DUE DILIGENCE IN CHINA

Preface xiAcknowledgments xvChapter 1: The Business Landscape in China 1Macro and Structural Domains 2Corruption in China 6Conducting Due Diligence in China versus Western Countries 26Conclusion 30Notes 31Chapter 2: Due Diligence in China 33Due Diligence for Different Types of Deals 36Levels of Due Diligence 48Key Considerations 56Organization of Due Diligence Process 59The Due Diligence Team 63Independence of Vendor Due Diligence 64Reasons for Poor Due Diligence 68Reverse Takeovers 73Dispute between SEC and CSRC 75Conclusion 77Notes 78Chapter 3: Financial Due Diligence 81Financial Due Diligence Checklist 82Conclusion 139Notes 140Chapter 4: Operational, Commercial, Legal, and Other Due Diligence 143Operational Due Diligence 144Commercial Due Diligence 167Legal Due Diligence 169Balanced Scorecard (BSC) 178How to Predict Bankruptcy--Altman Z Scores and Gearing 185Optional Checklists 186Conclusion 193Notes 194Chapter 5: Beyond the Checklists: Founder and Management 195Founder Management Root 198The Founder Background Check 200Guanxi (Relationship) 216Due Diligence on More Than One Founder 223Summary of Background Check: SWOPEST and Tri-Background 224Conclusion 228Notes 229Chapter 6: Beyond the Checklists: Hard Facts 231Face-to-Face Meetings 231Proportion Check 242Site Visits 247Due Diligence Goes One Step Deeper: The Four Deadly A's 256Conclusion 290Notes 292Chapter 7: Implementing a Due Diligence Workflow 293Getting the Mind-Set Right 294Formulating the Due Diligence Strategy 295Forming a Team 300Starting the Due Diligence Process 304Conclusion 312Notes 313Chapter 8: Post Due Diligence and Case Studies 315Preparing the Due Diligence Report 316Due Diligence Outcome Review 316Deal Structuring, Negotiation, and Deal Making 318Post-Acquisition Due Diligence 318Summary Models 319Final Case Studies 327Conclusion 347Notes 348About the Website 351About the Author 353Index 355

Kwek Ping Yong has more than ten years of private equity investment experience in China. Mr. Yong started his first USD China-focused growth fund in 2001 and has since made more than thirty investments in businesses there, across various industries, including manufacturing, mining, energy, food and beverage, and the retail sector. He has also planned and executed many successful exits through trade sales and pre-IPO transactions, and performed hundreds of full due diligence exercises for Chinese companies pre- and post-investment. Mr. Yong launched his first Chinese RMB private equity growth fund in 2010 with a total USD and RMB fund size of more than US$4 billion under management. Prior to joining Inventis, Kwek Ping founded an IT system integration company that was later merged and listed at the Helsinki Stock Exchange in Finland in 2000. His track record is well recognized internationally, and he is frequently invited to speak at international conferences and summits. Mr. Yong is an adjunct professor at Singapore Management University, where he developed and teaches private equity courses for the Financial Training Institute. In addition, he is a visiting lecturer at the Imperial College Business School, UK, and a Senior Fellow of the Wharton School, University of Pennsylvania. Kwek Ping Yong is the author of Private Equity in China: Challenges and Opportunities (Wiley), the first industry-focused book on the subject.