Mergers & Acquisitions
and Due Diligence
A Legal Perspective
Master of Professional Accounting, SMU
Stefanie Yuen Thio
Joint Managing Director of TSMP Law Corporation
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Types of M&A transactions:—
Sale & Purchase of shares
—
Sale & Purchase of business or assets
—
Take-over of public company
—
Scheme of Arrangement (Singapore company)
—
Merger of 2 Singapore incorporated companies
—
Reverse Take-overs (RTO)
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SALE & PURCHASE OF SHARES
Shareholders
Agreement
Remaining
Shareholders
Seller
SPA
Buyer
Target
Company
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SALE & PURCHASE OF SHARES
Key Features:
i.
Buying a company, a separate legal entity, with all its assets and
liabilities
ii.
Inherit management team
iii.
Inherit regulatory status
iv.
Inherit future contract liabilities
v.
Stamp Duty: 0.2% of higher of NAV attributable to the shares, and
purchase price
vi.
Shareholders’ Agreement
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SALE & PURCHASE OF SHARES
Key Risk : Hidden Liabilities
Accounting due diligence is key.
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SALE & PURCHASE OF SHARES
Special Consideration : Financial Assistance (Section 76 – (1) Companies Act)
A company shall not :
(a)
whether directly or indirectly, give any financial assistance for the purpose of, or in connection with:
(i)
the acquisition by any person, whether before or at the same time as the giving of
financial assistance, of :
(A) shares or units of shares in the company; or
(B) shares or units of shares in a holding company of the company; or
(ii)
the proposed acquisition by any person of :
(A) shares or units of shares in the company; or
(B) shares or units of shares in a holding company of the company;
(b)
whether directly or indirectly, in any way :
(i)
acquire shares or units of shares in the company; or
(ii)
purport to acquire shares or units of shares in a holding company of the company; or
(c)
whether directly or indirectly, in any way, lend money on the security of :
(i)
shares or units of shares in the company; or
(ii)
shares or units of shares in a holding company of the company.
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SALE & PURCHASE OF SHARES
Whitewash Requirements
—
Solvency Statement
—
Court Filing
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SALE & PURCHASE OF SHARES
Whitewash Requirements (Section 7A – (1) Companies Act)
A Solvency Statement is a statement by the directors of the company :
a)
that they have formed the opinion that, as regards the company’s situation at the date of the statement,
there is no ground on which the company could then be found to be unable to pay its debts;
b)
that they have formed the opinion:
(i)
if it is intended to commence winding up of the company within the period of 12 months
immediately following the date of the statement, that the company will be able to pay its
debts in full within the period of 12 months beginning with the commencement of the winding
up; or
(ii)
if it is not intended so to commence winding up, that the company will be able to pay its debts
as they fall due during the period of 12 months immediately following the date of the statement;
c)
that they have formed the opinion that the value of the company’s assets is not less than the value of its
liabilities (including contingent liabilities) and will not, after the proposed redemption, giving of financial
assistance or reduction (as the case may be), become less than the value of its liabilities (including
contingent liabilities).
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Sale & Purchase Agreement of
Business/ Assets
Seller
SPA
Buyer
Assets
Fixed
Assets
Real
Estate
Assets
Cash
Liabilities
Contracts
Licences
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Employers
Sale & Purchase of Business and Assets
Key Features: i.
Purchase of component parts
ii.
Employees S18A Employment Act
iii.
Cannot assign liabilities
iv.
Stamp Duty on shares and real estate
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Sale & Purchase of Business/ Assets
Key Risks :
-
Component Parts
-
Third Party Consents
-
Regulatory Licensing
Pre-deal due diligence is key.
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Take-over of a listed company
Public
Shareholders
Vendor
65%
SPA
Purchaser
35%
Listed
company
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Take-over of a listed company
—
Mandatory Take-over
—
Voluntary Take-over
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Take-over of listed companies
- Recent cases
Heineken
F&N
N.V.
40%
Real Estate
Assets
Soft Drinks
Business
41.9%
Asia Pacific
Breweries
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Take-over of listed companies
Key Features:
i.
Public Shareholders
ii.
Take-over offer and other Code requirements
iii.
Cash Confirmation
iv.
Offer Price
v.
Competition Commission clearance
vi.
Concert Parties
vii.
Requirement to raise price
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Take-over of listed companies
Key Risk :
-
Unsuccessful bid
-
Competing offer (incentives in the form of a
Break Fee)
-
Cash confirmation (Jade Technologies)
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Scheme of Arrangement
Shareholders
Investor
Creditors
Target
Company
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Scheme of Arrangement
Key Features :
i.
Must be Singapore company
ii.
Court process
iii.
Approval requirements
iv.
Is it a shareholder or a creditor scheme?
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Scheme of Arrangement
Key Risks :
-
Requirement of target company cooperation
-
Uncertainty and third party objectives
Use this for all-or-nothing scenarios like privatisation,
eg. SC Global
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Mergers and Amalgamations
1
Singapore
Company
Singapore
Company 2
2
Singapore
Subsidiary
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Mergers and Amalgamations
Key Features : Amalgamation Proposal (Section 215B – (1) Companies Act)
An amalgamation proposal shall contain the terms of an amalgamation under section 215A and, in particular:
(a)
the name of the amalgamated company;
(b)
the registered office of the amalgamated company;
(c)
the full name and residential address of every director of the amalgamated company;
(d)
the share structure of the amalgamated company, specifying :
(i) the number of shares of the amalgamated company;
(ii) the rights, privileges, limitations and conditions attached to each share of the
amalgamated company; and
(iii) whether the shares are transferable or non-transferable and, if transferable, whether
their transfer is subject to any condition or limitation;
(e)
a copy of the memorandum of the amalgamated company;
(f)
the manner in which the shares of each amalgamating company are to be converted into shares of the
amalgamated company;
(g)
if shares of an amalgamating company are not to be converted into shares of the amalgamated
company, the consideration that the holders of those shares are to receive instead of shares of the
amalgamated company;
(h)
any payment to be made to any member or director of an amalgamating company, other than a
payment of the kind described in paragraph (g); and
(i)
details of any arrangement necessary to complete the amalgamation and to provide for the subsequent
management and operation of the amalgamated company.
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Mergers and Amalgamations
Manner of Approval :
-
Special resolution of each amalgamating company
-
Board of Directors to give a solvency statement for the
amalgamating company and the amalgamated company
-
Registration with ACRA
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Reverse Take-overs
Investor
Shareholders
New
shares
Listed Company
Existing
Business
New
Business
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Thank You
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