Mergers & Acquisitions and Due Diligence A Legal Perspective Master of Professional Accounting, SMU Stefanie Yuen Thio Joint Managing Director of TSMP Law Corporation © 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) © SALE & PURCHASE OF SHARES Shareholders Agreement Remaining Shareholders Seller SPA Buyer Target Company © 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 © SALE & PURCHASE OF SHARES Key Risk : Hidden Liabilities Accounting due diligence is key. © 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. © SALE & PURCHASE OF SHARES Whitewash Requirements — Solvency Statement — Court Filing © 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). © Sale & Purchase Agreement of Business/ Assets Seller SPA Buyer Assets Fixed Assets Real Estate Assets Cash Liabilities Contracts Licences © 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 © Sale & Purchase of Business/ Assets Key Risks : - Component Parts - Third Party Consents - Regulatory Licensing Pre-deal due diligence is key. © Take-over of a listed company Public Shareholders Vendor 65% SPA Purchaser 35% Listed company © Take-over of a listed company — Mandatory Take-over — Voluntary Take-over © Take-over of listed companies - Recent cases Heineken F&N N.V. 40% Real Estate Assets Soft Drinks Business 41.9% Asia Pacific Breweries © 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 © Take-over of listed companies Key Risk : - Unsuccessful bid - Competing offer (incentives in the form of a Break Fee) - Cash confirmation (Jade Technologies) © Scheme of Arrangement Shareholders Investor Creditors Target Company © 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? © 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 © Mergers and Amalgamations 1 Singapore Company Singapore Company 2 2 Singapore Subsidiary © 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. © 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 © Reverse Take-overs Investor Shareholders New shares Listed Company Existing Business New Business © Thank You ©
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