[Editor’s note]2013Year8month12Day,Associate Professor Feng Pengcheng, director of the China Capital Operation Research Center at the w88 casino, published an article titled "Easily Overlooked Issues in Due Diligence" in the "Enterprise Observer" on the issue of due diligence for overseas mergers and acquisitions.
The original text is as follows:
2004Year,TCLThe group acquired France’s Thomson color TV business and established a joint ventureTTE, but due to continued losses in European business,TTEEuropean Company2007Year4Applied for bankruptcy liquidation in March. AfterTCLThe total amount claimed by the group exceeds5100 million yuan.TCLThe acquisition of Thomson failed. The reasons include conflicts in strategy, marketing, staffing, culture and other aspects. This also reflectsTCLFailed to do due diligence and failed to nip risks in the bud.
Finance and law are the focus of investigation
Currently, due diligence on overseas mergers and acquisitions by Chinese companies focuses on financial and legal aspects. From a financial perspective, the purpose of due diligence is to see if the target company has any financial problems, such as fraud, and whether other figures are true and accurate, and to evaluate whether the company's profitability in the future is strong. From a legal perspective, the purpose of due diligence is, first, to help the acquirer clarify the target company's debts and avoid legal risks; second, to provide the acquirer with enough information to help him make a well-informed decision; third, to discover whether there are legal and contractual obstacles to completing a transaction, including whether the target company has the corresponding authorization, whether it requires the consent of a third party, and whether it can obtain government approval. These two aspects of due diligence are the core and key of the entire due diligence, but other due diligence is also critical in overseas mergers and acquisitions.
Manpower: Details can easily lead to management bottlenecks
It is easy to overlook some issues in the details of human resources during overseas M&A due diligence, and these subtle issues often lead to bottlenecks in later management:
In the labor contract, special attention should be paid to overtime pay, probation period, contract type, social security, housing provident fund, annual leave and other clause details that may not meet legal requirements.
Unresolved employee litigation issues or potential legacy issues from historical litigation will directly have a negative impact on the post-merger company.
Union. From a domestic perspective, enterprise w88 unions have relatively little say. In cases of overseas mergers and acquisitions, corporate w88 unions are something that requires great attention. In European and American countries, enterprise w88 unions are very powerful. Any decision related to employee interests must be supported by the union, otherwise it will lead to, for example, a large-scale employee strike.
Undiscovered pension liabilities. In many European countries, defined benefit pension plans are used for pensions. Based on accounting requirements, companies offering such plans need to predict future pension cash flows and discount them as a long-term liability in the company's financial statements. When a merger or acquisition occurs, the acquirer often neglects to conduct an independent review of long-term liabilities, resulting in an underestimation of the overall liabilities of the acquired company.
