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You have made a sizeable investment in China but it is time to get out. Perhaps your joint venture ('JV') partner wants to take the business in another direction. Perhaps the business is under performing or loss making. Whatever the reason, you have made the decision to exit the investment. Once this decision has been made, you now have to address the issues: How am I going to do this? What are my options? What is the best way to deal with my JV partner? How can I optimise my exit?
The first stage in planning an "optimised" exit is to look at the options available and to assess which is most likely to meet your aspirations. Maximising value will generally be a major consideration but other factors such as maintaining your hard-earned reputation or avoiding negative publicity may also be important.
A successful exit not only requires selling or liquidating the foreign investor's stake in the JV, but also navigating a difficult path of administrative procedures through China's banking and FOREX controls to repatriate capital. And above all, it requires careful handling of your JV partner and its stakeholders.
Broadly speaking, investors may exit distressed Chinese JV investments in the following ways:
- Sell on an "as is" basis, i.e., based on the terms of the existing JV agreement
- Fix and sell, i.e., fix any perceived deficiencies in the JV agreement and then sell
- Early termination of the JV agreement, i.e., according to its terms
The critical path to achieve an optimised exit may be divided into two phases:
Exiting an investment in China can be more challenging than entering it, and it requires careful planning and implementation. Just as in entering an investment, knowledge of the documents, laws, and regulations is critical, but equally critical is first-hand experience of what has actually, in practice, been achieved in similar circumstances. Enabling an optimised exit requires considerable on-the-ground activity and contact, and multiple channels to the JV partner, government officials and related parties. It also requires advisors with resources and skill-sets specifically tuned to such initiatives in China and a well-disciplined implementation programme.
We assist investors in all facets of the optimised exit process, including identifying the proposed strategies and detailing important issues, risks and milestones in pursuing the strategies, as well as negotiating with the parties involved, whether they be the JV partner, government officials, or new investors.
Our Experience
PricewaterhouseCoopers' Business Recovery Services group has amassed significant experience over recent years dealing with numerous types of exits from distressed investments in China. We also have experience assisting banks, bondholders and shareholders in restructuring debt and advising both buyers and sellers in relation to acquisitions and disposals of Chinese non-performing loan portfolios. As a result, we have the know-how and local market knowledge to assist you in achieving an optimal result.
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