Investors look west

2. Which sectors have attracted the most inbound M&A investment and why?

According to the relevant statistical data, the most popular sectors of the Chinese M&A market remain in metals, mining, telecoms and manufacturing. In addition, the nine major sectors including car production, steel, cement, shipbuilding, electrolytic aluminium, rare earth, electronic information, pharmaceuticals and agriculture will undergo a massive reorganisation driven by government policies and more foreign investment through M&A will be attracted to these nine sectors.

3. This year, the NDRC and MOFCOM issued the Catalogue for Foreign Investment in the Dominant Industries of the Central and Western Regions (2013 Revision) – How do you expect the Catalogue to affect M&A in China's interior? What advice can you offer to foreign acquirers of companies in China's regions?

The revised edition of the Catalogue contains more relevant items in labour-intensive and service sectors. Vehicle manufacturing projects that have been removed from the Foreign Investment Industrial Guidance Catalogue are now included in this regional Catalogue, which is another highlight of the revision. The Catalogue will undoubtedly stimulate foreign investment, including throughM&A, in the central and western regions. Vehicle manufacturing projects are included in the encoraged catagory in 11 provinces. For foreign automobile brands that have not yet been localised, as well as joint venture enterprises that still expect to expand production in China, the list of provinces provides them with some significant guidance. This also illustrates China's new reform plan for the automotive industry.

Many government policies, for example the simplification of the procedures for approval and preferential tax measures, have been adopted to encourage foreign investors and enterprises based in coastal areas to step up investment in the central and western regions. Having a good knowledge of all the preferential policies is one of the prerequsites for participating in M&A in the central and western regions.

4. What key trends are you seeing in outbound M&A Deals?

China's appetite for foreign energy and resources assets has been very clear for some time and the bulk of China's overseas investment will continue to be within the energy and resources industries, which are championed by state-owned enterprises. At the same time, the increasing participation of private capital is another trend in China's outbound M&A and private companies' M&A deals have become increasingly varied. They are inclined to acquire industrial technologies and consumer-linked businesses overseas, aiming to bring advanced western technologies, know-how, intellectual property and brands back for use in the Chinese domestic market.

5. What are some of the biggest challenges faced when carrying out due diligence before M&A deals? How do you overcome these challenges?

In terms of inbound M&A for foreign investors, one of the biggest challenges affecting the success of the transaction is the complete and accurate grasp of the real situation of the target equity or assets. A seemingly comprehensive due diligence questionnaire cannot guarantee that all the problems will be discovered. What is needed is to find out everything about the target assets and practically formulate an objective assessment based on the attributes of the target company, the characteristics of the target assets, the specific requirements of the local industry and policies and then to decide the price, structure, payment method and investment protection measures of the transaction.

In terms of outbound M&A for Chinese enterprises, different languages, culture, laws and regulations, and investment environment are undoubtedly the biggest challenges. The only solution is to obtain practical and effective support and cooperation from professional teams at home and abroad; at the same time Chinese enterprises need to learn quickly and accumulate valuable experience from each transaction. Opportunism in recklessly concluding a transaction without paying for the appropriate professional services often leads to a loss which outweighs the gain.

In terms of indirect overseas acquisitions involving domestic assets, it is rather risky to assume that the Chinese government's approval or regulation could be avoided. It is a smart move to make yourself aware of the latest laws and regulations and prepare the relevant plans.

6. Which deal has stood out as a particular highlight of the year for your firm? Why was it innovative?

From late 2012 to the beginning of 2013, a team of Alliance J&S assisted one of the overseas subsidiaries of TCL Corporation to obtain the 10-year naming rights to Grauman's Chinese Theatre, a landmark building on Hollywood Boulevard in Los Angeles (TCL Chinese Theatre). The nature of the transaction target was relatively special. It is neither equity nor a physical asset in the traditional sense but a combination of relevant real-estate related interests and great intangible assets under relevant US laws and the actual governing law is a third country law. Both the nature of the transaction target and the tough negotiations conducted before the final determination of the transaction price and TCL's complicated 10-year payment made this deal a particularly notable one.

7. Can you provide an update on MOFCOM's merger review process? When are the simplified reviews likely to be up and running?

In March and April this year, MOFCOM published the Provisions for the Imposition of Restrictive Conditions on Concentrations of Business Operators (Draft for Comments) and the Tentative Provisions on the Criteria Applicable to Simple Cases of Concentrations of Business Operators (Draft for Comments) respectively, inviting comments from relevant people and the public. These measures suggest that the promulgation of supporting anti-monopoly provisions is being expedited by MOFCOM and MOFCOM is aiming to improve the efficiency and transparency of reviews relating to concentrations of business operators.

8. What is the outlook for M&A in the year ahead?

Due to liquidity and other factors, the volume and value of M&A transactions might decrease. However, the quality of successful M&A transactions is expected to increase.

From the policy and regulation aspect, in the wake of the new rules on the foreign exchange control of foreign investments announced by SAFE and the Catalogue for Foreign Investment in the Dominant Industries of the Central and Western Regions, a series of policies relating to the improvement of the examination and approval process and of the investment environment are expected to be adopted this year, which will lead M&A players to concentrate on the modern agriculture, high-tech, advanced manufacturing, energy saving and environmental protection, new energy, modern service industries and other sectors.

9. If you could offer one piece of advice to foreign clients about to engage in M&A, what would it be?

Given the many special characteristics of the Chinese market, foreign investors should be on the highest alert and undertake thorough research in the Chinese policy and regulatory environment as well as the local investment conditions at the outset when choosing a transaction target and designing the transaction. They must maintain an operational flexibility and seek practical professional advice.

Author biography

Yang Yuhua

Yang Yuhua is a partner of Alliance J&S Law Firm. She graduated from Peking University in 1999 with an LLB degree and a bachelor's degree in Economics. Ms Yang received an LLM degree from University of Pennsylvania Law School and a Certificate of Study in Business and Public Policy from Wharton School in 2006. From 2004 to 2005, Ms Yang participated in the Lord Chancellor's Training Scheme (UK) for young Chinese lawyers, and during that period she worked with various law firms in London and Hong Kong. From 2006 to 2007, Ms Yang worked in a New York law firm, Phillips Nizer LLP. Ms Yang was qualified in China and admitted to the New York State Bar.

Ms Yang focuses on the fields such as corporate, securities and capital markets, foreign inbound investment, advising Chinese companies on outbound investment, international trade and other cross-border transactions, and has valuable international practice experience. She has advised on a number of projects and transactions including enterprise reforms, corporate reorganisations, M&A, divestments, offerings and listings inside and outside China, corporate finance and project finance, investment funds and has served different clients as outside general counsel on their day-to-day business operations and is involved in several heavy negotiations and high-profile complex transactions. Ms Yang possesses sound professional skills and multi-jurisdictional practice experience to provide practically efficient and effective services in the relevant areas both domestically and internationally. Ms Yang is proficient in English.

投资者朝向西部发展

颐合中鸿律师事务所的杨玉华律师综观境内外投资的趋势，并对最近引起争议的VIE结构裁决作出分析

1. 过去1年，并购方面有什么主要的法规出台？

《外商投资产业指导目录（2011修订）》、《中西部地区外商投资优势产业目录（2013修订）》及2012年初工信部、国家发改委等发布的《关于加快推进重点行业企业兼并重组的指导意见》确定九大行业未来兼并重组的蓝图，均对并购市场的产业风向标产生重要影响。环保、可再生能源、高科技和服务行业等进一步受到政策鼓励，九大行业的结构调整和产业整合亦将为并购交易提供巨大市场机会。

2012年底至今年5月间，国家外管局在外汇资本项目领域颁布了《进一步改进和调整直接投资外汇管理政策的通知》、《外债登记管理办法》和操作指引、《外国投资者境内直接投资外汇管理规定》及配套文件等一系列规定，进一步简化并整合了外商投资外汇登记、账户开立与使用、资金收付及结售汇等环节和政策。这些外汇新规对外国投资者以并购方式取得相关FIEs的资金流和企业发展战略的执行均在具体实务操作层面产生重要影响。

VIE结构的合法有效性在近期的行政决定、法院判例和仲裁裁决的影响下显得愈发扑朔迷离。2012年8月，商务部反垄断局公布了对沃尔玛公司收购纽海控股有限公司（拥有电子商务平台“1号店”）股份交易的反垄断审查结果，对该交易附加限制性条件——沃尔玛不得通过VIE架构从事1号店运营的增值电信业务。这是商务部首次在正式决定中明确提及对“VIE结构”的禁用。2012年底，最高人民法院对华懋金融服务有限公司与中国中小企业投资有限公司之间持续了12年之久的有关代持民生银行股份的争议做出了裁定，认定两者之间的委托关系规避对外商投资金融领域的规定，“以合法形式掩盖非法目的”，协议无效。此外，贸仲上海分会于2010及2011年在两起涉及网络游戏运营公司VIE结构案中，以VIE结构违反了禁止外国投资者投资网络游戏运营业务行政法规的强制性规定，“以合法形式掩盖非法目的”，裁决VIE协议无效。尽管上述个案对VIE协议或VIE架构的普遍适用性存在若干不确定性，但就中国政府机关自VIE架构最初开始使用后就一直保持沉默的态度而言，这些最新案例所释放出的信号显然并不太积极。并购实务中，对现存架构的调整预案及新的交易结构设计的论证和准备的重要性日益彰显。

2. 哪些行业吸引最多境内并购投资？原因何在？

统计数据显示，目前吸引最多外资的领域仍广泛集中在金属、采矿、电信和制造业。此外，汽车、钢铁、水泥、船舶、电解铝、稀土、电子信息、医药和农业产业化九大行业因国家政策的主导将经历一场洗牌，亦势必吸引外资以并购方式参与其中。

3. 今年，国家发改委、商务部出台了《中西部地区外商投资优势产业目录（2013修订）》。您预计《目录》对于在中国内陆地区进行的并购有什么影响？您对外国投资者收购中国内陆地区的企业有什么建议？

该目录的最新修订增加了劳动密集型和服务业领域相关项目；且在《外商投资产业指导目录》中已不再出现的整车制造项目，此次入选也成为关注重点。该目录无疑将引导外资以并购方式等向中西部地区相应领域发展，如此次把整车项目列入鼓励范围的11个省份，对那些尚未国产落地以及仍希望在华扩产的的汽车品牌，这份名单具有特殊导向意义，国家在新一轮汽车产业调整中的布局意图也浮出水面。

目前中西部地区在简化审批手续、财税政策方面均支持鼓励外资和沿海的外资企业在中西部地区扩大投资。充分了解这些优惠政策，则是涉足中西部地区并购交易的前提之一。

4. 境外并购方面有什么主要趋势？

毋庸置疑，基于中国对原料能源的需求，中国的境外并购仍主要集中在以国有企业主导的能源和资源领域，但不容忽视的是，民营资本正越来越多地参与到境外并购，且涉及领域更为广泛。民营资本倾向收购西方的工业技术及消费相关的行业，致力于将先进技术、诀窍、知识产权、品牌等引入广阔的国内市场。

5. 进行并购交易前的尽职调查时，遇到的最大挑战是什么？您如何克服这些挑战？

对于外资在中国市场的并购交易而言，全面、准确地了解并购目标股权或资产的真实状况仍是对一单交易是否成功的最大挑战。一份貌似包罗万象的尽职调查清单并不能保证发现所有的问题。需务实地根据目标公司的情况、目标资产的特性、具体地方行业和政策环境的要求，全面了解目标资产，形成客观的评估，进而确定交易价格、架构和支付方式及有效的投资保障措施等。

对于中国企业的海外并购而言，迥异的语言、文化、法律、投资环境无疑是中国公司面临的最大挑战。应对之策无他，唯有通过境内外有效的专业团队的支持和配合，为交易保驾护航，同时中国公司在每一单交易中迅速学习、积累宝贵经验。吝于支付专业费用而莽撞仓促达成交易的投机取巧行为常常是得不偿失。

对于涉及中国境内资产的海外间接并购而言，假定可以规避中国政府部门的审批或监管是危险的，对最新政策法规的研究和相关预案的准备则是明智之举。

6. 可否介绍您的事务所今年处理的一项重要交易？该项交易具有怎样的创新性？

2012年底至2013年初，颐合中鸿律师协助TCL集团旗下一海外公司成功取得美国洛杉矶好莱坞星光大道的地标性建筑“好莱坞中国大剧院”为期十年的冠名权（好莱坞TCL中国大剧院）。该交易的交易标的属性相对特殊，既非股权、亦非传统意义上的实物资产，而是相关美国法下部分房地产相关权益和巨大无形资产的结合物，而有关法律文件的适用法律则选定为第三国法律，且通过艰苦谈判而形成的交易价格和TCL为期十年的复杂支付方式的最终确定均令此交易非同寻常。

7. 商务部的并购审查程序有什么最新发展？简易审查程序将于什么时候实施？

今年三四月，商务部相继颁布了《关于经营者集中附加限制性条件的规定（征求意见稿）》和《关于经营者集中简易案件适用标准的暂行规定（征求意见稿）》，向有关各方及公众征集意见。这些积极的举措表明商务部正在持续努力加快反垄断法配套规定的制定，并致力于提高经营者集中的审查效率和透明度。

8. 您认为并购于未来1年有什么发展？

受流动性等因素影响，并购交易数量和金额可能会下降，不过市场也许期望成功实施的并购交易的质量有所提升。

政策法规层面，继外汇管理新规、《中西部地区外商投资优势产业目录》出台后，涉及完善外资审批程序、改善投资环境的系列政策有望年内出台，并可能引导并购向现代农业、高新技术、先进制造、节能环保、新能源、现代服务业等领域集中。

9. 如果您要为预备进行并购交易的外国客户提供一项建议，那会是怎样的建议？

鉴于中国市场的诸多特性，外资并购中的境外投资者应在遴选交易对象、交易设计之初即保持对中国政策法规环境和交易实施地的地方投资环境予以最高的警醒和充分的研究，预留灵活操作的空间，寻求务实的专业意见。

作者简历

杨玉华 (合伙人)

杨玉华律师1999年毕业于北京大学法学院及中国经济研究中心(CCER, 现北京大学国家发展研究院)，获得法学学士学位及经济学学士学位；2006年毕业于美国宾夕法尼亚大学法学院及沃顿商学院，获得法学硕士学位及商务与公共政策研修证书。此外，杨玉华律师于2004 - 2005年赴英参加中国青年律师培训项目，期间在伦敦及香港律师事务所工作。杨律师于2006 - 2007年间在纽约 Phillips Nizer LLP 律师事务所工作。

杨律师拥有中国律师执业资格、美国纽约州律师执业资格。

杨律师侧重于公司、证券与资本市场、外商对华投资、中资企业境外投资、国际贸易及其他高端涉外业务，并具有国际执业经验，曾担任企业改制、公司重组、收购兼并、重大资产处置、境内外股票发行与上市、公司及项目融资、证券投资基金、风险投资及私募股权投资基金等项目的专项法律顾问，协助中外客户进行重大商务谈判、复杂的各类交易设计和实施，并为公司、企业提供日常经营法律咨询。