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Strategies for SuccessfulChina Outbound M&A in the U.S.

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““There are two winds in the world today, There are two winds in the world today, the East Wind and the West Wind…the East Wind and the West Wind…

the East Wind is prevailing the East Wind is prevailing over the West Wind.”over the West Wind.”

Chairman Mao, 17 November 1957

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Agenda

I. China’s Outbound M&A

II. Why should Chinese companies consider Outbound M&A?

III. Why should a Chinese company choose the U.S.?

IV. Steps of M&A Process

V. Strategies for Success

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I. China’s Outbound M&A Chinese companies have been investing in foreign companies for

more than 20 years.

According to People’s Daily, in 2009 China could invest $150 billion

U.S. dollars overseas. This is three times more than last year’s figure

of U.S. $52 billion.

China’s role in the global economy will shift from “manufacturer” to

“capital exporter.”

Transactions in the energy, mining and utilities sectors continue to

dominate Chinese M&A purchases abroad, accounting for 29 percent

of the total outbound deal flow by volume since 2003.

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Comprehensive revisions in 2008 and 2009 to China’s regulatory regime have made Chinese antitrust and M&A policies more comparable to those in North America and simplified the approval regime.

North American-based businesses have been preferred targets of Chinese acquirers over the 2003-Q32009 period, with some 106 acquisitions, accounting for 24% of the announced total.

Estimates indicate Chinese companies have invested US$15 - $20 billion in the U.S., including China Investment Corp.’s $5.0 billion purchase of a 10% stake in Morgan Stanley and the $3.0 billion deal for a 10% stake in Blackstone.

China’s Outbound M&A, continued

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Largest Chinese Mid-Market Deals into the U.S. 2007 ~ 2009 by Disclosed Deal Value

DateDeal

StatusAcquirer

Value(US$M)

% Acquired/S

oughtTarget Target Sector

Sep-07 W Huawei Technologies Ltd. 363 16.50 3Com Corp Telecommunications

Oct-07 C China Minsheng Corp. 317 10.00 UCBH Holdings Financials

Mar-08 C China Life Insurance Co. Ltd 300 N/A Visa, Inc. Financials

Mar-08 C Mindray Medical International Ltd. 209 100.00Datascope-Patient

Monitoring Business

Healthcare

Jan-08 C WuXi Pharmatech Inc. 153 100.00AppTec Laboratory

Services Inc.Healthcare

Jun-09 PSichuan Tengzheng Heavy Industrial Machinery Co.

150 100.00General Motors Corp. - Hummer

DivisionIndustrials

Jun-09 P COFCO Ltd 139 4.95Smithfield Foods

Inc.Industrials

May-07 CJiangxi Greatsource Display

Technology Co.95 70.00 VOMagic Corp. High Technology

Mar-09 P BeijingWest Industries Co. Ltd. 90 100.00

Delphi Corp. - Brakes &

Suspension Business

Industrials

Nov-07 C Spreadtrum Communications, Inc. 76 100.00Quorum Systems

Inc.High Technology

C = Completed P = Pending W = Withdrawn

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II. Why Should Chinese CompaniesConsider Outbound M&A? Buy or Build?

Cheaper

Faster

Time to Market Accelerate business objectives

Leverage opportunities

Increase Market Share “Survival of the Fittest”

Eliminate competition

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Why Should Chinese CompaniesConsider Outbound M&A?, continued

Acquire Intellectual Property Avoid potential infringement issues

Vertical or Horizontal Integration Increase margins

Economies of Scale Improve efficiencies

Synergies between products, markets or personnel “Sum of the whole is greater than the sum of the parts”

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III. Why Should a Chinese CompanyChoose the U.S.?

Lower valuation of U.S. targets

Strength of the RMB

Less Competition from U.S. buyers

Opportunity for Chinese companies to reposition

themselves in the global marketplace

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IV. Steps of M&A Process

Identify Target

Valuation What price will Chinese company have to pay?

Letter of Intent Outlines price and general structure of deal

Due Diligence Exchange of information

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Steps of M&A Process, continued

Definitive Agreements

Integration Planning

Transition Strategies

Regulatory Approvals

Closing

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V. Strategies for Success

Devise sound M&A strategy

Define Objectives

Select proper target

Analyze financial impact

Strengthen internal M&A capabilities

Strong CFO

Thorough due diligence

Understand regulatory regime

Manage political or social concerns

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Smooth transition Identify and retain key employees

Implement necessary changes

Overcome geographical and cultural gaps

Develop strong corporate governance Experience is critical

Learn from mistakes of others

Enhance internal and external communication Integrate offices

Enhance interaction of key employees

Strategies for Success, continued

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Jeffrey A. Rinde Partner

New York, NY

v. 212.885.5335 JRinde@blankrome.com

www.BlankRome.com

Jeffrey A. Rinde focuses his practice on corporate and securities aspects of cross-border

business between the United States and Asia. Mr. Rinde represents clients in a wide range

of industries including agriculture and food, alternative energy, healthcare, manufacturing,

real estate, technology, media, and wholesale and retail, among others.  Mr. Rinde also

represents emerging and established Chinese companies, with particular emphasis on

companies operating in Mainland China, in complex transactions to help expand their

businesses, access capital, and list in the United States.

Additionally, Mr. Rinde represents issuers and merchant and investment banking firms in

public and private securities offerings, and buyers, sellers, and financial advisors in a wide

variety of public and private business combinations.