某咨詢結構咨詢報告

某咨詢結構咨詢報告D. RestructuringoptionsD1. Generaloptionsandpre-selectionInChina,asfarasforeigninvestmententerpriseisconcerned,thereexistthreemainrestructuringcategoriesRestructuringofinvestmentprojects

inChinaTurnaroundofJVEquitystructurerestructuringWithdrawalOnthebasisoffavorableresultsofmarketandcompetitiveanalysis,optioncategoryIandIIaremostcommonlyusedforcompanies’long-termdevelopmentCharact

-eristicOption1:TurnaroundofJVOption2:

EquitystructurerestructuringPerformanceimprovementwithoutchangingtheequitystructurePerformanceimprovementwithequitystructurechangeBuyoutOption3:WithdrawalWithdrawalfromexistinginvestmentprojectsSelloutequityTerminationBankruptcyFreezing(walkaway)ExlesBoschSiemensSiemensBayerHenkelABBDinovaBOSCHThermoTechnikLindeforklifterWhirlpool’srefrigeratorJVinBeijingPeugeotGuangzhouLiebherrSiemensThegeneralmethodologyistofilteroptionswithkillercriteriaandhardcriteriatoscreenoutrestructuringalternativesPotentialoptionsPre-selectionIn-depthevaluationConclusionRestructuringalternativesKillercriteriaHardcriteriaSolvekeyproblemsSecurefuturesuccessGeneralCostTimeRiskIntegration(GSHA-GDAI)Sales&marketingManagementOthersProcedureImplementationAtpre-selectionstage,turnaround,selloutequityandfreezingcanbeeliminatedwithkillercriteriaPre-selectionChinesePartnerin?KillercriteriaSolvekeyproblemsSecurefuturesuccessPass?RemarksI.TurnaroundII.Equitystructurerestructuring-EquitybuyoutIII.Withdrawal(1)Selloutequity(2)Termination(3)Bankruptcy(4)FreezingYesNoYesNoNoYesNoYesNoYesYesNoNoYesNoYesYesNoNoYesNoYesYesNoIt’sveryhardtoimplementfutureintegrationandconsolidationwithoutfullcontroltheboardofdirectorsGeberitgainsfullcontrolIt’salmostimpossibletofindabuyerItopensthewayforanewstartItopensthewayforanewstartFreezingwillruinGeberit’srelationwithlocalgovernment,thuscausingpotentialhurdleforfuturepresenceandtroubletoGDAITerminationToceaseoperationandliquidatetheJVFreezingWithdrawallforeignmanagementteamandexpatriateemployeesandleavetheJVtoChinesepartnerwithoutfileterminationorbankruptcy.It‘sanillegalbutwidelyadoptedpracticeinChinaBuyoutTobuyouttheequityownershipfromChinesepartner,thusturningtheJVintoawhollyforeignownedenterprise(WFOE)BankruptcyTofilebankruptcyandliquidatetheJV.IfthecreditorisJV’sforeignparentcompany,tofilebankruptcybycreditoristheoreticallypossiblebutpracticallyinfeasibleinChinaBack-upDefinitionofsomeoptionsSomekeyproblemsofGSHAarecloselylinkedtotheChinesepartner.AcleanbreakcanonlybeassuredbyaseparationTheVGMofLidamaintainsanunofficialnetworkconsistingofformerLida-employees.HeoftenusesthisnetworktosecurehispersonalinterestsSincethisVGMhasdirectaccesstopersonnelfiles(Fuehrungszeugnis)someemployeeswereblackmailediftheydidn’tcooperatewithhimIncontextwiththeNanxiangproductionsitetheVGMshouldhaveacceptedaconsiderableamountofkickbacks,saidsomeformerGSHA’semployeesBack-upKeystatementfromsomeformerGSHAemployeesonMr.Cai(1)Thereisnocooperationbetweentwopartnersfromtheverybeginning.Mr.Caisaid"wemakethisjointventurebankruptin3years.Wecanrestartagainbyourselves.""ItdoesnotmatterthatGeberitislosingmoneyinChina.IttookGeberit10yearstomakeprofitsoverseas,itneedsthesametimeinChinaaswell.Anyhow,itisGeberit'smoney."Mr.CaihasextensivenetworkintheindustrybuthedoesnotuseitforGeberitproducts.Incontrast,heintroducedthebusinessforothercompaniesthathavecloserelationshipwithhim.AlltheimportantdecisionsregardingpersonnelrecruitingaremadebyMr.Cai.MrSchuettedoesnotandisnotabletoinfluencethesedecisions.SomeofthesedecisionsareagainstGeberit'sinterests,forexle,someChineseemployeesintendnottodotheworkproperlyandsomekeypersonsinkeypositionsarenotqualified,suchasproduction,stockcontrol,CCSetc.Thecontrolsysteminthecompanyistotallyscrapped.Atthebeginningofthejointventure,aboutRMB600Kmachinesand100mouldswerelostwithoutanyrecord.Thewarehouseonlychecksthebookrecordsratherthanrealgoods.Asaresultthereisdifferencebetweenthebooknumberandtherealamount.Thisisespeciallyseriousontheincomingrawmaterials.Theysuspectthatsomefinancialaccounts,especiallydonebyMr.Changdaohua,arefalse.Theso-calledscrappedproductsandthewasterawmaterialsaresoldinanottransparentway,i.e.nospecificpriceandnoinvoice.TheresponsiblepersonisappointedbyMr.Cai.Duetothepoorcontrolsysteminallareaswasteishigh.Auditingisextremelynecessary.Back-upKeystatementfromsomeformerGSHAemployeesonMr.Cai(2)Geberitproducts'technologicalknow-howisobtainedbyLida.Mr.CaiassignedonepersoninCCS(Ms.YingHua)andhasobtainedrelevanttechnologicalinformation.ItispossibleforLidatoproducesimilarproductsifGeberitwithdrawsfromthejointventure.Moreseriously,itisbelievedthattheknow-howofDuofixhasbeenreleasedtoTOTO.Thebusinessoriginalplantlocationis100metersfurthernorth,withoutanyworkinvolvedforthenewlocation.MorethanRMB100khasbeenspentonworkmentionedabove.AndMr.CaiinsistedoncontractingtheelectricitysupplysystemtoonelocalelectricengineeringcompanywithacostofRMB1560K.TheformermanufacturingplantofLidainChangpingRoadwasleasedtoanothercompanywithannualrentofaroundRMB1millionwhichishandedtoMr.Hong/SBMCInyear1998,Mr.Caiusedcompany’smoneytobuy5Peonycards(debitcards)withvalueofRMB30keachandsenttofivekeypersonsaspresents,includingMr.HongandhimselfBack-upAlthoughLida’sproductsaccountfor52%ofGSHA’stotalsalesvolume,theiractualgrossprofitmarginis-7%.Meanwhile,Lidaproducts’salesvolumesharplydeclined60%from1999to2000GSHAsalesvolume(2000)Lidaproducts’salesvolumeGrossprofitmargin-7%LidaGSHA’productsImportedGrossprofitmargin-7%Grossprofitmargin36%Unit:RMB‘000WatertankPipe&fittingBack-upActualgrossprofitmargin:4%ThereasonbehindLidaproducts’sharpdeclineisthechangeingovernmentpolicyonresidentialbuildingconstructionandtheshrinkageinlowendsanitarywaremarketGovernmentTheoriginalpolicythatrequiredallwelfareresidentialbuildingtohavesanitaryware(lowend)includedatconstructionstageisinvalidWelfarehouseallocationsystemisdisappearingShrinkageoflowendmarketHousedecorationbecomesapopularconsumptiontrendMediumandhighendsanitarywareproducts’brandawarenessimprovedwhichincreasebrandsensitivitysubstantiallyConsumerswithgrowingpurchasingpowerareturningtomediumandhighendsanitarywareproductsBack-upD2.In-depthevaluationCost,time,riskandpotentialimpactonfutureintegrationconstitutehardcriteriaindeterminingwhichoptiontochooseOptionsHardcriteriaEquitybuyoutTerminationBankruptcyCostRiskTimeInte-

grationD.2.1EquitybuyoutBuyingoutLida’sequityisfavorabletofutureintegrationbutthebuyoutpricehavetobeagreedbyChinesepartnerExplana-tionTotalCriteriaCostBuyoutprice:USD149,0001)Employeedismissalfee:

USD80,000~USD340,0002) (90%ofemployeeswillbedismissed)Auditfirm:

USD20,000249,000~509,000USDRiskLidaisnotwillingtoselloutequityLidaasksfortoohighprice,andpricenegotiationbreaksdownGovernment’sconcernonunemploymentNanxiangdisagreestoselloutequity-to--TimeNegotiationperiod

-max.2monthsExecutiontime

-1monthMax.3monthsIntegrationGeberithasfullcontroloveritsChinaoperationFreechoiceofhowtorestructureandconsolidatetheoperationsinChinaNoneedtocloseShanghai’soperation+++1):UnderthepremisethattheChinesepartneragreewiththisprice2):WhethertotakeLidaemployees’servicetimeinShanghaiLidaintoaccountresultsindifferentamountofemployeedismissalfeeProvidingLidaandNanxiangagreeonequitytransfer,thewholetransferprocedureconsistsof3majorstepsandlastfor2~3months1TheinvestorsofanFIE1)(andthethirdparties)agreeontheequitychange(ortransfer)Awrittenagreementmustbesignedbyallparties2TheFIEsubmitstheapplicationforequitychangetothelocalForeignInvestmentCommission(FIC)TheFICmustreplywithin30daysaftersubmission3UponapprovaltheFIEmustcompleteallregistrationproceduresattheAdministrationforIndustryandCommerceandotherrelatedGovernmentalbodieswithin30days1):ForeignInvestedEnterpriseBack-upAnequitytransferagreementmustcoverthefollowingcontentsBack-upEquitytransferagreementName,addressandlegalrepresentativeofboththetransferorandthetransfereeSharesandpriceofthetransferredequityDateandwayofequitytransferRightandresponsibilitiesofthetransfereeConsequencesincaseofviolationApplicablelawsandconflictresolutionValidationperiodandterminationoftheagreementDateandplaceoftheagreementsingingForGeberit,thebottomlineofbuyoutpricecouldbedeterminedonthebasisoffinancialcomparisonanalysisBack-up

Buyout

Dismissalfee: USD250,000

(90%ofemployeesdismissed)Auditfee: USD20,000Buyoutprice: USD149,000

Dismissalfee: USD360,000Auditfirm: USD20,000lawfirm: USD20,000Tariffreturn: USD19,000Total: USD419,000BankruptcyD.2.2TerminationGenerallyspeaking,terminationisunfavorabletoChinesepartner,however,itcanbeusedinsomecasestoachievetheforeignpartner’sobjectiveveryquickly(personalincentive)Explana-tionTotalCriteriaCostEmployeedismissalfee:

USD100,000~USD360,0001)Auditfirm:

USD20,000Tariffreturn:

USD19,000Personalincentive139,000~399,000USDRiskLidaisnotwillingtoselloutequityDismissalfeedisputeGovernment’sconcernonunemployment-to---Negotiationperiod

-max2monthsTerminationperiod

-within4monthsTime3~6monthsIntegrationUndercurrentsituation,providingChinesepartneragrees,terminationcanbethemostfavorableoptionforGeberitbutit’sveryhardtoreachagreementwithChinesepartnerwithoutincentiveterms++1):WhethertotakeLidaemployees’servicetimeinShanghaiLidaintoaccountresultsindifferentamountofemployeedismissalfeeComparedtobankruptcy,terminationgenerallyhaslowercost,shorterexecutionperiodandmoresimpleprocedureinliquidationTerminationBankruptcyInitiatepartyJointventure(Boardofdirectors)Jointventure(Boardofdirectors)LiquidationprocedureRegularliquidationBankruptcyliquidationBoardofdirectorsGovernmentCourtAuditfirmLawfirmLiquidationcommitteeOthercostAuditfirmcostLawfirmcostOthercostLiquidationcostTime3~6months6~18monthsD.2.3BankruptcyInviewofcost,time,riskandfutureintegration,bankruptcyshouldbethelastchoiceforGeberitExplana-tionTotalCriteriaRiskCan’tgetgovernmentapprovalLida’soppositionDismissalfeedisputeNegativepressLoseeverythingincluding:investmentloan,accountreceivableandstaffs---Time6~18months (AlthoughtheChina’sBankruptcyLawprovisionthattheliquidationshouldbecompletedwithin6months,manycasesactuallylastformorethan1year6~18monthsIntegrationComplicatedprocesstokeepthebusinessrunningTotransferequipmenttoDaishanorNingbocouldbeverydifficult-CostEmployeedismissalfee:

USD100,000~USD360,0001)Auditfirm:

USD20,000Lawfirm:

USD20,000Tariffreturn:

USD19,000159,000~419,000USD1):WhethertotakeLidaemployees’servicetimeinShanghaiLidaintoaccountresultsindifferentamountofemployeedismissalfeeBankruptcyprocedureincaseofthedecisionmadebyboardofdirector1AllthemembersofBoD1)agreetobankruptthecompany.TheBoD

andthesupervisingbodyoftheChinesepartnersincaseofJVagreetodissolvetheFIE2)TheFIEappliestothelocalForeignInvestmentCommissioninordertoformallybegintheliquidationprocedure1):BoardofDirectors 2):ForeignInvestedEnterpriseLiquidationprocedure23456UponapprovaltheBoDmustorganizealiquidationcommitteewithin15daysofthebeginningofliquidationTheFIEmustprovidewrittennotificationofthenameandaddressoftheFIEandreasonsforliquidationtocustoms,taxauthority,bankswithwhomtheFIEhasanaccount,andetc.within7daysfromthestartoftheliquidationTheliquidationcommitteemustdisposeofassetsandthecreditsanddebtsoftheFIEPriorityforpayingoutdebts:liquidationexpenses;wagesandsocialinsurancepremiums;statetaxes;otherdebtsAftercompletingalltheliquidationworktheliquidationcommitteemustsubmitafinalliquidationreporttotheBoDforapprovalUponapprovalthereportmustalsobesubmittedtothesupervisingbodyandthelocalForeignInvestmentCommissionTheliquidationcommitteegoesthroughallthecancellationprocedureswiththecustoms,thetaxbureau,thelocalAdministrationforIndustryandCommerceandmakesandAnnouncementBack-upTheliquidationvalue(marketprice)ofGSHAwouldbeUSD2.51millionNon-currentassetsCurrentassetsItemsDevaluatedtotalassetsafterliquidated

Property,plant,equipment:USD2,142,000

Inventory:USD1,002,000

AccountPayable:USD524,000

Totalcashandsecurity:USD208,000Totalassets

Totalassets(Bookvalue):

USD

3,951,000Liquidationvalue(Marketprice):

USD2,510,000Devalutedproperty,plant,equipment:

USD2,142,000x0.6=USD1,285,000USD1,002,000x0.6=USD601,000524,000x0.8=USD419,000208,000XI=USD208,000Back-upD.2.4ComparisonofthealternativesEquitybuyoutisclearlythebestchoiceforGeberit.TerminationcanbeveryattractiveifbothpartiescanachievemutualunderstandingCostRiskEquitybuyoutTimeIntegrationTerminationBankruptcyMax.3months-to--+++USD249,000~

USD509,0001)3~6months-to---++USD139,000~

USD399,000+Personalincentive6~18months----USD159,000~

USD419,0001):UnderthepromisethattheChinesepartneragreeandthefigurealreadyincluderedundancyrestructuringcostBuyoutisnotonlythemostbeneficialoptiontoGeberit,butalsototherestofpartiesaswell1):Personalincentives 2):Re-investmentBuyoutTerminationBankruptcyMr.CaiMr.Hong/SBMCNanxiangGovernmentMunicipalGovernmentGSHAemployeesGeberitoto++oto+++++++++++to++++to+++--/++--/++---+---------------o+++:best ---:worst1)1)2)2)1)1)D3. FeasiblescenariosGeberitshouldstartthenegotiationquickly.Ifnoagreementcanbereached,bankruptcycouldbethelastoutcomewiththeconsequenceoflosingeverything(investment,loans,machines,staffetc.)

Negotiation2monthsStartImplementation1monthScenarioI:BuyoutImplementation3monthsScenarioII:TerminationExecution6~18monthsFall-back:BankruptcyAgreementAgreementNoagreementMin.time3monthsMin.time5monthsMin.time8~20monthsEachscenariowillresultindifferentorganizationalrestructure

Dismissalfee(90%employee)BuyoutLidaClosingcost(Ningbo)LocationMachine

PotentialhighermarginSynergyPricetoohighNoagreementwithLidaUprisingofemployees,sabotageFindingmanagementteamScenarioI:BuyoutScenarioII:TerminationFall-back:BankruptcyBuyoutofSBMCHeadquartersSales&MarketingCCSProductionClosedProduction

Dismissalfee(allemployees)Write-offinvestmentLoweroperatingcostLogisticManagementteamLay-offeasierLongerthanbuyoutLossofallloansandaccount

receivableNegativepressSharpdropinbusiness

Dismissalfee(allemployees)Write-offinvestmentTransfercostManagementteamLogisticLoweroperationexpensesPotentialhighermarginMuchlongerthanbuyoutLossofallloansandaccount

receivableNegativepress

DropinbusinessTerminationofGSHARepofficeofGDAISales&MarketingCCSHeadquartersandimportProductionBankruptcyofGSHARepofficeofGDAISales&MarketingCCSHeadquartersandimportProductionShanghaiNingboDaquCostBenefitRiskHowevertheorganizationalstructureforscenarioIshouldbeaimedforasGeberit’sfuturestructureinChinaNoagreementAgreementonterminationAgreementonbuyoutCloseNingboNingboasheadquartersScenarioIFall-backScenarioIIGDAIRe-openRe-openGSHArbaddressesARGENTINARolandBergeryAsociadosS.A.InternationalManagementConsultantsTte.Gral.J.D.Peron346-Piso5°1038BuenosAiresPhone ++54-11-43421498Fax ++54-11-43455758AUSTRIARolandBerger&PartnerGes.m.b.HInternationalManagementConsultantsFreyung3/2/10A-1010ViennaPhone ++43-1-536020Fax ++43-1-5360260BELGIUMRolandBergerInternationalManagementConsultantsS.A.100,BoulevardduSouverainB-1170BrusselsPhone ++32-2-6790170Fax ++32-2-6729222BRAZILRolandBerger&PartnersS/CLtda.RuaAlexandreDumas,2220-5°andar04717-004S?oPaulo/S.P.Phone ++55-11-51818366Fax ++55-11-51816919CHINARolandBerger(Shanghai)InternationalManagementConsultantsLtd.72XingGuoRoad3FBusinessBuildingShanghai200052,P.R.C.Phone ++86-21-62126411Fax/Phone ++86-21-621274716/F.EastLakeVillasOfficeBuilding35DongzhimenwaiStreetBeijing100027,P.R.C.Phone ++86-10-64677069 or7093or7094Fax ++86-10-64677628CZECHREPUBLICRolandBerger&PartnerGmbHInternationalManagementConsultantsVsehrdova2/560CS-11000Prague1-MaláStranaPhone ++420-2-57311161Fax ++420-2-57311163FRANCERolandBerger&PartnerGmbHInternationalManagementConsultants16,avenueGeorgeVF-75008ParisPhone ++33-1-53670320Fax ++33-1-53670375GERMANYRolandBerger&PartnerGmbHInternationalManagementConsultantsAltMoabit101bD-10559BerlinPhone ++49-30-3992750Fax ++49-30-39927303Georg-Glock-Stra?e3D-40474DüsseldorfPhone ++49-211-438901Fax ++49-211-4389140BockenheimerLandstra?e42D-60323FrankfurtPhone ++49-69-170030Fax ++49-69-17003502Stadthausbrücke7D-20355HamburgPhone ++49-40-376310Fax ++49-40-37631102Arabellastr.33D-81925MunichPhone ++49-89-92230Fax ++49-89-9223202L?ffelstra?e40D-70597StuttgartPhone ++49-711-76730Fax ++49-711-7673401GREATBRITAINRolandBerger&PartnersLtd.InternationalManagementConsultants12StratfordPlaceGB-London

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