Government approvals of mergers and acquisitions by foreign investors in China can be complicated. They are governed by the 2006 Regulations Concerning Merger and Acquisition of Domestic Enterprises by Foreign Investors (M&A rules) and remain the dominant means of acquisition. But in certain deals to absorb smaller targets, particularly where time is of the essence, some multinational buyers are opting for asset acquisitions.
The transactional efficiency considerations of asset purchases can be quite significant. They can help cut out government red tape, particularly under the M&A rules, and assist in meeting mid- or long-term objectives of removing the legal person status of the target entirely.
Traditional advantages on the decline
The traditional advantages of an asset deal – such as cherry-picking of assets, leaving behind or carving out historical issues and liabilities, integration efficiency – are not as solid as they used to be. With maturing Chinese legislation intending...