If a listed company in Malaysia signed a MoU for cross-border M&A (merger and acquisition), what kind of process does the company needs to take?
For example, announcement to their stakeholders;
Please also raise some referred policies for this answer.
A Memorandum of Understanding (MOU) is a short agreement in principle of the broad outlines of the deal, worked out mainly by the executives of the companies involved with input from senior legal professionals for each company. The MOU itself will often also clarify the general structure, which could be a sale of assets, or a sale of ownership interests in a company or a subsidiary of a company, and so on.
Some high points of the process and recent trends in how these deals are done are reviewed here.
Usually, an MOU is followed by having lawyers for each party to the merger negotiate a much more specific and detailed contract with lots of exhibits and scheduled that address deal specific terms. This will set deadlines for each step of the process, although it isn't uncommon to adjust those deadlines over the course of the deal. The final deadline will usually be a closing date. The final M&A contract will also usually contain a long list of representations of fact, with specifically listed exceptions (e.g. all accounting statements attached as scheduled to the contract are materially correct, there are no pending lawsuits except . . . , there are no pending government investigation except . . . , the company has no derivative contracts except . . . ).
The hard part of this legal work is not the broad outline of the deal, but the immense attention to detail that is required for every little thing related to each business involved in the merger like the need for a new municipal business license for a merged office in Taiping, or the need to renegotiate a lease term with a difficult landlord at the Bentong warehouse of one of the companies.
In a cross-border acquisition, the laws of all of the countries where the merging companies do business need to be considered. There are also practical logistical considerations. For example:
Parties will have to plan ahead and factor in the additional time that will generally be required. Transfers of funds from offshore may have to be initiated earlier, in order for the funds to be received by the seller on closing. Similarly, parties may have to add buffer time for the delivery of signed documents into Malaysia for such documents to be effected on closing. For instance, it is pertinent to note that in the case of a share transfer, the instrument of transfer of shares cannot be signed in counterparts. In a situation where the authorised signatories of both parties are not in Malaysia, additional buffer time will need to be factored in for the delivery of the instrument.
It takes considerable legal skill and experience to set realistic deadlines for the various tasks involved in an M&A deal. The process would often take somewhere between a couple of months and a little longer than a year, depending upon the facts and circumstances and complexity of the individual deal and the terms of key contracts of the merging companies.
After, or at the same time as an MOU, there is normally a non-disclosure agreement between the merging companies and a due diligence period during which the merging companies and their lawyers figure out what details need to be addressed and confirm key facts before closing on the deal. If the due diligence exchange of information and research from third-party sources reveals problems with the merged company that weren't anticipated, the deal can usually be called off, and the secrets obtained in making deal can't be used or shared if the deal is called off.
During the due diligence period, the lawyers for the merging companies need to make up a long check list of items that need to be dealt with and confirmed. This would usually include stock exchange listing (if any), legally required disclosures to the public, notices and requirements under existing leases and contracts, pending lawsuits and government investigations that need to be addressed, lists of employees and employee benefit programs with provisions for how each one will be handled, lists of property owned by each company with any debt for which that property is collateral and how that will be handled, agreements on how financial reporting of various items will be addressed, etc. There will also usually be a list of all of the government officials who need to approve all or part of the deal.
There is not a single template for how this is done. An equipment manufacturing company merger is going to look different than a restaurant chain merger is going to look different than a bank merger.
An M&A transaction is basically impossible for even sophisticated business executives to do correctly without the assistance of legally trained professionals with M&A experience. Typically, if the businesses are large, it will take a small army of junior legally trained professionals, accountants, administrative staff, and consultants to put together the deal, in addition to several senior legally trained professionals on each side of the deal.
Transaction costs of several percent of the combined value of the companies would not be unusual. For example, according to one source:
M&A transaction costs can range from 1% to 4% of the deal value, though deals valued more than US$10b incur lower average integration costs as a percentage of the deal value than deals valued less than that threshold
Practice guides for doing M&A transactions in a particular industry often run to many hundreds of pages long and are very expensive (often as much as the salary of a single lawyer for several months of work). A practice guide for doing an M&A transaction could easily cost $5,000 to $20,000 USD up front, plus a subscription cost of many hundreds of USD equivalent per month to keep it up to date.
