infodatos Chapter 36 -1
Chapter 36 -1
Ling Yun knew that enthusiasm and a business plan alone were far from enough to leverage the latter. He needed a compliant and robust "lever"—an authoritative asset appraisal report.
Through the introduction of Mr. Xu Hua, the secretary of the school's Youth League Committee (one of Mr. Xu's students worked at PricewaterhouseCoopers' Shanghai office), Lingyun contacted this internationally renowned accounting firm. Upon learning that it was a state-owned enterprise restructuring project in a prefecture-level city in mainland China, the firm initially showed little interest. However, after Lingyun promised to pay a substantial fee and hinted that the matter had attracted the attention of a certain leader in the city, they finally agreed to send a capable team.
150,000 yuan! This appraisal fee, which is a huge sum these days, was transferred out by Ling Yun without batting an eye. He knew that the authority of this report would directly determine the tone of all subsequent negotiations.
The PwC team was extremely efficient; three accountants and their assistants were stationed at the city's electronics factory for a full week. They sifted through mountains of ledgers, inventoried every rusty piece of equipment, measured the dilapidated factory buildings and overgrown land, and repeatedly verified information with the remaining finance staff and experienced workers. Their professionalism and meticulousness bordered on the ruthless; every figure required supporting original documentation.
Finally, a nearly 100-page, beautifully bound "Asset Appraisal Report of the Municipal Electronics Factory" was presented to Section Chief Wang, the representative of the Municipal State-owned Assets Administration Bureau.
The report's core conclusions are cold and brutal:
"Based on our careful investigation and assessment, as of the valuation date, the market value of the total assets of the Municipal Electronics Factory (including land, factory buildings, equipment, inventory, accounts receivable, etc.) is RMB 7,800,000.00."
"However," the PwC project manager, who was giving the explanation, pushed up his gold-rimmed glasses, his tone completely flat, "their verified bank debts, overdue taxes, employee wages, and various accounts payable total RMB 8,800,000.00 (¥8,800,000.00)."
He paused, looked around at everyone present, and delivered his final verdict:
Therefore, the net asset value of the municipal electronics factory is assessed at: negative one million yuan (¥-1,000,000.00).
One million negative!
Despite being mentally prepared, when the figure was confirmed in black and white by a top international accounting firm, everyone present except for the PwC team and Ling Yun looked extremely grim.
Section Chief Wang from the State-owned Assets Supervision and Administration Commission, a middle-aged cadre around fifty years old with a stern face, slammed the copy of the report shut, his fingers pounding the table, his voice filled with suppressed anger:
"Absurd! What kind of assessment is this?! The electronics factory occupies such a large plot of land, located on the outskirts of the city, with huge potential for future appreciation! Much of that equipment was imported from abroad back then; even if it's old now, it would fetch more than this price if dismantled and sold as scrap metal! And what about all that inventory of raw materials and semi-finished products? Are they worthless? Seven million in assets? I'd say it's worth more than ten million!"
He became increasingly agitated as he spoke, standing up and pointing at the report: "What's even more outrageous is that this report only shows debt and negative assets. Did it assess the skilled workers our electronics factory has trained over decades? Did it assess the intangible assets of the 'Municipal Electronics Factory' brand? Nothing at all! Based on just a few cold, hard numbers, they want to classify our perfectly good state-owned factory as having negative assets? I can't sign this! The State-owned Assets Supervision and Administration Commission will never accept this result!"
Section Chief Wang's reaction was exactly what Ling Yun had expected. Last night, after he showed the restructuring report and asset appraisal report to his uncle, his uncle told Ling Yun that the professional report clearly and accurately assessed the municipal electronics factory, but he definitely couldn't take over the factory. No one would sign it, and no one dared to take the risk of losing state-owned assets.
The atmosphere in the office froze instantly.
The PwC project manager remained expressionless, his tone still professional yet distant: "Section Chief Wang, our valuation is based on market value principles and generally accepted accounting standards. The land value referenced recent industrial land transactions in the surrounding area. The equipment valuation considered depreciation, functional depreciation, and economic depreciation. Bad debt provisions were made for accounts receivable based on their aging and recoverability. As for the skilled workers and brand value you mentioned… I'm sorry, under current valuation standards, they cannot be reliably monetized and included in the net asset valuation."
"Unmeasurable? That means your standards are flawed!" Section Chief Wang retorted, "In China, workers are a company's most valuable asset! You foreigners don't understand this asset!"
Seeing that the negotiations were about to reach a stalemate, Ling Yun, who had been silent all along, spoke up. He did not directly refute Section Chief Wang, but instead changed his perspective.
"Section Chief Wang, you're right. Skilled workers are indeed the most valuable asset of an electronics factory; they are priceless." Ling Yun first affirmed the other party's point of view, easing the atmosphere. "PwC's report is based on internationally accepted, conservative financial standards. It sets the 'floor' for our negotiations, that is, the worst-case scenario."
He picked up the report and turned to the asset details: "The core problem with the electronics factory is its excessive debt burden, which has devoured all asset value. If we put aside the debt and just look at the equipment, the land, and especially the skilled workers you mentioned, together they should have been productive and valuable, right?"
Section Chief Wang snorted but did not deny it.
"Then," Ling Yun proposed a solution to break the deadlock, "could we, while respecting PwC's assessment of tangible assets and liabilities in this report, separately conduct a supplementary valuation of the electronics factory's 'skilled technical worker team,' a unique 'intangible asset' with Chinese characteristics?"
"Supplement the valuation?" Section Chief Wang frowned.
"Yes," Ling Yun said clearly. "We can set the overall value of the existing, verified, and registered skilled workers in the electronics factory (based on years of service and skill level) at 1.2 million yuan. This value is based on their ability to immediately generate productivity, providing a core guarantee for resuming production after I take over."
He looked at Section Chief Wang and the people from PwC: "In this way, the total value of the electronics factory can be adjusted to: PwC's assessed tangible net assets of negative one million, plus the value of the workforce of one million two hundred thousand, resulting in a final net value of two hundred thousand yuan."
"My Xinghuo Technology will pay this 200,000 yuan as formal consideration for state-owned assets, to fully acquire all the property rights of the municipal electronics factory and assume all its debts."
Section Chief Wang fell into deep thought. This plan cleverly circumvented the political landmine of "transferring state-owned assets as liabilities." Although only 200,000 yuan was ultimately recovered, a drop in the ocean compared to the historical investment, at least on paper, the state-owned assets were transferred at a "positive" value, thus preserving the bottom line. The assessed value of 1.2 million workers, though inflated, conformed to the political correctness of "the working class being the masters of the country," making it easier to justify during the report.
The PwC representatives exchanged a glance; though they didn't explicitly state their opinion, their eyes revealed a hint of approval. This supplementary proposal did not affect the independence and professionalism of their original report; it was merely a commercial agreement reached between the two parties outside of the report itself.
After a long silence, Section Chief Wang slowly raised his head, looked at Ling Yun, and said with a complicated expression, "Two hundred thousand... Comrade Ling Yun, you've got a clever plan. However, your supplementary explanation... isn't entirely unreasonable. Workers are indeed our greatest asset."
His tone had softened.
"However," he emphasized, "this is just my initial opinion. Such a big matter must be reported to the bureau leadership, and may even require approval from the city's relevant leaders. I need to take your idea of 'supplementary worker value assessment' back to report."
"I understand, this is the proper procedure." Ling Yun knew that the most crucial step had been taken.
The following days were a silent struggle and a series of approvals. Section Chief Wang brought Lingyun's proposal back to the State-owned Assets Supervision and Administration Commission, where it reportedly went through several rounds of heated discussions. Some insisted that 200,000 yuan was too cheap, while others worried about the subsequent risks. But ultimately, faced with the hot potato of the electronics factory, the increasingly severe pressure of layoffs, and the hard promises in Lingyun's proposal to "assume all debts" and "receive and resettle all employees," coupled with the political security of the "200,000 yuan" transfer price, the proposal was finally approved.
When Ling Yun received the approval document from Section Chief Wang, stamped with a bright red seal and authorizing Xinghuo Technology to acquire all the property rights of the Municipal Electronics Factory for 200,000 RMB, he knew he had obtained a key to unlock the heavy shackles.