Asian investment in the US

Friday 12 February, 2010

David Laverty’s International Counsel group sponsored this presentation on Asian investment in the United States.  Colleagues of his made presentations on inbound investment from China, India, & perspective on the same from Europe.  Here are the highlights:

China-Mark Williams of DLA Piper spent 4 years in China as well as time in Thailand, Korea, & Europe.  He listed some things that impact upon inbound investment

Mark noted that investment in China is approaching $100B, & investment from China is almost $60B.  M&A is up in China too, & the country has evolved from being a net seller to a net buyer.  Government policy dictates that their targets are natural resources.  Their objectives are simply to secure manufacturing inputs & diversify their resources. Private enterprises are targeting technologies, brands, distribution, & R&D.  Their objectives are to grow & add value to their shareholders.

India-David talked about India.  In contrast to 20 years ago, the Indian government now encourages outbound investment.  They do smaller deals:  75% were <$25M on US targets.  Outbound M&A from India is on par with China in 2007, but has fallen from $32.8B that year to $13.2B in 2008, & $1.4B in 2009.  A few of the reasons for these declines are  rising Indian labor costs, growth, & buy vs. build decisions.    In evaluating legal risks, stipulate getting recourse here & using arbitration to increase certainty in complex transactions & legal systems.  Stock transactions inherit liabilities while asset transactions limit liabilities.  Use these key steps:

  • confidentiality & acquisition agreements, & letters of intent
  • in deciding whether to keep or fire employees, Indian firms usually decide to keep management, at least temporarily
  • do your due diligence, especially on high risk issues
  • coordinate counsels as a team-US legal costs can be too high (foreign law firms can’t practice in India)

perspective from Europe-David’s colleague Jan Kooi from the Netherlands offered a European perspective.  Europe can be a base for foreign investment & is a good base for joint ventures into Asia, especially Japan.  Europe can be a springboard for Asian companies into the US & a springboard for American companies into Asia.  Emerging companies can move up from the Euronext market to the New York stock exchange, especially since the latter acquired the former.  Holland is a particularly good home base & offers these advantages:

  • the country has 90 (soon to be 110) investment protection agreements.
  • favorable tax treaty network
  • flexible corporate legal system
  • a stable economy with virtually no strikes
  • they speak English very well
  • there are legal/tax benefits for firms investing in Asia

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