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Editorial

ACQUISITIONS IN CHINA : ASSET OR SHARE DEAL?

January 2012 - Finance. Legal Developments by Lefèvre Pelletier & associés .

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The opportunities offered to foreign investors by the Chinese mergers and acquisitions market are increasing every year: in 2010, transactions involving foreign companies came to 60.1 billion euros, an increase of 21.2% compared with 2009. Seen from the West, where markets are declining, all sectors of the Chinese economy seem to be undergoing promising development and the statistics indicate that the Middle Empire will be a lasting springboard for growth.

In China, companies are still manufacturing and building, but they are also selling more. In China, even more so than in Russia, Brazil or India, industry is developing and consumers' purchasing power is growing every day.

Foreign enterprises often succumb to the lure of China or, if not, then they are conscious of the need for a presence in China. However, the difficulties of setting up directly in one's own name in a country that is so astonishingly different from our own often prompts informed foreign companies to consider an alternative: acquisition.

Obtaining a foothold in China by means of an acquisition means acquiring brands, a reputation and knowledge of the Chinese market as well as production and/or distribution networks. However, the acquisition of a Chinese company can also hold surprises (underestimated taxes and social contributions, absence of certain permits or non-observance of applicable regulations, imperfect real estate deeds, etc). The question that then arises is what form the acquisition should take, and some investors prefer to acquire the assets of one of their subcontractors, suppliers, partners or competitors.

Ultimately, the question is often whether to acquire an interest or assets.

I - Acquisition via a capital interest


II - Acquisition via the purchase of assets


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