Private Chinese companies drawn to U.S. initial public offerings by the cachet and strong returns from a U.S. stock offering are being courted by a cadre of American corporate law firms jockeying for a piece of the burgeoning China market.
A spate of U.S. IPOs by Chinese companies since last year has engaged lawyers as managers’ or issuers’ counsel from such firms as Latham & Watkins; Shearman & Sterling; Skadden, Arps, Slate, Meagher & Flom; and Sullivan & Cromwell — all of which have offices in China and Hong Kong.
Even firms without an Asian presence, such as Loeb & Loeb and Philadelphia’s Cozen O’Connor, have found room on the field. Cozen, for example, has represented special purpose acquisition corporations (SPACs), a type of public equity fund formed to target companies with a certain industry or geographic profile, such as a Chinese company.
Private equity investment in China is driving the trend toward U.S. listings and fueling the need for U.S. lawyers to assist Chinese companies and attorneys. The bottom line for Chinese companies is often just that: the chance to raise more cash in the public markets than they could by listing elsewhere, such as Hong Kong.
“In China, everyone wants to get registered to raise funds in the public markets in the U.S.,” said Latham’s David Zhang, a partner in the firm’s Hong Kong office who has worked on many such deals. “It’s a good opportunity for firms like us in the U.S.”
Strong interest from the Chinese companies in the U.S. markets, coupled with the intricacies of such deals, translates to a glut of corporate work for those with the language skills, ties to the investment banking community and Chinese deal-making experience to stake a claim in the China market.
Work can include setting up an offshore holding company in the British Virgin Islands or the Cayman Islands, instructing the Chinese companies in the U.S. regulatory requirements, drafting the prospectus of the offering for the Chinese law firms and helping to oversee the company’s shift to U.S. accounting standards. Once the deal is closer to fruition, U.S. lawyers perform the standard work with the U.S. Securities and Exchange Commission and the chosen stock exchange.
“Our role is to be the international law firm that knits it together, that weaves together the various threads,” said Skadden’s Michael Gisser, a Los Angeles lawyer who co-leads the New York firm’s Asia Pacific practice. Skadden was issuer legal adviser for the IPOs of JA Solar Holdings Co. Ltd. and 3SBio Inc., both of which were listed on Nasdaq in February.