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A different toolbox for M&A due diligence in China
Author(s) -
Boyle James,
Winter Matthew
Publication year - 2009
Publication title -
thunderbird international business review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.553
H-Index - 37
eISSN - 1520-6874
pISSN - 1096-4762
DOI - 10.1002/tie.20310
Subject(s) - due diligence , toolbox , database transaction , diligence , process (computing) , business , china , work (physics) , marketing , public relations , economics , computer science , law , finance , political science , mechanical engineering , psychology , social psychology , programming language , engineering , operating system
Prior to spending considerable resources on putting together a meaningful due diligence process, it is imperative for businesspersons to ask some major questions regarding the decision under consideration. What, explicitly, does the company hope to achieve with the transaction? What is the end game and what are the alternatives? Why is the deal better than a greenfield operation or some other business arrangement? If the transaction is to be a joint venture, will the company merely be paying tuition for a formidable competitor? In the West, the diligence team would typically sit in a war room and pore over piles of documents. This will simply not work in China, as much of the documented information is intended to mislead the tax collector or, in the case of a business, the acquirer. Any meaningful understanding of the target will come from re‐creating a representation of the business from scratch using process mapping and modeling techniques based on trusted information. This article is intended to help businesses entering China conduct accurate and meaningful due diligence as they enter a market fraught with pitfalls and cultural nuances with which Westerners may not be familiar. © 2010 Wiley Periodicals, Inc.