China question: How do I flush out informal and oral agreements, hidden shareholders and undisclosed liabilities, and give myself more comfort and protection?

The international perspective

For many multinationals, China represents the market with the best investment potential for M&A according to a joint survey by Hogan Lovells and Financial Times in 2011. The same survey also found China is the most difficult region for deal making. One reason is that traditional M&A due diligence has its limits in China. Multinational corporations are used to more developed markets in which most of the company's business and financial information are well documented and accessible as long as the seller is willing to cooperate. This is usually not the case in China. Foreign acquirers frequently find their Chinese targets are unable to provide accurate or complete information within an expected timeframe. This is because the company does not maintain a good documentation system, or key information is simply not put in writing for cultural and other reasons.