A U.S. Exit Strategy

Summary

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• In order to execute a smooth exit from U.S. operations, Chinese companies should retain a good U.S. financial adviser
• Careful consideration should also be given to how the asset is packaged, preparing stand-alone audited financial statements, and optimizing the business for post-closing operations
• Chinese companies should be prepared to use U.S. law and engage in longer negotiations as a result
• CFIUS-related requirements and risks should be understood during the early stages of the deal

As an unfortunate consequence of the deterioration of the U.S.-China relationship, more and more Chinese companies are divesting and exiting their U.S.-based operations. This can be a difficult type of transaction to pursue, and companies should bear the following in mind.

Retain a U.S.-based Financial Advisor. The U.S. has a deep market of M&A buyers and spending the time to properly market the U.S. business can maximize value.  An experienced investment bank will assist with proper marketing, including creating marketing materials and preparing the management team for their presentations. Most importantly, a reputable, experienced investment bank will have a substantial network of potential strategic and private equity buyers and will also have a good sense of which buyers will be more interested in any given industry or business. Once buyers have been identified, an investment bank can assist with conducting the auction process, including day-to-day interaction with buyers and responding to their questions. Having the banking team handle such buyer communications assists with bridging cultural and time-zone divides, particularly where the seller's team is based in China.