Types and targets of inbound M&A by foreign investors

Foreign investors in China typically set up wholly foreign-invested companies or partner with Chinese investors to establish Sino-foreign joint ventures or co-operative enterprises. To penetrate the Chinese market and speed up the execution of their investment plans in China, foreign investors are inclined to merge or acquire domestic corporates with an established sales network and factory equipment, so as to obtain the greatest returns in the shortest timeframe.

Inbound merger and acquisition (M&A) transactions can be divided into two main streams: equity acquisitions and assets acquisitions. The targets of M&A transactions include Chinese state-owned enterprises (SOEs), private enterprises and foreign-invested enterprises established in China.

Relevant laws and regulations involved include: Provisions on the Merger or Acquisition of Domestic Enterprises by Foreign Investors; Interim Measures for the Management of the Transfer of the State-owned Property Right of Enterprises and other relevant provisions of the state-owned assets transfer; Provisions for the Alteration of Investors’ Equities in Foreign-funded Enterprises; Notice of the Relevant Issues Concerning the Transfer of State-Owned Shares and Corporate Shares of Listed Companies to Foreign Investors; Administration of the Takeover of Listed Companies Procedures; Measures for the Administration of Strategic Investment in Listed Companies by Foreign Investors, and other related provisions regarding the M&A of listed companies.