有一個意味深長的腳印在中國世界各地成為了戰略命令為多民族公司。 吸引力是對產品、服務、資本和技術的中國的表面上貪心的需求。 喬治D。 馬丁、Faegre & Benson中國實踐的夥伴和椅子，在中國看當前承購景氣，因為的國外投資趨向邏輯頂點他在90年代中期時首先觀察，當實踐在上海。 馬丁期待這個M&A趨向繼續。 但將來，他勸告，它不會是外國公司在介入中國的跨越邊界M&A成交的買邊。

中國的增加到世界貿易組織(WTO)在2001對國外投資打開了新的區段并且消滅了對構造那些投資的許多制約。 結果，在早期中國投資者之中是正在流行的合資企業減少了。 多民族承認了比較文化的綜合化和操作的問題與他們的夥伴。 最初，這認識，加上中國的市場自由化，導致外國擁有的企業的創立作為外國企業完全被說服這樣問題可能避免與他們自己「greenfield」起始的操作。 當這被證明的真實，許多公司發現有機成長是a令人沮喪和不能接受地慢過程時。

舒適以市場風險，面對進取計劃為事務在中國由他們的競爭者和被確定做這個市場一個更加重大的組分他們的全局操作，美國。 多民族在中國擁抱了M&A。 當不免於風險， M&A被證明是達到戰略成長在中國的最佳的手段。 Martin cites statistics indicating nearly 300 cross-border acquisitions of Chinese companies in 2006, up 16 percent from the year before; and M&A volume is up even more in 2007. Yet, achieving critical mass is not simple. Most acquisitions are small by developed market standards—a systemic challenge in China resulting from local companies operating in highly segmented and regional markets. Because of this, “foreign investors need to complete more deals for significant market penetration,” Martin says. “That means having a greater deal flow. The challenge is that buyers are largely on their own in finding targets. Investment bankers in Greater China tend to be focused on capital markets and only the very largest M&A deals.”

Thinking Holistically

“Acquisition targets in any emerging market usually have poor financial controls, inadequate record keeping, spotty regulatory compliance and a history of questionable business practices,” Martin cautions. “Buyers can also face very real cultural hurdles in obtaining full disclosure during diligence and in getting local managers to accept the ways of their new owners.”

Martin believes, however, that thorough and realistic integration planning makes it possible for U.S. companies to achieve success with their new businesses in China.

Dave Sampsell, associate general counsel for Minneapolis, Minn.-based ADC Telecommunications, Inc., agrees. Sampsell has worked on acquisition and joint venture transactions around the world for ADC, a global provider of network infrastructure equipment and related services. He found that analyzing and negotiating an acquisition in China involves a range of issues either unique to China or more sensitive than they might be elsewhere.

“Above all, you need to think holistically about how to structure the purchase and how you will address diligence issues you uncover relative to the impact on future operations, including any ongoing relationship with the sellers of the business,” he says. “Obviously this is important in any deal, but the legal, cultural and language differences between the United States and China really heighten the importance of thinking not only about legal solutions to issues but the business impact of those solutions.” This involves deliberate fact checking during diligence, heightened attention to relationship-building and careful consideration as to how acquired operations will be overseen and integrated.

Love It or Leave It

The good news is that the number of viable targets in China is increasing. State-owned enterprises are being privatized and early investors in Asia are divesting to realize the rewards of their early market entry. But, “expect intense negotiations over price,” Martin warns. “The strategic imperative driving interest in China drives up valuation. In addition, local management is often pressured by their shareholders to explore an IPO on one of the booming Chinese stock markets. And, there are financial investors emerging on the scene.” As a result, Martin has seen instances where acquiring companies paid multiples of 12 to 18 times EBITDA—significantly higher than current valuations in the United States in comparable industries.

Martin recommends that buyers emphasize their strategic value. “Chinese companies are highly motivated by the prospect of absorbing international best practices, worldwide branding and distribution, and accessing the deeper pockets of a strategic foreign buyer to help with expansion,” he says. At the same time, Martin cautions that Chinese owners take great pride in the companies they have built and may be reluctant to change their ways post-closing. “If the management of an acquired company does not embrace the new ownership culture within six to nine months of closing, it never will. The best solution is to part ways, cut losses and move on,” he asserts.

Look Before Leaping

The challenges associated with buying and operating a business in China make exhaustive legal and financial due diligence essential. Sampsell recalls, “It was impossible for us to do all the diligence ourselves. First, we don’t have many people who read and speak Mandarin, much less in areas of needed expertise.” He says that ADC invested more than a year negotiating and structuring a recently announced acquisition, relying on a multilingual team in China that included Faegre & Benson as outside counsel and a global accounting firm. ADC also retained a market research firm to verify the target’s market assessments and business plans.

Even so, risks can’t be avoided entirely. Martin says that a buyer can mitigate those risks, however, by positioning its own managers to at least initially control finances, protect intellectual property and oversee operations. He also adds, “Being prepared to make a quick change is imperative.” For example, under PRC law, the chairperson is the company’s “legal representative”—a role with significant power. Martin recommends installing your own designee as the new chairperson to allow for swift action if problems occur. Still, reliance on expatriates is not a longterm solution. Martin recommends a transition period of no longer than three years, during which expatriates train local successors.

The Payoff

The frenzy surrounding China can be intoxicating. This is an exciting market, with many competitors hunting for the same targets. Committing to the market and engaging with a fully dedicated team is important. But, Martin notes, “the most successful buyers look at many deals, carefully choose which to pursue, undertake exhaustive diligence, make realistic valuation and risk decisions, and instill strong governance, with ongoing training and oversight of local management.”

Those who do so will find ample rewards in China for many years to come. And, they will be better positioned to fend off their rapidly emerging Chinese competitors, whose commitment to globalization—with increasing means to achieve it—will soon add additional buy-side pressures to this dynamic market.

George D. Martin is a partner and chair of theChina Practice at Faegre & Benson LLP, which maintains a foreign law office in Shanghai.

Dave Sampsell is associate general counsel of ADC Telecommunications, Inc.

This is article was previously published in the January 2008 Edition of Counsel to Counsel Magazine