Managing the auction process
Buying a state-owned enterprise can be a challenging ordeal for a foreign acquirer. To navigate the auction process successfully, a bidder must understand how it is structured and devise a strategy
Issue: March 2011
Keywords (click to search):
SOE
auction process
Hogan Lovells
bidder
In China, almost all acquisitions of state-owned enterprises (SOEs) are complicated by the fact that the deal is statutorily required to go through a public listing and auction process designed to safeguard the disposal of state assets, regardless of whether it is structured as an equity or asset transaction. The related rules also apply to the sale of non-SOE entities (including Sino-foreign joint ventures) if state assets are involved. Foreign deal makers need to understand the process to effectively manage a transaction so that the intended commercial objectives will not be frustrated.
The auction process
The auction is required to be conducted by a local Property Rights Exchange (PRE). A seller starts the process by providing the PRE with information regarding the target company, minimum price and payment terms, as well as any qualification requirements for a potential bidder or buyer to participate in the auction. The PRE will then...
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