Asimco-Nanyue Joint Venture in China

Abstract

This case is written for a course on emerging markets finance. It can be used to teach valuation, merger and acquisition, and financial forecasting in an emerging market setting. Intrigued by growth opportunities in China, Jack Perkowski, a retired Wall Street investment banker, raised a venture capital fund with the backing of two large U.S. institutions in 1994 to found Asian Strategic Investment Company (ASIMCO) to explore private equity investment opportunities in China. After visiting more than 100 automotive component factories in China, Perkowski and his partners identified a few state-owned factories as potential equity joint venture partners. On top of the list was Nanyue Fuel Injection Pump Assembly Company, Ltd. (Nanyue), one of Chinas largest fuel injection pump manufacturers. After three months of negotiation, the two parties struck a deal under which ASIMCO and Nanyue would enter into a joint venture with ASIMCO holding the majority ownership. Should Perkowski and his partners give this joint venture agreement their final approval? And if so, how should Perkowski integrate and restructure its state-owned partner, Nanyue? More generally, should ASIMCO invest in Chinas automotive component industry?