Though Chinese companies have a long way to go, Wolf believes they have strong potential to drive enterprise value by adding IT Services capabilities. IT Services is currently creating more enterprise value than reselling products. 

So, what's the key takeaway for Chinese IT Companies?

Cross-border transactions are the fastest and cheapest way to gain a strong foothold in the U.S.  There is immediate acquisition of talent, intellectual property, and global customers.  Why? Because cross-border transactions can...

1. Deliver immediate positive financial impact through acquiring a platform company

2. Leverage lower-cost outsourcing teams by obtaining complementary service offerings

3. Build customer relationships and sales capacity to cross-sell new products and services

4. Establish geographic footprints in strategic U.S. markets

5. Generate cost synergies by consolidation with a current U.S. presence

6. Gain capabilities in infrastructure, management, systems and technology further expanding U.S. presence

However, for Chinese companies making deals work is harder than for other non-U.S. companies.  That is the syndrome -- or as we deemed it -- the China IT Syndrome.

Marty Wolf being interviewed by the Dalian Finance & Economics Channel at CISIS

The fastest path to enterprise value -- acquisition of U.S. IT companies -- is an especially difficult task for Chinese companies.  The reason?

The cultural fit of two companies is as important as the mechanics of a deal. Creating value across two distinct cultures is an art, not a science.

To get a deal to work requires the following:

1. Intimate knowledge 
   of the Chinese markets and the niche U.S. market players
2. A dedicated team that understands both cultures. It's critical to have employees on both sides who are bilingual in Mandarin and English
3. A focused work plan to properly pace each phase of the transaction assuring that parties remain interested without destroying value 
4. Extensive experience in U.S. M&A transactions by the China team
   to help determine the price, and understand the customs and practices  
5. Finesse in negotiations: Both sides need to obtain the best value without discouraging potential targets
6. Understanding of structuring transactions through a variety of flexible vehicles

Most of all, a successful deal requires proactive, aggressive involvement with due diligence, financing, tax considerations, disclosure obligations, regulatory hurdles, corporate governance, securities law and antitrust issues.

In a word, it's complex.

When you add cultural differences, deals are even more complex.  But they can -- and will -- get done.

Why?  Because despite The China IT Syndrome, the upside is great in creating enterprise value when you can offer better, faster, cheaper services to enterprise companies across the globe.

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