Securing Approval for a Groundbreaking Joint Venture in China
Our Objective
A leading investment bank sought to break new ground by establishing a joint venture securities firm in China just as the market opened to foreign firms. At the same time, the Government of China was seeking financial expertise to help launch the first major overseas IPO of a Chinese firm. As foreign wholly-owned enterprises were not permitted, a partner was required, but the U.S. firm did not want to grant control in the market — especially as its ultimate goal was to have 100 percent ownership.
Our Approach
To ensure our client could maintain control, our team needed to find a novel way to create a partnership where no single entity was the majority shareholder. At that time, the foreign firm could only hold 33 percent of the equity, so we identified two strategic partners — a financial partner and a passive investor — to split the remainder. As part of this process, the financial partner created a new firm with the necessary securities license, granting it the legal ability to do business without an existing infrastructure. This novel approach required approval from the very top of the Chinese government. We helped brief regulators, build internal supporters, and message leadership not only about the importance of this approval, but also the credibility that this firm would provide by entering the Chinese market.
Our Impact
Not only was the JV approved with a one-of-a-kind structure — enabling the operational control they needed — but this paved the way for their wholly-owned entity. Our client went on to become one of the first wholly owned foreign securities firms in China, giving them a competitive industry advantage through their expertise in operational control in the market.
