Amidst the global economic downturn, China is having another record year for outbound M&A. The 12th Annual China Mergers & Acquisitions Summit was held in Shanghai on January 14, 2015. The main purpose was to provide participants with an overview of key lessons for foreign access to China M&A and proven strategies and solutions for ensuring successful cross-border deals in and from China.
During the summit, American Appraisal, an independent, employee-owned consulting firm headquartered in Milwaukee, Wisconsin with nearly 50% of employees participating in the firm’s ownership, held a presentation on Dissecting Value: Differences in Valuation Practices in Cross-border M&As. The content of the presentation dealt with the transition of the legal framework of professional valuation.
In the past, independent valuations were only clearly mandated in acquisitions or transfers of state-owned assets. Since 2006, however, assets of domestic enterprises being acquired must be valued according to “internationally accepted principles”. These principles primarily demand that shares must have “proven value”. Moreover, equity or asset transferred below “fair value” should be prohibited and a formal submission to relevant authorities of the valuation report is required in accordance with these principles.
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