Vulture Investing or Angel Investment? That's the question
BEIJING, April 13, 2011 /PRNewswire-Asia/ -- Transformation and Renewal: Corporate Reorganization and Investment in China, a new bilingual book written under the invitation of Wolters Kluwer CCH by King & Wood Law Firm, an authority on bankruptcy law, is set to unveil secrets by discussing the practical endeavors in China's corporate reorganization from a totally different point of view.
As with throughout history, the rule of the "Survival of the Fittest" has always been an indispensable part of modern business, and in this game, losers will be soon forgotten or ignored. But wait...What about when giants lose? Do the values vanish? Nothing left, or is there something we just simply ignored? Much like in nature, business has its own eco-system. Every single unit, lose or win, has its irreplaceable identity. The key lies in whether you can obtain the power to manage. There are vultures in nature, which can generate energy from the dead. Then, how will "vulture investing" work in business?
There are questions being discussed over and again that have drawn plenty of attention: After over 30 years' rapid growth, how will China's economy achieve a balanced, more sustainable development while digesting the cost coming along? For enterprises, how to find new chances of growth in the forming framework; and for investors, how to seize the opportunities of the time and dig deeper for more?
Let Periodicity Work for You
"Gaining from periodicity works a lot better than from growth." Simple, yet it's harsh to reveal the nature of "Vulture Investing".
"Vulture Investing" refers to those investors that buy out and reorganize bankrupt enterprises in order to get the most of the investment interests. "Angel Investing" is similar. The only difference is angels prefer the emerging ones, while vultures the bankrupt and the ones in trouble.
"Vulture Investing" works similar to vultures in nature: feeding on the dead. And people have not seemed to pay enough attention to its value.
In fact, put aside the negative associations and we'll literally see that "Angel Investing" is actually investing on growth while "Vulture Investing" periodicity. There are periodicities in economic lives: a product can not always win or succeed, nor an enterprise, nor a field. There are four periods for an enterprise: emerging, growing, breaking-even and dying out. "Angel Investing" is staring at one, while "Vulture Investing" takes all four, which means more businesses, more opportunities and more profits possible.
The dramatic growth rate of China's economy, bringing huge profits for growth investment in a long time, makes us ignore the gold mining of business periodicity off our fingertips. However, as the competition becomes harsher and the framework grows more stable, the room for investment will be smaller and smaller, and thus capitals and funds have nowhere to go but to find a new world. It is right time for us to give a serious look at vulture investing.
Let Periodicity Work for You! This might be, and will be, the slogan of the year.
Vultures Fly
Then how does "Vulture Investing" work?
"Vulture Investing" makes money from low price purchases. Assessing the value of bankrupt enterprise assets is very low, which is the best time to buy. But how to sell is the real work, requiring different perspectives.
Let's see what we can do with vultures
Firstly, Go International: the long-term depression of markets caused by a financial tsunami put many foreign businesses in trouble. Most of them have mature sales networks, sophisticated market structures and coordination practices in the local market. All of them need huge investment and years of accumulations. So, for newcomers, the correct use of vultures can be quick fixes to success. After all, the opportunities brought by periodical volatility in financial markets are limited.
Secondly, Obtain Brands and Creations and other Intangible Assets: It is shortcoming for most enterprises. Under normal circumstances, it will be costly and full of risks to accomplish the accumulation. But now, periodicity makes it easier.
Thirdly, Get Access Permits: In certain fields, it requires a series of identifications and assessments to get the access permit. Fortunately, "Vulture Investing" has the most efficient way of accessing, which reduces time cost and is able to get sophisticated workers familiar with standards and experiences of expanding in that field.
"Vulture Investing" can not only obtain the resources of the bankrupt enterprises other than fixed and intangible assets, but more importantly get more opportunities in business, to buy out the reputations, experiences, markets and access permits that an enterprise has accumulated for years with a small sum of money. Well, it not uncommon in China's A-Share market.
Undoubtedly, growth can not forever push forward an enterprise or a field. It may come across setbacks in due time. But for periodicity, where there is a transaction, there is periodicity and profits.
Seize the Opportunity
As the saying goes: the gold you saw is not always gold you got. "Vulture Investing" means huge opportunities, however, it's hard to master. The biggest barrier lies in legislations.
"Vulture Investing" involves diverse fields and complicated procedures that require the operator to have a comprehensive appreciation of relevant laws and regulations. Otherwise, there could be a rather upset result. The business and legislation environment in China is unique, so how to avoid risks and make full advantage of laws and regulations will be the very challenge. The publication of Transformation and Renewal: Corporate Reorganization and Investment in China will be a great guideline for investors.
For instance, China brought in from western countries the reorganization method for A-Share listed companies. Most A-Shares are SOEs or of state-owned backgrounds. For investors, it is rare good business opportunities. And to seize the opportunity demands a deep understanding of the background. In recent years, the relevant legislations have become sophisticated. Investors can enter into A-shares through merger and acquisitions, assets reorganization and absorbtions, which are detailed in this book.
Also, the enterprises under reorganization procedures usually face two major challenges: solvency and time. But in reality, executive orders and regulations aiming to prevent over-heating and illicit business transactions make the issue much more complicated. Now, the government has issued a series of administrative regulations to ensure the detailed planning and effective implementation of the listing and delisting of companies on the A-Share market.
Moreover, reorganization involves labour law issues, like the most common ones: labour cost and labour cost reduction. Reducing the labour cost will increase the chances of success in reorganization for ill-financed companies, but employee cut-down should be taken according to certain regulations and procedures. The book has a detailed and accomplished introduction on this aspect. Besides lay-offs, there are other ways to cut the labour cost. To encourage the enterprises to minimize the scale of cut-down or not to cut workers, the local governments issued many incentives in the past few years. A business will do better after understanding this.
In short, all these above will be able to make this book essential reference for enterprises in reorganization practice.
Master the Future, Starting from the Present
Transformation and Renewal: Corporate Reorganization and Investment in China is a comprehensive home-published bilingual manual for "Vulture Investing". It is specializing in the bottle-necks of experience and legislations, and provides the readers with deep and comprehensive explanations.
It is noted that the author of the book, King & Wood Law Firm is one of the first agencies dealing with bankruptcy businesses. It has undertaken over 200 bankruptcy and reorganization projects since 1994. From 2003 to 2006, a total of 31 securities companies went bankrupt, 11 of which, or one third, were done by King & Wood. After the new Bankruptcy Law was issued, there has been 30 listed companies conducting reorganization, 18 of which were handled by King & Wood Law Firm.
CCH is the flagship brand of Wolters Kluwer, which was founded in the Netherlands 175 years ago. As the first and to date the largest information provider in China specialized in bilingual legislation services, CCH has been endeavoring to serve the professions in practical fields of business, tax, accounting and Human resources since 1985. As first choice for them, together with renowned experts in diverse fields, Wolters Kluwer provides timely, accurate, and authoritative information solutions and business compliance advice.
This time, Wolters Kluwer and King & Wood Law Firm makes a strong combination. Transformation and Renewal: Corporate Reorganization and Investment in China, a book coming from sufficient practices, will really be a guide to best practices. The best thing of this book lies in its professionalism and practicability.
China's economy has been on its way to a brand-new phase. Namely, from blind development focusing on figures like growth rate or GDP only to move to a more rational and balanced development; from a single domestic market to global competition; from focusing on physical assets to resource reallocations. This is a great transition from single buy-sell modes to operate and a change and upgrade in identities. Without doubt, this is another round of liberation. The opportunities are gushing out. As for seizing them, please check the book and look to the future.
About Wolters Kluwer
Wolters Kluwer provides information solutions globally for professionals in the tax, accounting, financial services, legal and regulatory and health sectors. Headquartered in Amsterdam, the Netherlands, Wolters Kluwer maintains operations in 40 countries across Europe, North America, Asia Pacific, and Latin America and employs approximately 20,000 people worldwide. The total revenue of Wolters Kluwer in 2010 reached EUR3, 556 million.
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