What "pre-deal" planning should an investor perform?
The first step, customarily, lies in making the choice between a share deal or an asset deal acquisition. A foreign investor can avoid wasting unnecessary time and resources doing the actual due diligence if it can assess in advance the regulatory efficacy and tax efficiency of the target, in order to see if it can serve the company's key investment objectives in China. From the investors' perspective, participation in China's M&A market is motivated by a number of different factors. The foreign investor should review preliminary targets on the basis of the following issues before taking the first step towards conducting the actual tax and regulatory due diligence review: 1. Regulatory efficacy - restrictions on the proposed investment under the current PRC laws and regulations; 2. Funding option - capital contribution requirements and financing options for the proposed investment project; 3. Investment evaluation - tax attributes and the potential business scope to be approved for the proposed investment; and 4. Exit strategy - options for future disposal of the China investment, and the related tax and regulatory considerations.
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