Technomic Asia show

Technomic Asia

Summary: Is China a threat or an opportunity for your company? Are there real growth opportunities for you in the world's fastest growing market? Expertise and insight from Technomic Asia China, a market strategy consulting firm with more than 20 years in China.

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Podcasts:

 Interview with Andy Rice of The Jordan Company on Outlook for Foreign Investment in M&A in China | File Type: audio/mpeg | Duration: Unknown

Interview with Andy Rice of The Jordan Company on Outlook for Foreign Investment in M&A in China

 Introducing the partnership of Technomic Asia and the Schwartz Advisors on Cross Border US-China M&A Support | File Type: audio/mpeg | Duration: Unknown

Introducing the partnership of Technomic Asia and the Schwartz Advisors on Cross Border US-China M&A Support

 Interview with David Hong of King & Wood Mallesons: Key Issues Around Intellectual Property Protection in China | File Type: audio/mpeg | Duration: Unknown

Interview with David Hong of King & Wood Mallesons: Key Issues Around Intellectual Property Protection in China

 Interview with Andy Rice of The Jordan Company On Outlook For Foreign Investment in M&A in China | File Type: audio/mpeg | Duration: 27:22

Interview with Andy Rice of The Jordan Company On Outlook For Foreign Investment in M&A in China

 Interview with Andy Rice of The Jordan Company On Outlook For Foreign Investment in M&A in China | File Type: audio/mpeg | Duration: 27:22

Interview with Andy Rice of The Jordan Company On Outlook For Foreign Investment in M&A in China

 Interview with David Hong of King & Wood Mallesons Regarding Key Issues Around Intellectual Property Protection in China | File Type: audio/mpeg | Duration: 17:30

Interview with David Hong of King & Wood Mallesons Regarding Key Issues Around Intellectual Property Protection in China

 Interview with David Hong of King & Wood Mallesons Regarding Key Issues Around Intellectual Property Protection in China | File Type: audio/mpeg | Duration: 17:30

Interview with David Hong of King & Wood Mallesons Regarding Key Issues Around Intellectual Property Protection in China

 Introducing the partnership of Technomic Asia and the Schwartz Advisors On Cross Border US-China M&A Support | File Type: audio/mpeg | Duration: 18:38

Introducing the partnership of Technomic Asia and the Schwartz Advisors On Cross Border US-China M&A Support

 Introducing the partnership of Technomic Asia and the Schwartz Advisors On Cross Border US-China M&A Support | File Type: audio/mpeg | Duration: 18:38

Introducing the partnership of Technomic Asia and the Schwartz Advisors On Cross Border US-China M&A Support

 Making Your Product in China: An Interview with Creation Technologies, a Leading EMS Provider | File Type: audio/mpeg | Duration: 23:48

This podcast comprises an interview with our own Steve Crandall and Creation Technologies, a world class EMS provider to a diversified group of OEMs around the world.

 Highlights of Amcham’s 2012-2013 Business Report: A conversation with Kent Kedl of Control Risks | File Type: audio/mpeg | Duration: 16:37

Interview Steve:  I’m here with my good friend Kent Kedl, Managing Director of Control Risks Greater China, North Asia.  We’re here to talk about the annual review of Amcham’s business climate survey.Kent did a great job in summarizing the results at the annual event with the membership and so we’re very privileged to have Kent give some of his personal highlights to us today. Steve:   Kent.  Welcome! Kent:     Good to be here. Steve:   Kent, basically what were the highlights this year? We’ve been used to pretty stellar results and very positive feedback from the membership of Amcham.  What did it look like this year? Kent:     Again the performance was good.  73% of the membership reported profitable performance.   I think that’s fantastic in pretty much any environment.  The year-on-year performance, that’s where we’re starting to see a little bit of leveling off. Since 2010, which was a great  year after the setback in 2009 we’ve seen a little bit of a stair step down, and this year 71% said that revenue was up year-on-year whereas last year 80% said revenue was up year-on-year.  This year 48% said operating margins were up, whereas last year it was 51%, so we’re starting to see a little bit of leveling off. Steve:   We’re so used to these big numbers and so it’s pretty easy to say we’re going downhill but if you step back to look at the absolute numbers in the context of global performance, it all sounds pretty good. Kent:     What we need to remember is where we are versus where we’ve come from. You remember 4 to 5 years ago, 13% growth was just nuts and we are sitting at 7-8% growth right now.   Anyone else around the world would kill for the 7-8%, the US certainly would. The fact that we’re sitting at that level is pretty good.  It is not 13% and so what everybody’s looking at is the 5% delta between the 13 and 8 and that’s the part that’s tougher. Steve:   How about on the challenge side? Anything new in terms of what are the key operating challenges, regulatory challenges; I know you look at them separately? Kent:     One of the features of the survey we’ve designed is to look at two different kinds of challenges.  One is business challenges and those are the things that any market around the world would go through.  As China has matured we wanted to compare it with what’s happening around the rest of the world.  So that would be issues like HR challenges, competition, rising costs, things like that. And then there are the issues like; the kind of legal regulatory challenges in which China is still… we would call it “emerging”; China would call it “self-emerged”, they’re “fully emerged”. But that’s more in the maturing market kind of thing.  And so we ask two questions: No. 1 Does this challenge hinder your business?  No. 2 Is it getting better, is it deteriorating or is it staying the same. On the business challenges, what happened last year was rising costs, which became no. 1.  And that was the first time it beat out HR constraints.  This year it became even more of an issue and it was 92% of those surveyed said that rising costs got in the way of their business.  And the majority of the contribution of that was labor cost. And your business I’m sure, like my business, it’s the same, costs are rising.  And you have to pay for people and to hang on to them is also an issue.  Taxes were a big contribution to the rising costs as well.  Interestingly No. 3 was domestic competition. Steve:   Right, that stood out to me as well.  I do not remember that being called out in the past. Kent:     Well, to be fair we hadn’t asked it that way in the past, so… Steve:   Okay, well that explains that! Kent:     Yeah, well you know the survey design.  But it had become more of an issue and we had a couple of questions last year that talked about domestic competition.  What we’ve seen is a feeling among the foreign business community that Chinese companies are getting better.

 New Product Development in China | File Type: audio/mpeg | Duration: 30:13

Pete Maddson of Worrell speaks on new product development for the China market.

 Partnering Chinese State Owned Enterprises | File Type: audio/mpeg | Duration: 30:58

Partnering with Chinese State Owned Enterprises: An Interview with Terry Fry of PPG Industries

 M&A in China – Why Deals Fail: Part II | File Type: audio/mpeg | Duration: 16:12

Interviewer: Steve Ganster My name is Steve Ganster, Managing Director of Technomic Asia, a market strategy and growth consultancy based in Shanghai. I’m pleased to continue our series on M&A in China with our second segment in a conversation with Qi Tang, Technomic’s M&A practice leader, on why deals fail. In our last podcast, we covered aspects of deal failure such as differences in the environment between the West and China, important trust issues in relationship-building, as well as the unique prevalence of multiple sets of financial books. In this segment, we will address additional issues such as regional geographic influence on M&A, private-owned enterprise versus state-owned enterprise deals, the impact of a softer economic environment, and other topics. I hope you find the conversation useful in your understanding of doing deals in China. Steve: Qi, how about the difference in dealing with a state-owned enterprise (SOE) versus a private enterprise in terms of doing the deal? Dramatic differences in how you approach the deal? Or likelihood in closing the deal? What do you think? Qi: SOEs versus POEs--They are in very different situations in terms of operating objectives, so we’ve got to have different ways to approach those two very different animals. Typically, POE seller-owner would be more interested in selling for a higher price-tag, while for an SOE, their objective could be more complicated. Other than selling for a higher price. For instance, an SOE seller, in some cases, would also have to factor in consideration of taking care of the employment, the social responsibility of keeping jobs for a particular locale. So if a foreign acquirer’s proposal can demonstrate that the business would continue to be good or much better, and all the jobs would be retained, then there will be a consideration from the Chinese seller to factor this in, even to be factored into the valuation of the company. Steve: Qi, one of the other areas that might be a problem or maybe a solution to improving the deal success is structuring the deal. What do you see as some of the popular approaches now to deal with perhaps gaps in valuation for putting some golden handcuffs on existing management? How are deals being done? Qi: In many cases, I would recommend a phased approach given the often huge differences between the Chinese seller and the Western acquirer in valuation. The reasons, I think, are pretty obvious. A seller could have cooked the books, but after a couple months of interaction, it’s still premature for him to tell you the truth. He might need some longer time before having full confidence to tell you the story and also let you experience what he told you is real, because sometimes it’s really difficult for a Chinese seller to demonstrate to a buyer in writing or in documents that the real sales of this company is this number versus the sales as indicated in a book, which was only meant to show to the local authorities. Steve: Qi, clearly this year China has, relatively speaking, slowed in terms of its GDP growth, and it’s not sure when that recovery will kick back in, but clearly the market landscape in terms of economic growth has tempered a bit. What impact is that having, do you think, on foreigners making acquisitions here? Qi: I think these days because of this slow-down in economic growth, more opportunities are emerging. Many domestic-market-oriented Chinese companies, ironically, to my knowledge, are in difficulties versus companies which are export oriented. Many export companies appear to be basically stable. You may have seen the numbers for October. Chinese exports grew by 10% from a year earlier, so potential acquirers should not miss this window to spot good acquisition targets. Steve: So you’re suggesting that companies now may be more open to selling or maybe to a more realistic valuation given the economic environment? Qi: Both.

 M&A in China – Why Deals Fail: Part I | File Type: audio/mpeg | Duration: 14:27

Qi Tang M&A in China – Why Deals Fail: Part I     Interviewer: Steve Ganster   My name is Steve Ganster; Managing Director of Technomic Asia, a market strategy and growth consultancy based in Shanghai. I am pleased to kick off our series on M&A in China with our first segment on why deals fail.   It is well acknowledged that it is tough to culminate an equity partnership in China, even after a good candidate has been identified and taken through LOI. In Part I, in a conversation with Qi Tang, Technomic’s M&A practice leader, we’ll begin to unpack this very interesting and complex topic. I think you’ll find some very practical insights that you can apply to your China acquisition initiatives.   Steve:​I’m here with Qi Tang, senior member of our team who has done many projects in the world of acquisitions in China and I think brings a very unique perspective on this topic.   ​Qi, welcome.   Qi:​Thank you.   Steve:​M&A in China is a big topic.  What I wanted to talk about today is one troubling area regarding why deals fail or don’t get done. As we’ve talked in other podcasts--It’s very difficult to find a qualified target who’s interested, but even when that happens and we have some good dialogue going, even an LOI in place, they tend more often than not to fall apart and never get culminated.   ​Just as a starting point, Qi, what would you say some of the main reasons are? What’s different about China that makes this failure rate so high?   Qi:​China is a very different place versus the United States. Its political system, economic system and legal system, so you’ve got to pay attention to all of these differences when you are trying to find an acquisition target [or] when you’re trying to do your investigation into an attractive target. It’s just a challenging market in which we need first of all to think through whether we even want to do an acquisition in this environment or not.   Steve:​Do you think it’s appropriate to change the process in how we do deals?   Qi:​Definitely. While I think the western way or western process to makingacquisitions in China makes sense on a general basis, you’ve got to adjust this process considering the Chinese environment. You’ve got to be both objective and somewhat subjective when you are looking at a target.   Steve:​Where do you see many of the negotiations falling apart? Often it can seem we’re on track and then either the western company or the Chinese company starts to go in another direction, sometimes without any logic or apparent logic.  They change their mind [and] the deals end up falling apart. What’s going on?   Qi:​A major problem often is that objectives eventually turn out to be divergent, which in many cases were not realized to some degree because of language barrier, culturedifference or other factor.   Steve:​So often we’ve seen, I know in our cases, that we’re negotiating, we have a value on the table, and then a week later that value changes. I think the sense that western companies get is that they’re being manipulated or played with. And maybe sometimes they are, but what else might be going on?   Qi:​This change should never be treated as odd, particularly in China. I think Westerners change their mind too, so--.   Steve:​That’s true. While we’re on the topic of valuations, how do the Chinese sellers often approach valuation? We know in the West, it’s often EBITDA based and the multiple thereof, but in China, what are some of the typical perspectives on how youvalue your own company?   Qi:​I would say that the Westerners first need to be prepared that Chinese typicallywould view the value to be tied to their asset value as a benchmark. And on top of that, it would be subject to the expectation of the seller, subject to the stock market, PE ratio at that particular time, and also it would be subject to the industry sector that company is in.  

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