinese and foreign companies are hardly incongruent - quite the opposite. Particularly for small and medium-enterprises (SMEs), JVs and M&As deserve a bit of reevaluation, as the Sino-foreign JV and M&A landscape today is quite different from several years ago.

For many foreign companies, China has become a target market and the local market knowledge and established contacts are held only by Chinese companies. On the Chinese side of the cooperation equation, at the SME level current drivers of JV and M&A activity are capital and ownership succession strategy. The inability of Chinese private SMEs to access capital has made it difficult for them to expand or even maintain their business. Meanwhile, in their forties and fifties, China’s first generation of entrepreneurs are looking to pass the torch, while their children – with goals and values characteristic of people far more than just a generation apart – are looking away. In this issue, we take a look at each of these investment vehicles – the current market circumstances, the motivations and challenges faced – and provide a few practical insights into key issues such as forming a JV contract and finding an M&A partner.