China Hearsay has a great post on private equity and investment bankers in China. The post is entitled, Great Recession Watch — Living With Mendacity in China [link no longer exists].
Why am I certain it is a great post? Because I wrote that same post, with that exact same conversation, IN MY HEAD, many times. I am, however, certain Stan Abrams did not pry this post from my head because I am too low-brow to quote Tennessee Williams; In my head, I quoted from Bob Dylan’s Sweetheart Like You.
Essentially, Stan’s post talks about investment bankers/venture capitalists coming to him to be their China lawyer on “deals” in China without having any clue whether the substance or structure of the deals are even legally possible in China. Oftentimes, they came to him after having spent huge amounts of time and money on “the deal” already:
Over the past few years, as China became a red-hot market, everyone wanted to get in on the game. Throw some money together and get some folks to buy Chinese companies. Sounds like a good idea. But some of those people working for these funds (PE in particular) had little industry-specific experience and no idea about some of the legal hurdles involved. I don’t blame them for the latter, but it did piss me off to no end when they belittled the contribution of lawyers and only got us involved after they pissed away hundreds of thousands of dollars evaluating projects that were structurally impossible to begin with.
It is a must read post.