Chapter 7Tug of War
After the announcement, the board of SDB met for two and a half hours on Sunday, September 29, 2002, and approved the agreement empowering Newbridge to exercise control over credit decisions.
Without knowing whether the top leaders of China's government would allow the deal to proceed, we had held off launching a full‐scale due diligence process—a thorough financial checkup for SDB. These were massive, expensive operations, involving teams of lawyers, bankers, and consultants and often costing millions of dollars. Now that we had received the green light, though, we assembled a large team to start doing the necessary digging. We needed to learn all we could about the operations and the true financial health of SDB. It would be a months‐long process. A small team from Newbridge Capital would work with advisors from the investment bank Morgan Stanley, the auditing firm PwC, lawyers at Cleary Gottlieb and Fangda (the Chinese law firm), the consulting firm A.T. Kearney (ATK), and others. On its side, SDB would be assisted by Salomon Smith Barney.
All these institutions and individuals would be tasked with combing through the bank's accounts and financial records, focused on a few core questions: What did SDB's loan portfolio look like? How many nonperforming loans were on its books? What were the potential losses from the bad loans? And what was the commercial potential for the bank?
The due diligence work kicked off on the same day that the SDB board gave the ...
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