Assisting a Private Equity Carve-Out Acquisition in China

A UK private equity firm acquiring a marketing and design team from a US PR company in Shanghai needed a fully operational WFOE in place before deal close, and a seamless employee transfer with minimal attrition. Acadia set up the entity, structured individual transfer agreements, and achieved a 90% retention rate.

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Client

A UK-based private equity firm focused on high-growth sectors across Asia. The firm was in the process of acquiring the marketing and design department of a US PR company operating out of Shanghai, a team of 16 graphic designers who would form the foundation of the new business unit.

Challenge

The acquisition required a new WFOE to be fully operational before deal close so that employees could transfer without interruption to benefits, payroll, or social insurance
Each of the 16 designers needed individual transfer agreements negotiated in line with PRC Labour Law, preserving existing service years and entitlements
Commercial contracts with existing clients and receivables had to move cleanly into the new entity
The PE firm needed internal control processes appropriate for a newly carved-out business

Solution

Entity setup: While the client completed due diligence, Acadia incorporated a new design consulting WFOE in Shanghai, fully operational with company chops, bank accounts, tax registration, and VAT invoicing capability, in parallel with the deal timeline.

Employee transfer: Acadia prepared individual employee transfer agreements for all 16 designers that preserved prior service years and benefits as required under Chinese labour law. To support retention, the client offered a sign-on bonus on Acadia’s recommendation.

Commercial continuity: Acadia prepared official notification letters to all existing business partners announcing the change in entity, and drafted new commercial contracts for current clients under the new WFOE. All outstanding accounts receivable were transferred in to ensure the new entity’s tax position was correctly established from day one.

Internal controls: Acadia created a Standard Operating Procedure (SOP) for the finance function and an Employee Handbook tailored to the new company’s structure and headcount.

Outcome

Metric	Result
Employee retention	90% (14 of 16 designers transferred)
Entity operational by	Deal close date
Commercial contracts transitioned	100% of existing client base
Compliance risk	Mitigated: all AR/AP, tax records, and labour contracts correctly structured

The carve-out was completed without business interruption to clients or employees. The new WFOE traded independently from day one under the PE firm’s ownership.

Planning a China acquisition or carve-out? Request a consultation to discuss entity setup, employee transfers, and compliance structuring.