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Inflated Assets of an Asian Family-Owned Conglomerate

February 1, 2017

Grapevine assisted a private equity investor map out a Asian family-owned conglomerate’s diversified assets and capital situation.

 

Like many privately run companies, this conglomerate built up its empire by sucking up funds from both local government’s policy-driven subsidies and foreign investment from institutions with superficial knowledge about the business environment in Asia. The company told fraudulent stories about its market dominance, high-tech ambitions, and overseas IPO plans.

 

The following research methods were applied during the project: 

 

Field visits - Onducting field visits in west china to verify the activities in the target’s various subsidiaries’ physical facilities and their land ownership status.

 

Source inquiries - Interviewing with sources from the banking and private financial sectors, to gather information about bank guarantees, loans, debts, and pledges under shadow banking (which revealed a significant amount of duplicated mortgages and self-guaranteed bank loans between sister companies).

 

Channel checks - Gathering production and distribution information from the market and the target’s sales team to evaluate the target’s liquidity situation.

 

Our research concluded that more than 50% of the conglomerate’s assets were fabricated, and its business was not liquid and lucrative enough to repay its loans.

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