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Specials
David Feldman mentioned in an article on SEC Rule 144(i) in The Corporate Counsel.
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Larry Langs quoted in an article on making startups fit together in the Investor's Business Daily on January 23, 2009
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December 2-4, 2009
David Feldman will speak on a panel at the PIPE Conference, sponsored by DealFlow Media, in Las Vegas on December 2-4, 2009
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November 13, 2009
David Feldman will be a panelist at the Financial Executive Institute seminar entitled, "Where’s the Money? Finding Public vs. Private Capital Today."
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David Feldman's book, Reverse Mergers: Taking a Company Public Without an IPO, now in its third printing, was published in 2006 by Bloomberg Press (available on http://www.amazon.com). View David Feldman's reverse merger blog at www.reversemergerblog.com.
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David Feldman is a contributor to PIPES: Revised and Updated Edition - A Guide to Private Investments in Public Equity (Bloomberg Press, 2005) available on
http://www.amazon.com
.
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Dov Scherzer is the U.S. contributor to the British treatise, Internet Law and Regulation (Sweet & Maxwell, 2d Ed. 1997; 3d Ed. 2002; 4th ed. 2007),
Available Here.
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Dov Scherzer is the U.S. contributor to the British treatise, Electronic Signatures Law and Regulation (Sweet & Maxwell, 1st Ed. 2004),
Available Here.
 
David Feldman wrote an article about China's new M&A rules for FW Private Equity and Venture Capital Review 2006.
China's New M&A Rules:
Will the "Yuan Rush" Hit its First Speed Bump?
Last month, while most of us were on vacation, six key Chinese ministries adopted sweeping new rules relating to foreign acquisition and ownership of PRC enterprises, known as the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors. However, I prefer to call the new regulations the "Chinese M&A Lawyer Full Employment Act of 2006." The new rules just took effect and could have a profound impact on the efforts by U.S. companies to obtain toeholds in the Chinese market.

The rules allow share swaps as a method of acquisition for the first time, which will simplify the structure in many foreign acquisitions. But the new regulations also dramatically increase the number and types of transactions that require central government approval, in many cases multiple agency approval. For example, a potential acquisition by a foreign company of a business in a "sensitive industry," or which incorporates a well-known Chinese brand, will require approval.

Larger acquisitions, as well as those by offshore "special purpose companies" set up to make the purchase (including public "shell" companies used in reverse merger transactions with PRC companies), will face layers of government analysis, including the consent of the Ministry of Commerce or MOFCOM. I expect that, at least in the short term, any transaction requiring approval, even if approval is expected to be obtained, will be slowed while the consent process is undertaken.

Why is this happening now? In recent years, the savings rate in China has skyrocketed, exceeding the country's domestic investment needs, thereby reducing the need for foreign direct investment (FDI). This is coupled with the PRC's growing concern about foreign control of domestic companies against a relatively small annual FDI of about $60-70 billion.

The new rules also appear, in part, to have been triggered by the Carlyle Group's attempt to acquire a stake in Xugong Group Construction Machinery, a $350 million deal which has been stalled in government approvals for nearly a year. Xugong controls the majority of China's crane and road-paving equipment market. Yet some are surprised at the timing, as many thought any new tightening of FDI would wait until after China is showcased in the 2008 Beijing Olympics. China's role in the global economy is also a concern which led to this change. Li Deshui, former head of the National Bureau of Statistics, has stated: "If China lets multinationals' malicious mergers and acquisitions go ahead freely, China can act only as labour in the global supply chain." Others have expressed concern about foreign owners which have shut down R&D departments of Chinese enterprises, potentially weakening China's technological development.

The government believes these changes represent a step in the maturity of the regulatory environment for an M&A business that is still in its infancy, encouraging FDI but preventing both undervaluation of PRC assets in foreign sales and the loss of important companies.

Many specifics still need to be ironed out, and it appears that some ambiguous aspects of the new regulations will be clarified in the months to come. For example, it is not yet clear what industries are considered "sensitive" by MOFCOM.

To avoid discouraging FPI in China through these new regulations, the Chinese government needs to ensure that foreigners applying for approval for an acquisition see a fair and speedy process. Resources should be focused on necessary staffing and funding to deal with what is likely to be a mountain of requests for approvals. All efforts should be made to avoid even an appearance of favoritism or other improper activities in seeking or obtaining approvals.

In addition, as soon as possible MOFCOM and the other agencies should clarify that which is still vague in the new regulations, so that practitioners can plan and advise foreign companies properly as they are contemplating transactions. Ultimately, hopefully this simply becomes the "new normal" for M&A players and deals move forward without significant impediments or confusion.

One thing is for sure, however, those foreign players interested in acquiring Chinese companies will now face greater scrutiny and review of their transactions than ever before.

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